The changes to the EU’s e-commerce rules will take effect on 1 July 2021. This factsheet provides an overview of the main changes and how we can support our SME customers. Time is of the essence.

Changes to the rules will have a big impact on e-commerce SMEs. We provide sources for additional guidance at the end of this document, but you may also need further specific advice.

Depending on their business model, the changes will have a profound impact on businesses. This is especially true during the coronavirus crisis, when the sole focus of many SMEs is daily survival.

To help SME clients make these changes, we should:
– explore new changes
– assess the impact and significance of changes for customers
– explain the rules and explain how this might affect the business
– help them transform their business processes / operations to conform to the rules

What types of transactions could this affect?
– Distance selling of goods in the EU by suppliers or recognized suppliers such as online platforms and marketplaces
– provision of services by EU and non-EU suppliers to consumers in the EU
– Distance sales of goods imported from third territories or third countries by suppliers and recognized as suppliers, with the exception of excise goods
– domestic sales of goods by recognized suppliers

What is distance selling of goods?
From July 1, 2021, two types of distance sales of goods will be available:
– intra-Community distance sales. These are consumer-to-business (B2C) sales of goods shipped from an EU Member State to a customer in another EU Member State
– distance selling of goods imported from third countries (outside the EU). These are B2C goods sales from a third country to a customer in an EU Member State

What are the main changes from July 1, 2021?
Effective July 1, 2021, the VAT rules for B2C cross-border business-to-consumer (B2C) e-commerce activities will change as follows for suppliers:

For intra-Community distance sales
1. Changing the Distance Selling Thresholds
The new EU-wide turnover threshold of EUR 10,000 will replace the current thresholds for distance selling of goods in the EU. This will be a significant change for companies with intra-Community B2C distance sales of goods, as the current Member States’ thresholds are typically in the range of EUR 35,000 to EUR 100,000.
Below this overall threshold of EUR 10 000, the provision of TBE services (telecommunications, broadcasting and electronic) and distance sales of goods in the EU may still be subject to VAT in the Member State where the supplier is established.
From 1 January 2025, SMEs will be able to benefit from other simplifications when trading across borders within the EU.

2. EU one-stop shop
The existing EU mini One Stop Shop (MOSS) system is extended to cover both cross-border supplies of goods and services. A new web portal, the one-stop shop (OSS), has been created. Where their TBE services and intra-Community distance sales exceed EUR 10 000, suppliers may declare and pay the VAT due in all other Member States via the portal of the Member State in which they are established. Otherwise, suppliers would have to register in each Member State where they conduct B2C distance sales.
Union OSS will cover:
– Provision of B2C services within the EU
– intra-Community distance sales of goods
– domestic deliveries of goods (only by recognized suppliers)
– For distance selling of goods imported from third countries (outside the EU)
3. The VAT exemption for small items will be removed
The VAT exemption for the importation of small shipments with a value of up to € 22 will be abolished. This means that all goods imported into the EU from third countries will now be subject to VAT, which would normally be charged to the customer via the national post office or courier company.
Collecting VAT from a customer can cause problems in customer relationships due to delays due to customs procedures and additional, often unexpected, charges. To avoid this problem and facilitate the process, the European Commission has introduced two optional systems:
Import one stop shop (IOSS), which allows companies to collect VAT at the time of ordering and to declare and pay VAT on distance sales of goods imported throughout the EU in one VAT return.
Special arrangements that allow the post office and couriers to declare and pay the VAT collected on a monthly basis
4. Simplified rules for small consignments – one-stop shop for imports from outside the EU
To simplify the declaration and payment of VAT for suppliers of goods from outside the European area.