European Commission issues new VAT rules proposal to speed up ecommerce in Europe

The VAT proposal aims to deliver for the extension of the current Mini One Stop Shop (MOSS) to cross-border supplies of tangible goods and services, the removal of the exemption for the importation of small shipments, the application of home country rules, and the introduction of a VAT exemption threshold, as well as other simplifications for start-ups.

Even with an extended One Stop Shop, online merchants will still have to deal with different VAT rates when selling abroad. The European Union currently has more than 75 different VAT rates and this creates a disturbance of the level playing field needed to foster cross-border trade and to complete the internal market.

The proposal also presents solutions to the issue related to a lack of threshold for intra-EU B2C supplies of electronic services. The lack of a threshold has caused, several problems, specifically for SMEs, since 2015. With the proposed new rules, a business which has intra-EU B2C supplies of electronic services of a value of less than a certain amount will be able to identify the place where the customer is located based on only one piece of evidence rather than two, thus simplifying the procedure for web shops with less resources.

In addition, the proposal will remove the current VAT exemption on importation of goods up to 22 EUR. With this exemption, VAT is not payable when goods below this threshold are bought from outside the EU.