Newsroom, VAT | 13. December 2022

What will change for “Deemed Supplier” with the reform of VAT in the Digital Age, 2025?

Digital marketplaces or "electronic interfaces" are responsible for taxing their EU-based sellers' sales from 1 January 2025 as part of the EU's "VAT in the Digital Age" reform package. by

From digital platforms responsible for their sellers VAT
From digital platforms responsible for their sellers VAT

This will level the playing field with sellers’ sales from non-EU countries, for which marketplaces have been responsible for invoicing and collecting VAT since 1 July 2021. The changes apply to marketplaces established in the EU and non-EU countries.

Currently, marketplaces are only responsible for imported B2C sales from EU sellers where the value of the consignment is at most EUR 150. In contrast, marketplaces are currently also responsible for collecting VAT on sales from non-EU sellers within the EU, regardless of the value of the sale. The latter is to be extended to sales from EU sellers from 2025. Apart from the additional VAT obligations (see below), this also means further record-keeping obligations for marketplaces.

Who is considered a marketplace?

The EU defines marketplaces as electronic interfaces comprising online marketplaces, portals, platforms or similar electronic means where sellers and buyers can meet and transact. To determine whether the electronic interface facilitates a seller’s transaction and therefore triggers the obligations of a supplier liable for VAT, all three of the following criteria should be met:

  1. The platform sets the terms of the contract.
  2. It authorises the customer’s request for payment
  3. It orders or delivers the goods

However, if the marketplace performs only one of the following functions, it is not a ” fictional transaction “:

  • Listing or advertising of goods
  • Payment processing
  • Redirects to other websites for the execution of transactions

Implementation of the “Deemed Supplier Marketplace” transaction

The marketplace must conduct two transactions to effect the “Deemed Supplier” process – between the seller and then the customer:

  1. Zero-rated sale from the seller to the marketplace: if imported, then outside the scope of EU VAT, i.e. zero-rated. For EU sales, zero-rated with the right to deduct the VAT from the seller to the marketplace.
  2. Local VAT sale by the marketplace to the consumer based on the consumer’s country of residence. The VAT collected must then be paid to the tax authority

Digital and traditional services

In addition to goods, marketplaces are now treated as VAT-liable suppliers for all sales of their third-party sellers (traditional and digital services) to EU consumers. In this case, the marketplace may use the EU OSS return as described above.

Note: Non-EU sellers should use the non-EU OSS if the marketplace is not in the EU.

Marketplaces outside the EU

For marketplaces that are not located in an EU member state, the Deemed Supplier rules also apply. They, too, can use OSS and IOSS, including non-EU IOSS, and they have to appoint an IOSS intermediary (fiscal agent) for the IOSS only.

Record-keeping obligations for IOSS and OSS

Since July 2021, the EU has imposed detailed record-keeping requirements on EU and non-EU marketplaces to support the use of the IOSS and OSS special schemes. In addition to the master data of their sellers, they have to keep detailed transaction data for at least ten years.

Non-EU sellers must pay VAT on the marketplace

Under the EU e-commerce reform package of 1 July 2021, online platforms will now assume VAT obligations for certain transactions of their third-party sellers. However, a loophole for special arrangements remains.

Marketplaces assume the EU VAT obligations of their sellers

To curb VAT fraud and simplify the VAT compliance burden for sellers and tax authorities, the EU has shifted specific VAT collection and reporting obligations from sellers to intermediary marketplaces from 1 July 2021. This applies to transactions on EU and non-EU marketplaces if:

  • Imported sales from outside the EU to EU consumers of consignments not exceeding €150 in value; and
  • Sales of any value by non-EU sellers on marketplaces if the goods were already in the EU at the time of the sale.

In the two cases above, the marketplace first buys the goods from the seller at a zero rate and then immediately sells them to the seller’s customer at the VAT rate of the country where the customer is located. The marketplace must then report and pay the VAT to the relevant Member State of the consumer. This can be done via:

New requirements for e-invoices also apply to marketplaces if they use OSS or IOSS.

Exception for special schemes

However, marketplaces have the option of circumventing the new rules. Instead, they can pass on the obligations to collect and report VAT to postal services and customs agents. These are the so-called special regulations.

Source: https://www.vatcalc.com/eu/eu-marketplace-deemed-supplier-for-eu-sellers-vat-2025/

More on the subject: ViDA - VAT in the Digital Age