VAT in online trading 2021 – what will change? – eCommerce magazine


The modernization of VAT in cross-border trade will come into effect on July 1, 2021. Anita Richter, from the tax technology company eClear, explains in an interview with Christiane Manow-Le Ruyet, editor-in-chief of e-commerce magazine, what needs to be considered when it comes to sales tax in online trading.

Christiane Manow-Le Ruyet: What exactly will change for online retail in terms of sales tax?

Anita Richter: From July 1st, sales to consumers in other EU countries will generally be subject to the local sales tax rules of the EU country to which the goods are being shipped. The trader then has the option of declaring all distance sales within the EU in the Member State in which he is based. This is done in a central declaration, the one-stop shop (OSS), to the responsible tax authority. There is no duty-free limit (22 euros) for imports of goods from third countries. Every import of goods is therefore subject to customs clearance, regardless of the value of the goods.

What do online retailers have to pay attention to from July? Do you fear that this will result in more administrative work?

On closer inspection, there are many peculiarities and additional work for dealers. The retailer is only allowed to make uniform use of the OSS regulation for all EU countries. If he does not do this, he must continue to register for sales tax in all EU countries in which he sells his goods to consumers, regularly submit sales tax declarations and make tax payments. In addition, the OSS simplifications do not apply to local deliveries from warehouses, cross-border transfers between warehouses or to transactions with companies. Dealers who have previously charged German sales tax for their sales to other EU countries must from 1.7. Know the applicable sales tax rate in the country of destination of the goods. A lack of transparency, local peculiarities and constant changes make it difficult for retailers to classify their articles correctly.

Sales tax in online trading: “I recommend retailers to deal with the new regulations as soon as possible”

The modernization of VAT includes, among other things, the abolition of VAT for certain imports of goods. What’s it all about?

Distance sales to the EU from third countries can be exempt from import sales tax up to a material value of 150 euros if the dealer registers for the so-called IOSS, the import OSS in the EU. A general tax exemption cannot be assumed here, however. The sale is still subject to sales tax in the EU country of destination. However, this is not collected during the import, but reported centrally via the IOSS and passed on to the responsible tax authority.

What do online retailers have to do in order to benefit from the new EU-wide VAT regime?

I recommend retailers to deal with the new regulations and the effects on their business as soon as possible. Application deadlines for the OSS / IOSS, necessary registrations in other EU countries and deregistrations must not be missed. Otherwise it can quickly become expensive. Accounting systems, ERP and shop systems have to be adapted with regard to tax determination logics.

Also read: Sales tax in online trading – tax rates fully automated and on demand.

Sales tax online trade, Anita Richter
Image: eClear

About the author: Anita Richter, VP Tax Technology Innovation and in-house tax advisor, is with eClear responsible for business development and innovative tax technology solutions.