This article looks at changes to Irish value-added tax rules for e-commerce businesses and online sellers in the European Union's VAT e-commerce package, which is being implemented across all member states in July.
VAT E-Commerce Reforms
Being introduced under the umbrella of the EU's Digital Single Market Strategy, the changes are intended to:
- simplify VAT rules for goods sold online,
- reduce administrative burdens for traders,
- introduce new obligations on online marketplaces to require them to contribute in the fight against tax fraud, and
- ensure fair competition between online sellers based in the EU and their non-EU counterparts.
Previously, in 2015, the EU told businesses that it would enforce the requirement to collect VAT on cross-border telecommunications, broadcasting, and electronic services to consumers in the EU.
As part of those significant changes, the EU introduced the Mini One Stop Shop (MOSS). MOSS was developed to make it easier for firms to comply with the requirement to collect tax, by enabling them to register and engage with only one EU tax authority, rather than with the tax authority of every member state where they do business.
This MOSS will become the One-Stop Shop (OSS) from July 1. As with the 2015 reforms, the OSS is being introduced alongside new tax collection requirements. From July 1, all B2C services supplied to the EU market by a non-EU provider must include VAT.
OSS will also cover the sale of goods between EU states that are sold without face-to-face interaction between seller and buyer (so-called "intra-EU distance sales") and distance sales of goods into the EU from outside the EU that are worth not more than €150.
Requirements for online marketplaces
Marketplaces are being required to play their part in the effort.
Under the package, online marketplaces will be treated as the supplier for VAT purposes in certain circumstances. This means if they facilitate a supply in the EU, they will be treated as having made the supply for VAT purposes. Where this is the case, they will be required to charge and account for the VAT on the supplies.
This is an important change for traders, as well as for marketplaces. It will mean that small businesses selling their goods through marketplaces may no longer have to contend with the complexity of administering VAT. It should also ensure a more level playing field for Irish businesses, by ensuring that goods do not enter the EU market untaxed.
Low-value consignments
Also under the new rules, an exemption from VAT for small goods worth up to €22 will be removed. This will mean that irrespective of their value, all taxable goods that enter the EU will face VAT.
Like with the wider e-commerce changes, the EU has introduced new systems to ease the burden on sellers. For instance, a new Import One Stop Shop (IOSS) will be introduced, which will be available where goods that are imported are worth up to €150.
The scheme will allow suppliers importing goods to declare and pay the VAT due in a monthly return via the IOSS in the member state where they have registered for the scheme.
Where the IOSS is used, the supplier will charge VAT to the customer at the time of the supply and the goods will not be subject to VAT at the time of importation.
Where the IOSS is not used, VAT will be collected by the customs declarant, such as a postal operator, courier firm, or customs agent.
Impact on Ireland
While many businesses operating online will be required to change some of their systems and processes to cater for the changes, the reforms should improve Irish businesses' competitiveness, by ensuring that the supplies of non-EU traders selling through marketplaces also bear VAT.
Also, by shifting the point at which VAT is administered to the point of sale, rather than at the border, Irish businesses may see their goods clear customs faster and with less hassle than at present.
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