Upcoming VAT Changes in Europe for Online Sellers
Staying up to date with current and upcoming changes to VAT regulations in Europe and beyond is paramount to stay legally compliant and keep your online business operating long term.
The year 2021 brought with it many major changes to the EU-wide taxation structure.
Additionally, VAT-related changes are coming up in 2022 in the UK due to Brexit.
In this article, we’ll discuss the most important VAT changes for eCommerce entrepreneurs, Amazon sellers, and online business owners who sell to customers in foreign countries.
New EU-Wide Delivery Threshold in 2021
In July 2021, a new VAT procedure that applies across the European Union, the One-Stop-Shop (OSS), was introduced.
The OSS removed country-specific thresholds and replaced them with a single EU-wide threshold.
Previously, country-specific thresholds, usually €35,000 or €100,000, dictated whether a VAT registration was required in a foreign EU country.
Prior to crossing the threshold, cross-border transactions were treated as if they were domestic transactions. Domestic VAT rates were used, and the sales were listed in a domestic VAT return.
Once a seller’s revenue generated by distance sales to customers in a certain country crossed the threshold of that country, the foreign VAT rates had to be applied, registration was necessary, and foreign VAT returns had to be filed regularly.
Therefore, online sellers had to continuously monitor several thresholds at once.
However, in July 2021 these thresholds were replaced by a new threshold of only €10,000 that applies EU-wide.
This means that all cross-border sales to foreign EU countries now count together toward the threshold, which in turn is reached far earlier than before.
A way to mitigate the additional VAT-related responsibilities that arise through the new threshold is the One-Stop-Shop.
New EU-Wide VAT Return with the OSS in 2021
The One-Stop-Shop changes the countries in which VAT registrations are mandatory, the countries in which VAT returns need to be filed, and the VAT rates that need to be applied to transactions.
The new EU-wide threshold of €10,000 then no longer applies, and country-specific VAT rates need to be used from the first cross-border transaction onward.
However, all transactions are listed in a unified OSS return, which needs to be filed in the country of OSS registration, usually the home country of the business or seller.
Therefore, local VAT registrations and the filing of local VAT returns are no longer necessary, considerably easing the bureaucratic burden placed on online sellers.
However, the OSS is only usable for cross-border transactions and countries in which a seller doesn’t store inventory.
This means that online sellers using fulfillment services that include storage still need to complete local VAT registrations in all countries in which their products might be stored or are part of their chosen fulfillment program.
Sales of products that are delivered from a foreign warehouse to customers in that same country then need to be listed in foreign local VAT returns, deliveries from a foreign warehouse to customers in the home country need to appear in the domestic VAT returns, and sales from a foreign warehouse to customers in a third EU-country need to be listed in the OSS return.
Overall, while the One-Stop-Shop aims to ease the tax-related administrative burden imposed on online sellers, it actually increases the complexity for many sellers, especially those processing orders via fulfillment programs like Amazon FBA.
That is why the OSS is a voluntary procedure, though the changed threshold itself still causes complications for online sellers.
New VAT Solutions for oOnline Sellers in 2021
As a VAT service provider specializing in eCommerce, hellotax can help online sellers on their way to VAT compliance despite the regulation changes.
If you already registered for OSS in 2021 or plan to do so in 2022, we can discuss your options, choose the best route for your Amazon business together, and take care of your VAT responsibilities from that point onward.
Our team can register you for OSS and VAT across the EU. Our OSS and VAT software prepares detailed and ready-to-file reports, and we also take care of all needed filings.
Additionally, applicable VAT rates are automatically identified, documents are translated, and deadlines are monitored.
UK VAT Changes for Online Sellers in 2022
After a year of changes in 2021 for European online sellers, the upcoming year is expected to be calmer.
However, due to Brexit and Covid-19, 2022 will be an eventful year for online sellers active in the UK.
End of UK VAT Deferral in 2022
The “New Payments Scheme for COVID VAT deferral,” which allows businesses to defer VAT payments from 2020 in interest-free installments, will end in 2022.
All unpaid VAT amounts are then potentially subject to penalties or interest, which means sellers and businesses should prepare payment plans sooner rather than later.
End of Delayed Customs Declarations in the UK in 2022
Furthermore, up until January 1, 2022, customs declarations for goods imported from Europe to the UK (except Northern Ireland) could be delayed.
Starting this year, that is no longer possible, and businesses should prepare for this change by building in-house capabilities or hiring service providers.
In turn, Intrastat reports for arrivals are no longer necessary for most UK businesses.
New UK Making Tax Digital Procedure in 2022
Starting April 1, 2022, the Making Tax Digital for VAT procedure will apply to businesses in the UK with a revenue below £85,000.
As a result, digital records of all VAT data need to be kept, VAT returns need to be filed using the appropriate software, and all data needs to be “digitally linked”.
New Penalties in the UK in 2023
On December 31, 2022, a final change benefiting most online sellers will be introduced.
The government has announced that the current VAT regime will be replaced by a new one at the end of the year.
The current regime harshly penalizes taxpayers who file VAT returns or make payments of VAT late and has long been criticized for being unfair and ineffective.
The new regime is expected to be more fair, simple, and consistent.
VAT changes in the coming year will mainly concern British online sellers or those active in the UK.
However, changes in the VAT regulations implemented across the EU in 2021 will continue to affect online sellers across Europe.
As the One-Stop-Shop caused complications for sellers using fulfillment programs like Amazon’s FBA, it is possible that the regulations will be amended with time. Many sellers have not yet considered the OSS, as it is a voluntary program.
2022 is the time to reconsider your business model and your delivery channels and find out if a simplification of the VAT compliance process is possible for you.