VAT developments: distance selling and e-commerce

Royal Decree-Law 7/2021 finalises the reform of the VAT treatment of e-commerce transactions and establishes the rules for the taxation of supplies of goods and services contracted via the internet or other electronic means by final consumers in the EU.

Background

The 2016 Action Plan designed by the European Commission provides for taxation at destination, irrespective of the status of the recipient, setting a joint EU threshold of €10,000 for services supplied to consumers in other Member States for TRE (telecommunications, radio and television broadcasting), electronically supplied services and distance selling services. The central rule at the heart of this plan is the abandonment of taxation at source and its transfer to the State of consumption not only for the supply of upstream services, but also for the supply of goods. The complex management of these transactions led the European legislator to establish special regimes, characterised by the existence of a one-stop shop, to simplify the management of the tax. It should be borne in mind that the reform mainly affects taxable persons, insofar as it affects any online seller and service provider located in another Member State, although it has a particular impact on companies in the transport, courier or postal services sector. The main measures are as follows:

Distance selling

• The definition of intra-Community distance sales of goods and distance sales of goods imported from third countries or territoriesis included.

This concerns supplies of goods to be dispatched or transported by the seller, directly or indirectly, or on his behalf, from a Member State other than that in which the goods are dispatched or transported to the customer; or from a third country or territory. New means of transport, goods being installed or assembled and goods subject to excise duty are excluded from the arrangements.

• Traders or professionals holding a digital interface who carry out distance sales of goods imported from third countries or third territories in consignments (intrinsic value > €150), or deliveries of goods within the Union by a supplier not established in the EU to final consumers, shall be deemed to have received and delivered on their own behalf such goods and the dispatch or transport is linked to their delivery. Consequently, the interface may become a taxable person.
  • In order to avoid double taxation situations, the supply of the good made by the interface holder will be exempt from VAT and will not limit the right to deduct input VAT for those making the supply.
  • The accrual of tax on the supply made to the trader or professional facilitating the sale or supplies, as well as on the supply made by the trader or professional himself, will occur upon acceptance of payment from the customer. In other words, both supplies are simultaneous, although the first is exempt.

In order to facilitate the administration of the tax, interface holders may make use of the special one-stop-shop arrangements for submitting the tax return, even in the case of domestic supplies.

• Location of distance sales. These sales will be taxed in the Member State where the supplier is established until a common threshold of €10,000 is exceeded for the rest of the territory of the Union and together with the TRE services; and in the Member State of arrival of the dispatch or transport where the final consumer is located as soon as the aforementioned threshold is exceeded.

However, all distance sales may be renounced and taxed in the State of arrival of the goods.

Finally, it should be noted that goods imported from third countries or territories into a Member State other than that of arrival of the transport to the customer will be subject to Spanish VAT if the place of delivery or transport is in Spanish territory. The same applies to sales declared under the import regime or special regime applicable to distance sales of goods imported from third countries or territories.

• Location of ETR services. These services are taxed at the place of supply of the customer once the aforementioned threshold of €10,000 has been exceeded. This threshold will be common to both types of transactions, i.e. distance sales and TRE services (when the recipient is a final consumer), so that the entrepreneur or professional carrying out the two activities must take into account the joint volume to determine when the threshold is exceeded and, therefore, becomes taxable at the destination.

However, it should be remembered that you can waive the threshold and always pay tax at destination.

• A specific register is established for certain transactions by traders or professionals who, using a digital interface, facilitate the supply of goods or services to final consumers. This register must be made available to the Member States concerned by electronic means and will be kept for a period of 10 years.

Special regimes applicable to distance sales

In order to avoid entrepreneurs or professionals supplying services other than BST to non-business or professional recipients having to identify themselves for VAT purposes in each of the Member States where these services are located, they are allowed to submit the tax return via the One Stop Shop (OSS). This option also applies to entrepreneurs or professionals supplying the service who are not established in the EU. A similar special regime is also introduced for distance sales of goods imported from third countries or territories, also establishing an Import One Stop Shop (IOSS), introducing a technical import exemption when distance sales are declared through this special regime. The special regimes that allow control by the Tax Administration are as follows:

• External regime of the Union. Special scheme applicable to services supplied by traders or professionals not established in the Union to recipients who are not traders or professionals acting as such.
• Union scheme. Special scheme applicable to services supplied by traders or professionals established in the Union, but not in the Member State of consumption (intra-Community transactions), to recipients who are not traders or professionals acting as such, to intra-Community distance sales of goods and to domestic supplies of goods by interfaces. In this case, account should be taken of the possible existence of permanent establishments in other Member States, since only services provided in other Member States by such entities should be reported.
• Import regime. Special scheme applicable to distance sales of goods imported from third countries or territories, which may be applied, directly or through an intermediary established in the Community, under certain conditions, to traders or professionals who make distance sales of goods imported from third countries or territories in consignments whose intrinsic value does not exceed €150, with the exception of products subject to excise duty.

Underline that the accrual of tax occurs with the acceptance of payment from the customer.

Entrepreneurs or professionals covered by these regimes fulfil their obligations to the Member State of identification, so that they will pay all the tax due in the territory of the Union in that Member State, regardless of the transactions that take place in the State where they are established. In the case of a trader or business not established in the Union, they shall pay all the tax due throughout the Union in the Member State of identification.

Other measures

The application of a zero percent rate to domestic supplies, imports and intra-Community acquisitions of goods of medical equipment to combat COVID-19, for public, non-profit entities and hospitals, which expired on 30 April 2021 by virtue of Article 6 of Royal Decree-Law 34/2020, of 17 November, is extended until 31 December 2021. Another measure is the elimination of the exemption on low-value imports (those not exceeding 22 euros), with the idea of restoring competition between suppliers from inside and outside the Union. Given the complexity of the regulations, AddVANTE can analyse those operations that may be affected by the above-mentioned changes.