VAT Rules for E-Commerce in the EU
Starting July 1, 2021, in accordance with Directive (EU) 2017/2455 of December 5, 2017, and the subsequent Directive (EU) 2019/1995 of November 21, 2019, the value-added tax (VAT) rules on e-commerce between businesses and consumers are evolving. The general principle of VAT taxation in the Member State of consumption and the ability to combat VAT fraud are strengthened.
The VAT taxation rules for online sales of goods to individuals depend on the countries involved in the transaction. Online sellers, including those on marketplaces or platforms, must register with EU Member States to declare and pay VAT on all distance sales of products and the provision of services to customers located in the EU.
Under this legislation, VAT will be charged to the customer at the rate in effect in the destination country. Thus, if a French company sells products to a Belgian customer, VAT is charged at the rate applicable in Belgium.
Who is concerned? All actors in the e-commerce supply chain are affected, whether online sellers and marketplaces/platforms inside or outside the EU, postal operators and couriers, customs and tax administrations, or consumers.
The advantages are numerous and varied When consumers buy goods online, inside or outside the EU, the VAT rate applied is the same as that applied to goods purchased in their home country, since VAT is paid where the goods are consumed.
EU businesses can grow in a simplified and fairer environment and overcome barriers to cross-border online sales. The single European electronic market aims to leverage technology for citizens in a fair and competitive digital economy.
It facilitates reporting obligations in distance selling operations and ensures that they return to the Member State of consumption, leveling the playing field between EU sellers and those from third countries.
It reduces the impact of differences in VAT rates between countries on product competitiveness and increases tax revenues in the country where the product is consumed.
For more information, please visit: How does VAT work for online sales? - Ministry of Economy, Finance, and Industrial and Digital Sovereignty VAT on e-Commerce - One Stop Shop - European Commission