From July 2021: change in the delivery threshold in the EU
New regulations in EU mail order from July 1st, 2021 for e-commerce retailers
From July 1, 2021, the new VAT rules will apply to all online retailers with cross-border deliveries to private individuals in all EU member states. The existing VAT system will thus be converted into a uniform and transparent VAT system. But what will change specifically for e-commerce entrepreneurs?
The following rules are still valid until July 1st, 2021: If a company delivers goods from Germany to a private individual in another EU country and arranges for the delivery of these goods, then according to the current rules, this delivery is generally subject to German VAT (19% or 7%).
Note the delivery threshold for cross-border deliveries in the EU
However, the situation is different if an entrepreneur has exceeded a certain delivery threshold for deliveries to private individuals in another EU country in a calendar year. If this is the case, the VAT rate of the respective EU country must be calculated. In Austria, for example, this threshold is 35,000 euros. So if a German entrepreneur has provided services with a total value of more than 35,000 euros to private individuals in Austria in the current or previous calendar year, the German, but the Austrian VAT no longer applies to these services.
However, it is important to note that this threshold differs depending on the EU country. If entrepreneurs exceed the threshold, they must also apply for a sales tax identification number in the other EU country and regularly submit a sales tax return.
Be sure to keep an eye on current legislation
As long as the new regulation has not yet come into force, it is important for retailers to keep track of whether the delivery threshold for a specific EU country has been exceeded. If this is the case, traders should apply for a VAT number in that EU country and calculate the VAT rate there.
What will change from July 1st, 2021?
From July 1st, 2021, the sales threshold per specific EU country will be abolished. For German online retailers, this means that from this point on, deliveries to private individuals in other EU countries must always be taxed at the VAT rate of the EU country of entry of the goods. An EU-wide uniform threshold of 10,000 euros for deliveries is planned. If companies are below this, they can continue to charge German VAT.
New sales tax digital package will simplify the processing of taxes in the future
With the implementation of the sales tax digital package on July 1, 2021, the one-stop-shop procedure (OSS) for goods deliveries to private individuals in other EU member states will also be introduced. OSS simplifies the new VAT regulations, as online retailers will in future have the option of processing the VAT due from other EU countries via a central VAT return at the Federal Central Tax Office (BZSt). If e-commerce retailers make use of this, local tax registration in the respective EU member states is no longer required. Country-specific knowledge of tax regulations is also no longer necessary. In addition, there is no VAT registration requirement.
This is how you can best prepare yourself for the new regulations:
Although the introduction of the new VAT rules will still take a few months and not all the details have yet been clarified, it would be advisable for online retailers to prepare in advance.
It is currently planned that online retailers will be able to register electronically for the use of the OSS procedure from April 1, 2021, so that they can start using the new regulations directly from July 1, 2021.
Therefore, note the following steps:
- Entrepreneurs can apply for participation in the taxation procedure electronically via the BZSt online portal.
- If the OSS procedure starts on July 1st, the registration must be completed by June 30th, 2021 at the latest.
- There are currently no indications that the current delivery thresholds will be halved from January to June 2021, as this is only a six-month period. So far, the Federal Ministry of Finance has not yet announced a halving in the event that the new system comes into force on July 1, 2021.
- With regard to the new delivery threshold of a uniform 10,000 euros, there is still no indication as to whether this will be halved for the period from July to December 2021.
- Therefore, inform yourself regularly on this topic and discuss this with your tax advisor!