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VAT on distance sales (e-commerce) in the European Union

In 2021, changes will be made to the (international) VAT system. Especially for entrepreneurs who do online business with other EU countries something will change. In this article we explain the most important changes and you can read what that means for you as an entrepreneur.

Different threshold amounts

In the current system, the supplier who takes care of the sale and transport of goods to private individuals in other EU countries must pay VAT in the Netherlands. A threshold amount applies for this. If this amount is exceeded in the other EU country, the VAT must not be paid in the Netherlands, but in the country of the customer. Since the threshold amounts are different in each EU country, this arrangement is complicated and creates the necessary administrative burden.
If you do business in different countries, VAT will have to be recorded in addition to the turnover.

What will change?

Legislative proposal on the implementation of guidelines for electronic commerce.
In order to simplify the VAT rules, the European Commission has drawn up the e-commerce directives. The guidelines mean that the 1968 law on turnover tax will be amended in the Netherlands. This adjustment should initially be introduced on 1 January 2021. However, this has been postponed by six months, due to the corona pandemic and Brexit.

The amendment of the law will mean that the threshold amounts will disappear from 1 July 2021. From that date, there will be a general threshold of € 10,000 per year for distance sales. If you stay below this amount, then as a Dutch webshop you will charge Dutch VAT. If you exceed this threshold, you will charge the VAT rate of the EU country where the customer is located.

VAT declaration is made easier 

Suppliers of digital telecommunication, broadcasting and electronic services can currently make use of the MOSS scheme. This Mini One Stop Shop scheme offers these entrepreneurs the opportunity to declare VAT in the country of registration. In order to create a fairer playing field in the European Union, this regulation will be extended to all online sales of goods or services or distance. This means that you declare the VAT on online sales (within the EU) from mid-2021 via the Dutch tax authorities. The Dutch Tax and Customs Administration ensures that the VAT is sent to the correct EU country. Incidentally, the various European VAT rates will continue to exist.

It pays off to determine in advance which scheme you are using

If you would like to make use of the MOSS scheme or would rather pay VAT abroad, you must notify the tax authorities. For small entrepreneurs (who remain below the threshold of € 10,000), it may be wise to think about the distance sales scheme in advance. For example, is the VAT rate in the other EU country lower than in the Netherlands; then it may be cheaper to file a declaration abroad.

Would you like more information about the new VAT rules and consequences for your company? Please contact our VAT specialists.