As mentioned in previous VAT Matters articles, significant VAT changes for the e-Commerce sector came into effect across the EU on 1 July 2021. Although the new rules are still in their infancy, businesses affected by these changes need to be aware and have taken steps to comply with these new requirements. This month, David Duffy provides a checklist of common issues for businesses to consider in adapting to the new rules.

Are you charging VAT in the right jurisdiction on your e-Commerce sales?

Prior to 1 July 2021, Irish online sellers should have charged Irish VAT on their distance sales of goods to consumers in other EU Member States unless their sales into a particular Member State exceeded the local distance sales threshold or they elected to register for VAT in another Member State. From 1 July 2021, online sellers of goods should charge VAT in the EU Member State of their customer (i.e., where the goods are shipped to), unless the total value of their distance sales to consumers in all other EU Member States does not exceed €10,000 per year.

Are you charging VAT at the correct rate?

It follows from the above that the VAT rate chargeable on each sale is the VAT rate for the particular product in the Member State into which the goods are sold. Depending on your product range, determining the right VAT rate and correctly calculating VAT across all sales could be an onerous task. The European Commission has an online VAT rate database but this may not be sufficiently detailed to determine the VAT rate on all products. Businesses will also need to consider whether to adjust their prices to take account of VAT rate differences between countries.

Do you know how and when to pay the VAT?

Sales by Irish online sellers to customers within Ireland should continue to be reported in their Irish VAT returns in the normal way. However, VAT on sales to consumers in other EU Member States, as well as Northern Ireland, should be reported in a quarterly One Stop Shop (“OSS”) return. If a seller does not register for OSS, they are obliged to register for VAT in each Member State into which they sell. As this is unlikely to be attractive to most sellers, online sellers should take steps to register for OSS (via ros.ie) as soon as possible if they have not already done so. It should be noted that having registered for OSS, all relevant sales to consumers in other EU Member States must be recorded in the OSS return, even if the seller has a local VAT registration in another EU Member State for another reason. The first OSS return will become due by 31 October 2021 for the period 1 July to 30 September 2021.

Are you selling goods that are shipped from outside the EU to consumers in the EU?

Additional rules and requirements apply to distance sales to EU consumers from non-EU countries. The VAT relief for imports in consignments of less than €22 was abolished so that all goods imported into the EU are now subject to VAT at the appropriate rate. The Import One Stop Shop (“IOSS”) was introduced to allow sellers to pay VAT on imports of goods in consignments with a value not exceeding €150 through a monthly return, rather than having their customer pay over VAT on delivery. It is important to ensure that the correct information is included on the shipment of the goods, so the Customs Authorities are aware that VAT is due via the IOSS rather than at the point of import.

Are you selling goods on an online marketplace?

Additional complexity can arise in respect of sales via online electronic interfaces or marketplaces. Irish established sellers selling goods within the EU on an online marketplace (where the marketplace does not take title of the goods) will generally be responsible for charging and remitting VAT at the correct rate and in the correct jurisdiction (rather than the marketplace being responsible). However, the marketplace will be responsible for VAT in cases where they “facilitate” B2C online sales of imported goods from outside the EU in consignments with a value of €150 or sales within the EU by a non-EU established seller.

Do you need to appoint an intermediary or should you act as an intermediary?

Where a non-EU established seller wishes to register for IOSS in respect of their distance sales from outside the EU into the EU, they generally are obliged to appoint an “intermediary” established in the Member State in which they wish to register for IOSS. Revenue have issued guidance on the role and obligations of an intermediary. The intermediary must apply for a Tax Advisory Identification Number (TAIN) number before it can register as an IOSS intermediary in Ireland. Section 91J(10) of the VAT Consolidation Act 2010 gives Revenue powers to hold the intermediary jointly and severally liable with the seller they represent for a VAT liability payable under IOSS where they deem it necessary for the protection of the Exchequer. Revenue guidance notes that IOSS intermediaries are expected to engage in standard risk management practices such as customer due diligence and that they should inform Revenue where they have concerns about the taxable person that they represent. The guidance also states that a joint and several liability notification will apply on a prospective basis only and will only be imposed in exceptional cases where compliance issues have been identified. Before agreeing to act as an intermediary for a non-EU seller, any business or firm should carefully consider their obligations and consult with Revenue or their tax adviser in case of doubt.