[INTERVIEW] Exploring the new EU VAT rules in a post-Brexit market
A critical EU Reform to E-commerce VAT came into force on the 1st of July 2021. It directly impacts non-EU countries exports to European customers. British businesses exporting to European customers should be aware of it and act as soon as possible to adapt.
Watch the interview with Michael Boulanger, CEO of RM Boulanger, Tax representative and VAT expert.
Discover in 3min30 the key points to keep in mind
So, what are the value-added tax rules about?
- Country-specific value-added tax thresholds are being removed: sellers must now charge and collect VAT in every country where their B2C sales in the EU exceed €10,000.
- One-Stop-Shop portals has been set up in each EU Member State so that local VAT is collected at a single point, regardless of where the goods are sold in the EU,
- VAT obligations are transferred from sellers outside the EU to the marketplaces, which has become responsible for paying value-added tax. As a result, sellers based outside the EU have to specify when the marketplace handles the value-added tax for them, in order to avoid double collection. Marketplaces have to charge and collect VAT directly from end customers and declare it to the relevant tax authorities.
- The EU hopes that these rules will help to eradicate VAT fraud on sales to EU customers (estimated at around €5-7 billion per year).
This article could also be of interest for you: [BREXIT] Everything you need to know about VAT and the new EU rules, from 1st July
We asked a specialist on the matter, French Tax Expert, Michael Boulanger to tell us more about it in this Brexit context. Here are the key topics we covered:
“The country-specific thresholds, above which sellers need to invoice and declare VAT, are reduced to ten thousand euros. For example, in France, the threshold was thirty-five thousand euros but in Germany, it was a hundred thousand euros.”
If we take the example of annual sales to EU clients worth just twenty thousand euros, do I need to change the way I deal with value-added tax?
You certainly would need to be able to charge local VAT at the right rate. They are two available online portals to declare and pay EU VAT: the One Stop Shop (OSS) and the Import One Stop Shop (IOSS). Also, non-EU sellers to marketplaces are now liable for VAT payments and VAT are transferred from them.
Concretely how will this impact businesses selling to European clients?
Businesses are affected whether they sell goods from an EU warehouse or directly export goods from non-EU-countries to their European clients. Businesses are, however, not concerned if they only sell goods to professionals, on a B2B basis.
What can businesses do about this now? What are their options?
Several options are available depending on how the flows of goods are organized. However, we anticipate many complications for goods being exported from outside the EU and marketplaces not willing to be responsible for paying VAT, but solutions exist.
The closest solution for British-owned businesses
It is crucial to note that for simple operations after Brexit: import, export, purchases or sales, the easiest solution is fiscal representation. But, for more complex operations, such as multiple imports or re-export of goods, or multiple exports to several EU countries, the easiest solution is either to take up space in bonded warehouses or to set up a company on EU territory.
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Are you a non-EU business selling to European customers? Find out more about this VAT reform and how to preserve your European clients: contact us!