What to Know About Ecommerce VAT Changes in the EU

These times during the COVID-19 pandemic seem to have sparked many changes in terms of tax, though many of these shifts have been the topic of plenty of discussions in the past. The rise of e-commerce and online shopping seems to favour more companies than others, which was quite the struggle to regulate.

However, to make things fairer, the rules have changed for the value-added tax to businesses. Many sellers in and around the EU have been adjusting in hopes of complying, though some may find themselves struggling. Get in touch with an accountancy service that is staying on top of all these updates.

If you want a clearer picture of the newer VAT regulations that have been enforced, here’s a look into it:

VAT System Changes

It’s the first time the VAT system in the EU will undergo large-scale changes in decades, with the last shift dating back to the 1990s. E-commerce was something that still hadn’t been fully developed at the time. 

However, as implied before, online shopping’s slow integration into the consumer process had made the playing field unbalanced. Many online and non-EU businesses have been getting away with not paying VAT as the system didn’t exactly apply to them or the products posted virtually.

The only thing that online sellers had to abide by was the Mini One Stop Shop, an electronic portal policing electronic services that were crossing borders. It’s similar to the rules placed in Australia and New Zealand, though even that seems to be revised. The two main changes in the VAT system will be in regards to its exemptions and registration thresholds.

VAT Exemptions

Non-EU companies that have been exempted from complying with the VAT system will now have to pay when importing their goods into the continent. In the past, the e-commerce businesses from America and other countries selling to EU consumers didn’t have to pay for VAT. This put EU businesses at a disadvantage financially as they had to shoulder those fees.

It’s ideal for non-EU companies to get in touch with an EU accountant. It’ll be easier to comply and integrate the tax when calculating money-wise, creating more accurate reports to base future decisions on. Plus, there wouldn’t be a need to let go of the EU market that your business is currently holding in sales. 

VAT Registration Thresholds

The VAT system used to recognise varying thresholds when requiring e-commerce companies for registering, with the fluctuation in price shifting due to the company’s country of origin. Now, sellers and businesses would need to register under the One Stop Shop with a common threshold of €10,000, equating to roughly £8500.

The One Stop Shop differs from the Import One Stop Shop introduced at the same time. Along with that, the common threshold was taken from the last minor changes on electronic services back in 2019. EU accountants should be able to register e-commerce brands of non-EU businesses into the newer electronic portal and manage the profile for them. 

Conclusion

These regulations have been in place for a month now. Managing the online marketplace and putting non-EU businesses on the same footing as EU companies can be quite challenging, but complying with the new rules can help achieve balance. 

Looking for accountancy services for small businesses to help with your VAT? 1 to 1 Accountants is a firm in England, UK that serves small businesses and freelancers for all their accounting needs. Get in touch with us today!

‍