Cheaper to sell online in the EU

VAT payment for selling goods online within the European Union will simplify by 2021. The latest report by MAZARS analyses the EU’s plan that would reduce the administrative burden and costs of e-commerce businesses in several stages. According to the report, as of 2018 online service provider businesses will only have to pay the VAT in the country where the buyer lives if the total value of services provided to the resident of the given country exceeds EUR 10,000 a year.

rendszer kiterjesztését is javasolja az Unió.

What is more, from 2021 the EU recommends a scheme in which a so-called mini one-stop shop (MOSS) system will simplify rules for online shops and distance selling businesses. As regards the VAT payment obligation, the EU’s position is that the VAT needs to be paid in the member state of the final consumer. For instance if a Hungary-based online shop sells a product to a person who lives in Slovakia, the Slovakian VAT has to be used in calculating the price and the sum will go into the budget of Slovakia.

However, this isn’t easy to implement in practice: the administrative burden is big and costly; therefore the EU has laid down special rules for selling online to private individuals who are residents in another member state. It is one of the biggest barriers to cross-border e-commerce that these VAT obligations cost businesses around EUR 8,000 for every EU country into which they sell – if they sell for a net EUR 35,000- 100,000 (depending on which member state we are talking about) to a given country in a 1-year period.

The EU’s ambitious goal is to standardise and reduce this value threshold of online selling to EUR 10,000 from 2021. What the EU is now proposing is that below this value businesses will only have to make one simple quarterly return for the VAT due across the whole of the EU, using the online VAT mini one-stop shop system (MOSS).