New rules on the application of VAT to e-commerce
The regulation on the VAT treatment of e-commerce establishes the rules for the taxation of supplies of goods and services that are generally contracted via the internet by EU final consumers. With effect from 1 July 2021, and as a result of the transposition into our domestic VAT legislation of the Directives on e-commerce Directive (EU) 2017/2455 and Directive (EU) 2019/1995, a common threshold is established at Community level, both for intra-Community sales of goods and for supplies of services by electronic means, made to final consumers. The most important changes introduced are as follows:
A. - Establishing the place of supply of intra-Community distance sales of goods and services.
For the purposes of determining the place of supply, a common quantitative limit of 10,000 euros is established for the sum of intra-Community distance sales of goods and/or the provision of services by electronic means carried out in the EU during the preceding calendar year.
Intra-Community distance sales of goods
Deliveries of goods dispatched or transported by the seller from one Member State (E.M.) to another, the recipients of which act or have the status of final consumers, will be considered as such. These transactions are taxed at destination, i.e. where the final consumer receives the goods. However, they will be taxed at origin when the following requirements are met:
- The threshold limit of 10,000 euros has not been exceeded.
- The seller (business or professional) has not opted to pay tax at destination.
From 1-7-2021, if a Spanish company sells its goods online to end customers in several Member States and the overall sales exceed the limit of €10,000 in that year, it must pay tax at destination and apply the VAT of each Member State:
- Register in each of the E.M. and declare and pay the tax of each State.
- Opt for the one-stop scheme (OSS) and file a single return.
Supply of services by electronic means.
As a general rule, if the recipient is domiciled in the territory of another MS, the technological services are located in the MS where the consumer is domiciled, unless the rule of effective consumption applies (i.e. where these services are actually consumed). The taxable person is the Spanish entrepreneur, who must pay in each MS other than Spain the VAT due in that MS, although he may choose to apply the one-stop shop (OSS) system and submit a single return. However, special localisation rules apply to these services when the recipient is a final consumer and domiciled in the EU (B2C transactions), provided that the total amount of the supplies in the Community has not exceeded EUR 10,000. From 1 July 2021, intra-Community distance sales of goods must also be taken into account in the sum of these 10,000 euros. Therefore, the taxpayer may be taxed at source (in Spain) when:
- The threshold limit of €10,000 has not been exceeded and.
- the entrepreneur or professional has not opted to be taxed at destination.
B.-Special one-stop scheme
In order to facilitate the management, collection and control of the tax, three new special schemes are included for the declaration and payment of VAT on supplies of goods and services to final consumers not established in the Member State where the transactions are subject to VAT. These three new special schemes are as follows:
External Union scheme: applicable to services supplied by traders or professionals not established in the Community to recipients who are not traders or professionals acting as such.
Import scheme: applicable to distance sales of goods imported from third countries or third territories to which entrepreneurs or professionals making distance sales of goods imported from third countries or third territories in consignments with an intrinsic value not exceeding €150, with the exception of products subject to excise duties, may apply under certain conditions.Union scheme: applicable to those entrepreneurs or professionals established in the territory where VAT applies, but not in the territory of consumption, who:
- Supply services to final consumers domiciled in the EU.
- They carry out intra-Community distance sales of goods.
- supply goods internally to the final consumer through digital platforms or interfaces that facilitate the supply of these goods from a supplier not established in the Community.
Characteristics
Entrepreneurs or professionals who carry out transactions under this special scheme shall:
- Declare electronically the date of commencement, modification or cessation of their transactions covered by this special scheme.
- File a VAT return-settlement return electronically for each calendar quarter (Form 368), regardless of whether they have carried out transactions covered by this special scheme. The return-settlement return shall be filed during the month following the month of the period to which it refers.
This declaration-settlement must include the tax identification number and, for each MS of consumption in which the tax has accrued, the total value of the transactions taxed under this scheme broken down by tax rates. The total amount, resulting from the sum of all these, will be the amount to be paid in Spain.
- Keep a register of transactions for 10 years. In addition, they must issue and deliver invoices for the operations carried out under this regime.
- Register the transactions corresponding to the special one-stop scheme in their VAT registration books.
With regard to the deduction of input VAT, they will not be able to deduct the VAT incurred in carrying out their transactions in the aforementioned tax returns-settlements. These quotas may be deducted through the normal returns (general scheme) which they must submit, without distinguishing between the quotas corresponding to one or other transactions.
Registration obligations
Entrepreneurs and professionals covered by the Union scheme must keep a register of the transactions included in this special scheme. To this end, the register must contain the following information:
- The Member State of consumption in which the transactions were carried out.
- The type of services supplied or the description and quantity of the goods supplied.
- the date on which the transaction was carried out
- The taxable amount with an indication of the currency used.
- Any subsequent increase or reduction in the taxable amount.
- The rate of tax applied.
- The amount of tax due with an indication of the currency used.
- The date and amount of payments received.
- Any advance payment received before the transaction is carried out.
- The information contained on the invoice, if issued.
- The information used to determine the place of establishment of the customer, or his domicile or habitual residence, in the case of services, and, in the case of goods, the information used to determine the place where dispatch or transport of the goods begins and ends.
- Any evidence of possible refunds of goods, including the taxable amount and the rate of tax applied.
C.- Digital interfaces: online platforms, portals and marketplaces.
It should be noted that the new features essentially concern digital interfaces facilitating supplies of goods. Facilitating" means the use of an electronic interface to enable a customer and a supplier offering goods for sale through the electronic interface to enter into a contact which results in a supply of goods or services through that electronic interface to that customer. Entrepreneurs or professionals who own a digital interface are considered to be taxable persons and are liable to pay the tax when they facilitate the following sales:
- Distance sales of goods imported from third countries or territories in consignments whose intrinsic value does not exceed EUR 150.
- Deliveries of goods within the Community by a supplier not established in the Community to final consumers.
This fiction has important tax implications:
- Two supplies of goods are made, one from the supplier to the interface holder and one by the interface holder to the final consumer. The accrual of both supplies occurs with the acceptance of payment from the customer.
- The trader or professional owner of the digital interface may make use of the special one-stop schemes for the declaration-settlement of the VAT derived from these transactions for which he is a taxable person.
On the other hand, entrepreneurs or professionals owning a digital interface will have certain registration obligations.
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