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

EMEA
June 16, 2022
VAT on Non-Fungible Tokens (NFTs)

The recent popularity of non-fungible tokens (NFTs) has captivated investors, governments and tax authorities. An NFT is a digital asset that represents real-world objects such as a piece of digital art, an audio clip, an online game or anything else. NFTs are purchased and sold online and are typically encoded with the same software as […]

EMEA IPT
June 15, 2022
In Focus: Why is Italy’s IPT Regime so Challenging?

Tax compliance in Italy – where do we start? From monthly tax settlements to an annual declaration, prepayment, additional reporting and treatment of negative premiums – all these factors make Italy unique and one of the most challenging jurisdictions from an insurance premium tax (IPT) compliance perspective. Let’s break it all down: Insurance taxes IPT […]

EMEA VAT & Fiscal Reporting
June 15, 2022
Reciprocity Agreements and Why They Matter When Recovering VAT

Sovos recently hosted an online webinar on VAT recovery where we covered reciprocity agreements between the UK and EU Member States when making 13th Directive VAT refund claims. One of the questions that kept coming up is what are reciprocity agreements and why do they matter? Reciprocity When making 13th Directive refund claims, each EU […]

E-Invoicing Compliance EMEA
June 14, 2022
Draft Resolution Introduces Changes to Peru’s E-transport Document

E-invoicing was introduced in Peru in 2010, following the continuous transaction controls (CTC) trend in Latin American countries for a more efficient collection of consumption taxes. Since then, the government has rolled out measures to encompass a significant number of taxpayers under the country’s mandatory e-invoicing regime and advance new technical and institutional structures within […]

E-Invoicing Compliance EMEA
June 9, 2022
Belgium Steps Closer to Mandatory E-Invoicing

In line with the obligations set by the European Directive 2014/55 on electronic invoicing in public procurement, Belgium introduced a mandate for public entities to receive and process electronic invoices in 2019. For Brussels, Flanders, and Wallonia the initiative went beyond the bare minimum of the EU Directive requirements and introduced obligations to also issue […]