The EU E-Commerce VAT Package: Lessons Learned Two Months On

David Stokes
September 8, 2021

On 1 July 2021 the EU E-Commerce VAT Package was introduced. The package replaced existing distance-selling rules and extended the Mini One Stop Shop (MOSS) into a wider-ranging One Stop Shop (OSS).

The implementation of the EU E-Commerce VAT Package was designed to simplify the VAT reporting requirements for sellers and improve the tax take for Member States.

Two months in: we take a look at how it’s going.

Delays and teething problems

There were unfortunately some initial delays and teething problems when the EU E-Commerce VAT Package was introduced, which is to be expected with the adoption of such a significant new system, but as with any new scheme these can be resolved over time.

Some examples include:

  • Netherlands system issues: The introduction of the system in the Netherlands appeared to cause an IT glitch whereby Article 23 licenses to defer import VAT were not recognised. As a result, importers were asked to pay VAT at the border. This caused delays in imports and onward delivery at the beginning of July. Once the Dutch tax authority became aware of this issue it implemented a temporary fix and the issue is now resolved.
  • Inconsistencies in data submission: There are inconsistencies in how taxpayers must communicate data to the relevant tax authority. The EU proposal foresaw a portal where all transactions could be uploaded, but this hasn’t materialised yet.
  • Varying file format requirements: Some Member States require data to be submitted in a .csv file whilst others ask for submissions in a .txt file. The Netherlands requires taxpayers to key data directly onto its website.
  • Data issues: There have been issues around receiving data and Sweden was briefly unable to receive data but this was quickly resolved (in less than a week).
  • IOSS processing errors: Some freight forwarders used the shipment date and not the payment date resulting in some consignments that didn’t qualify for IOSS to be processed under IOSS. This will lead to an underpayment of VAT and it will be necessary to reconcile the data.
  • Intrastat reporting: There is currently no mention in either the Directive or the explanatory notes of how Intrastat should be reported.

Issues with the import of goods

There are also issues associated with the import of the goods.

Some Member States disallow the import of certain categories of goods due to local restrictions e.g. foodstuffs, plants etc.

It’s sometimes unclear if freight forwarders have used IOSS or not and this could lead to repeated errors of underpayment or overpayment of VAT.

Some non-EU vendors are trying to avoid an IOSS registration by stating that the customer is the importer of record. Such practice happened before the introduction of IOSS but not always at the same level as it is now – and was not always spotted or queried.

However, since the introduction of the IOSS, some tax authorities, including Germany, are questioning such an approach on the grounds that the carrier who imports the goods is acting for the non-EU vendor and is not known by the buyer.

This means import VAT is due by the vendor who must then also charge German VAT. For cases that have already occurred there may be an issue with recovery of the import VAT, as the evidence required to support the deduction will have been issued in the wrong name (consumer).

It’s still early days for the EU VAT E-Commerce Package and initial teething problems are to be expected. One thing is certain, navigating these new VAT schemes is complex. Sovos is here to help and we’ll keep you updated on the latest regulatory changes.

Want to know more about simplifying EU VAT with IOSS?

Join our latest webinar on September 22, 2021 to learn how you can use the Import One-Stop Shop (IOSS) to simplify your EU VAT compliance and unlock the full potential of the EU e-commerce market.

Take Action

Still have questions about OSS and IOSS? Download our e-book to understand the implications of the 2021 EU e-commerce VAT package and ensure your business is ready by 1 July 2021 for the significant changes ahead

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

David Stokes

As an FCCA of many years, David brings a commercially focused accounting perspective to the treatment of European VAT issues. He specialises in the understanding of cross-border VAT transactions and has helped many clients map their flows to optimise their VAT position. He has successfully completed the VAT Forum’s ‘Expert in European VAT’ course and is a partner of the forum. As well as advising clients David also sits on several technology product development teams at Sovos.
Share This Post
Share on facebook
Share on twitter
Share on linkedin
Share on email

EMEA VAT & Fiscal Reporting
September 21, 2021
Fiscal Representation Post-Brexit – Requirements for UK Companies Trading in the EU

Non-EU companies are required to appoint a Fiscal Representative in order to be registered for VAT in many Member States. Following the end of the Brexit transition agreement on 31 December 2021, this was a consideration for UK companies who wanted to remain registered or had to register as a result of changes to supply […]

E-Invoicing Compliance EMEA VAT & Fiscal Reporting
September 16, 2021
French E-invoicing Mandate Update: Government Revises Rollout Schedule

When the French Tax Authority published its report last fall, unveiling the continuous transaction control (CTC) plans for France, we questioned whether it would be possible to finalise all the details of this system in less than a year, to allow sufficient time for businesses to adapt. Although the French Treasury (DGFiP) has made good […]

E-Invoicing Compliance EMEA VAT & Fiscal Reporting
September 16, 2021
Saudi Arabia’s E-Invoicing Mandate is Fast Approaching

The Zakat, Tax and Customs Authority (ZATCA) announced the finalised rules for the Saudi Arabia e-invoicing system earlier this year, announcing plans for two main phases for the new e-invoicing system. The first phase of the Saudi Arabia e-invoicing system is set to go live from 4 December 2021. With the mandate just around the […]

EMEA VAT & Fiscal Reporting
September 15, 2021
EU E-Commerce VAT Package FAQs: Understanding Marketplace Liability

The EU E-Commerce VAT Package is here. The new schemes, One Stop Shop (OSS) and Import One Stop Shop (IOSS) bring significant changes to VAT treatment and reporting mechanisms for sales to private individuals in the EU. Our recent webinar, Back to Basics: The EU E-Commerce VAT Package, discussed the basic principles of the three […]

EMEA IPT
September 15, 2021
IPT Compliance in the UK: What Does the Metropolitan Fire Brigade Act Mean for Insurers in Greater London?

IPT compliance is complex, especially when insurers are writing across multiple regions, jurisdictions or boroughs.