The VAT e-commerce package
On 1 July 2021, the second stage of the EU VAT e-commerce package will be implemented. The measures included serve to reform the complex VAT system in the EU, which is characterised by derogations; they are intended to make it simpler, more robust and more fraud-proof.
The new rules take into account technological developments, changes in business models and the globalisation of the economy. And, of course, they are supposed to bring money into the tax collector’s office. – The Commission estimates that, before the reform, EU states will lose tax revenues of around 150 million euros every year.
What do the measures mean for e-commerce?
One of the most relevant innovations for merchants is the abolition of the delivery thresholds, which differ depending on the EU country. Until now, the delivery thresholds for e.g. France, Italy or Austria were 35,000 EUR each, for sales to the Netherlands or Germany 100,000 EUR each. Up to these thresholds, merchants could pay the VAT due on their consignments in their own country. Only when these thresholds were exceeded the VAT had to be paid and reported in the country of destination.
However, these delivery thresholds will now be abolished on 1 July 2021 and replaced by an EU-wide threshold. This new threshold amounts to EUR 10,000 (for all EU countries together; not per EU country!). As soon as cross-border sales to consumer within the EU (net turnover) exceed this amount, merchants must register for VAT purposes in the destination country, apply the current VAT rates and pay and report the VAT to the competent tax authorities.
Regular rate? Reduced? Exemption?
But how are products actually taxed in EU countries? Do they follow the regular or reduced rate? Are they even tax-free or subject to an exemption? This is where VATRules comes into play.
The VATRules database contains all the VAT rates and rules that have to be applied in the EU-27 as well as the UK, Norway and Switzerland and assigns them to the merchant’s respective product groups. plentymarkets merchants can implement VATRules directly in their plenty backend due to the core integration. Fully automated, the VAT rates are delivered on demand, embedded in the order processes and applied.
„With eClear, we have gained a strategic partner who can offer our customers a unique solution for compliant taxation in cross-border e-commerce.“
Scaling business through a quick entry into further markets and product ranges.
With VATRules, merchants always apply the currently applicable tax rates when calculating product prices. Updates or temporary changes are automatically taken into account. This minimises costs and time efforts, as corrections are significantly reduced.
Because of correctly calculated VAT, prices and margins can be optimised, especially according to local conditions. After a classification of the product groups, the so-called assignment process, a fast entry into further markets or even new assortments is made possible.