New Value-Added Tax (VAT) rules for online shopping enter into force on 1st July, 2021, as part of
efforts to ensure a more level playing field for all businesses, to simplify cross-border e-commerce
and to introduce greater transparency for EU shoppers when it comes to pricing and consumer
The EU’s VAT system was last updated in 1993 and has not kept pace with the rise in cross-border ecommerce
that has transformed the retail sector in recent years. The Coronavirus pandemic has also
further accelerated the boom in online retail, and again underlined the need for reform to ensure that
the VAT due on online sales gets paid to the country of the consumer. The new rules also respond to
the need to simplify life for shoppers and traders alike.
The new rules come into force on 1 July and will affect online sellers and marketplaces/platforms
both inside and outside the EU, postal operators and couriers, customs and tax administrations, as
well as consumers.
What is changing?
As of 1 July 2021, a number of changes will be introduced to the way that VAT is charged on online
sales, whether consumers buy from traders within or outside the EU:
Under the current system, goods imported into the EU valued at less than €22 by non-EU
companies are exempt from VAT. As of Thursday, this exemption is lifted so that VAT is
charged on all goods entering the EU – just like for goods sold by EU businesses. Studies and
experience have shown that this exemption is being abused, with unscrupulous sellers from
outside the EU mislabelling consignments of goods, e.g. smartphones, in order to benefit from
the exemption. This loophole allows these companies to undercut their EU competitors and
costs EU treasuries an estimated €7 billion a year in fraud, leading to a bigger tax burden for
Currently, e-commerce sellers need to have a VAT registration in each Member State in which
they have a turnover above a certain overall threshold, which varies from country to country.
From 1 July, these different thresholds will be replaced by one common EU threshold of
€10,000 above which the VAT must be paid in the Member State where the goods are
delivered. To simplify life for these companies and to make it much easier for them to sell into
other Member States, online sellers may now register for an electronic portal called the ‘One
Stop Shop’ where they can take care of all of their VAT obligations for their sales across the
whole of the EU. This €10,000 threshold is already applicable for electronic services sold online
Rather than grappling with complicated procedures in other countries, they can register in their own
Member State and in their own language. Once registered, the online retailer can notify and pay VAT
in the One Stop Shop for all of their EU sales via a quarterly declaration. The One Stop Shop will take
care of transmitting the VAT to the respective Member State.
In the same vein, the introduction of an Import One Stop Shop for non-EU sellers will allow
them to register easily for VAT in the EU, and will ensure that the correct amount of VAT
makes its way to the Member State in which it is finally due. For consumers, this means a lot
more transparency: when you buy from a non-EU seller or platform registered in the One
Stop Shop, VAT should be part of the price you pay to the seller. That means no more calls
from customs or courier services asking for an extra payment when the goods arrive in your
home country, because the VAT has already been paid.
Already, businesses outside the EU have been registering in large numbers for the Import One Stop
Shop, including the biggest global online marketplaces.