Since 2021, EU e-commerce transaction rules have meant that supplies of goods and most supplies of services to EU consumers purchased via e-commerce are taxed where the consumer is located in the EU.
The rules focused primarily on business-to-consumer (B2C) transactions, however, recently there has been confusion around whether business-to-business (B2B) e-commerce sales will be affected.
This is because The Treasury has published explanatory notes summarising proposed changes to the following:
- The EU principal VAT Directive (2006/112/EC) and Implementing Regulation (282/2011/EU), and
- Regulation 904/2010/EU on administrative cooperation in relation to VAT
These proposals are part of The EU’s VAT in the Digital Age (ViDA) plans. The Treasury notes that ViDA could impact Northern Ireland, given that the NI VAT rules for supplies of goods remain aligned with the EU.
The EU’s proposals mean that the UK may need to develop new systems and reporting structures, should the proposed digital reporting requirements be implemented across the bloc.
Key changes proposed by the EU are:
Collecting VAT on behalf of suppliers
From 2025, online marketplaces (such as Amazon and eBay) facilitating sales of goods would have greater responsibility for collecting VAT on behalf of suppliers. If they don’t, then they may be held liable for VAT. This would bring supplies made by EU businesses into scope (currently the rules are limited to supplies by overseas suppliers selling to EU consumers via the online platform).
The EU Import One-Stop Shop
The One-Stop Shop (OSS) was launched in 2021 so eligible businesses could register with just one EU tax authority to manage their VAT obligations across the bloc and submit a single EU VAT return for e-commerce sales across the bloc. The new proposals make the OSS mandatory for online marketplaces from 2025. It would also be expanded to cover a broader range of goods, including movements of a business’s own stock.
The cross-border reverse charge
The cross-border reverse charge would also become mandatory (rather than optional) for EU Member States, meaning that sellers not established in the EU country in which supplies are being made, will not need to register for VAT there.
Digital reporting for VAT
From 2028, standardised digital reporting for VAT (the EU’s “Digital Reporting Requirements”) will be introduced, progressing towards live transaction reporting for B2B intra-EU supplies. This is in an effort to harmonise reporting standards across the EU. E-invoicing would be mandated for intra-EU supplies of goods and services.
Online marketplaces – B2C vs B2B
Much of the existing regulations have focused on e-commerce sales to consumers. This means online platforms like Amazon are having to insist that sellers are VAT registered. With current delays at HMRC in processing VAT registrations, this can be a protracted and frustrating process.
However, where businesses sell to other businesses on online platforms such as Amazon and eBay, they will fall into the new regulations. This is because the EU is honing in on online platforms to collect VAT irrespective of whether the transaction is B2C or B2B.
Currently, the proposed regulations only focus on transactions made via online platforms. UK Businesses selling directly to EU businesses are not affected.
Can we help
Many of the changes proposed by the EU are expected to be implemented in 2025, however, it’s yet to be seen if all EU states will agree on them. There may be further revisions along the way. That said, it will be prudent for UK businesses who trade on e-commerce platforms to be alert to the proposals.
We are helping our clients comply with the VAT regulations for their e-commerce operations. Drawing on our membership of AGN International – a global association of separate and independent accounting and advisory businesses – we are helping clients:
- arrange various EU VAT registrations
- establish EU subsidiary offices
- determine the best One-Stop Shop scheme/location for their operations
- get registered with the Scheme
- appoint fiscal representatives on their behalf
If we can help in any way, please get in touch with our team of specialists shown on this page.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact.
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