VAT for Cross-Border E-Commerce Transactions Changes on 1 July 2021
On 28 June 2021, the European Commission announced e-commerce taxation rules will change for cross-border EU e-commerce. The new VAT rules for online shopping enter into force on 1 July 2021. Their aim is to simplify cross-border e-commerce and ensure greater transparency for EU cross-border shoppers when it comes to pricing and consumer choice.
The new rules will apply to the following parties — both those inside and outside the EU/EEA:
- Online sellers and marketplaces/platforms.
- Postal operators and couriers involved in online deliveries.
- Customs and tax administrations applying the tax regimes for online purchases.
- Individual consumers (customers shopping online).
Please find a summary of the changes below:
- VAT is now charged on all goods that are imported into/enter the EU from non-EU countries, irrespective of value.
- All e-commerce sellers based in or outside the EU/EEA that sell to consumers — either directly or via online marketplaces — should have an EU VAT registration and pay VAT for all their EU sales via a quarterly declaration.
Here’s what these changes mean for consumers: VAT will be included in the total price, which they pay directly to the seller at the time of purchase. So, they will not pay VAT to customs authorities or courier services once their order arrives at the destination.
In its communication, the Commission warns that, “If the supplier is not VAT registered, you will need to pay VAT and possibly some clearance fees charged by the transporter of the goods when goods are imported into the EU.” It is assumed that paying VAT at the source will also reduce fraud and improve the online consumer experience for online shoppers in the EU.