New EU VAT rules explained: e-commerce regulations for trading in the EU

Finance and legal

8 July 2021

New VAT e-commerce rules were introduced on 1 July 2021. The reforms affect everyone in the e-commerce supply chain but are particularly significant for people who sell online or run an online marketplace.

According to a European Commission report, these new rules should make it easier for businesses to sell goods online. However, some people have expressed concerns that it could be costly for small and medium-sized businesses in the UK.

It’s important for UK businesses to take the time to understand these changes. Here, AXA summarises the key changes of the new EU VAT e-commerce regulations…


What are the new EU VAT rules?

The VAT rules on cross-border business-to-consumer (B2C) e-commerce activities have changed. Here’s a quick summary of the new rules:

  • Online sellers now register in one EU Member State

Online sellers (including online marketplaces) can now register in one EU Member State. Businesses may be able to close their foreign VAT registrations and deal with VAT in that Member State via a single quarterly VAT return. This return is known as a One-Stop Shop (OSS) single EU VAT return.

The EU says registering with the new OSS will reduce red tape by up to 95%.

  • A new EU-wide €10,000 VAT threshold

A new EU-wide VAT threshold of €10,000 has been introduced. If a business generates more than €10,000 per year in sales to other EU countries, they must register for VAT in each country they sell in. If a business earns less than €10,000, they will report and pay the VAT in their own Member State.

  • The VAT exemption for low-value consignments has been removed

The VAT exemption for small consignments up to €22 has been removed. This means all goods imported in the EU are now subject to VAT. A new Import One Stop Shop (IOSS) has been created to simplify the declaration and payment of VAT for distance sales of goods with a value of up to €150.

This change means EU sellers will no longer be disadvantaged on price, as non-EU sellers will have to charge VAT on all imported goods.

  • Online marketplaces now the ‘deemed supplier’ and VAT collector

Online marketplaces who facilitate the supply of goods are now deemed to be the receiver and supplier of the goods themselves – they are now the ‘deemed supplier’. Online marketplaces will become responsible for charging and collecting VAT on deemed supplier transactions.

Read more about the new VAT e-commerce rules on the European Commission website here.


What is the One Stop Shop (OSS) scheme?

One of the main features of the new EU VAT rules is the introduction of the One-Stop-Shop (OSS) scheme. It’s an extension of the existing Mini One Stop Shop (MOSS) which allows businesses to report VAT in a single EU Member State. Businesses submit the return and pay quarterly via an online portal rather than multiple local returns and payments. The extension of MOSS to OSS means more businesses will benefit from the simplified version of VAT reporting.

Initially, MOSS was only available to businesses who supplied telecommunications, broadcasting and electronic (TBE) services to consumers in the EU. The new OSS scheme is now open to all business-to-consumer (B2C) services taking place in EU Member States where the supplier is not established.

The existing scheme will remain tailored to non-EU businesses (including UK traders) and the new Union-OSS is accessible to EU and non-EU businesses, including online marketplaces.

Find out more about the new One Stop Shop (OSS) scheme here.


How will the changes to EU VAT rules affect UK small businesses?

According to the Financial Times, small and medium-sized businesses who export to EU customers will face the biggest upheaval because of the changes. They claim that 26,000 e-commerce sellers (roughly 10% of the UK sector) will have to register for VAT for the first time under the EU’s new One Stop Shop system. According to tax and finance consultancy Avalara, this will cost a majority of these companies at least €8,000 a year each.

However, accountancy and business advisory firm BDO UK think that businesses who use the One Stop Shop schemes will likely be at an advantage because they won’t be burdened by the normal VAT obligations, which involves reporting and paying in every EU Member State they operate in.


More help and advice for businesses who sell in the EU

Now that the UK has left the EU single market and customs union, the way businesses across the UK operate will change. Here are some resources you might find useful if you sell to customers in the EU: 


More Brexit help and advice

For more information on the impact Brexit may have on you, your business and your insurance, head over to AXA’s dedicated Brexit guidance pages here.