New VAT regulations on e-commerce will come into force today. The regulations are designed to create a level playing field for European traders and sellers from outside the European Union.
22 euros
The main modification is that goods with a value of under 22 euros, when imported into the EU by a non-EU company (often from China), are no longer exempt from VAT. This exemption was regularly abused by deliberately undervaluing goods in hopes of not having to pay VAT. In addition, the fact that customs could only check a fraction of all packages was cleverly exploited. According to the European Commission, this fraud cost the European member states some seven billion euros annually.
Apart from this fraud, European sellers were naturally at a competitive disadvantage because they always had to charge VAT. A 2019 report by France’s Inspectorate General of Finances revealed that 98 per cent of foreign companies active on marketplaces in France were not registered and did not pay VAT, including a large proportion based in China. This inequality should now be halted.
Under the new regulation, online platforms (such as Amazon, CDiscount and Fnac) will now have to account for VAT on behalf of the sellers operating on them. In other words, the platforms are considered to be suppliers of goods and not just intermediaries between a seller and a buyer. This new obligation is combined with the creation of a ‘one-stop shop’, where sellers and platforms can register to comply with their VAT obligations.
For the end consumer, not much will change, except that the consumer can be requested to pay VAT at the time of delivery if it has not been paid at the time of purchase.
Inspections?
Nevertheless, the question remains whether the European tax and customs authorities will be able to check whether all non-European sellers and platforms comply with the new obligations. The French government has already announced that it will intensify its inspections of small parcels to ensure that the correct amount of VAT has been paid.
The new system depends on strict inspections, concludes Stéphane Chasseloup of KPMG in Belgian newspaper La Libre. “This system will only be able to curb fraud if it goes hand in hand with severe inspections at the point where the parcels enter the country.”
