The new e-commerce rules, which will apply in the European Union (EU) as of 1 July 2021, are currently a hot topic. Although much will change and you will need to be properly prepared for these changes, the new rules also offer many opportunities. And it is these opportunities that we would like to discuss with you. Not just because opportunities are more fun to talk about than rules and restrictions, but also because we love to see businesses thrive! Such opportunities do exist, and in this blog, we will discuss what will change and how these changes can be turned into opportunities. Our focus lies on the position of online shops that sell goods.
What will change for owners of online shops?
Generally speaking, online shops sell goods to consumers. The consumer orders the goods online and has them delivered to an address of choice. This is easy, and has become the preferred (alternative) way of shopping, especially during the corona crisis. Sales are subject to VAT. The webshop must report this VAT to the Dutch Tax Authorities.
If goods are sold within the Netherlands, the VAT consequences are relatively straightforward. However, it gets more complicated if goods are sent from the Netherlands to another EU country, for example Germany. This complication is a result of the fact that, in principle, sales to consumers are subject to VAT in the country in which the goods are delivered. In our example, this sale would lead to VAT obligations in Germany. Currently, certain thresholds apply, which mean that an immediate obligation to pay VAT to, in this example, the German tax authorities, will not necessarily arise from the first transaction onward. However, despite these thresholds, this still forms an impediment to opening up your webshop to clients in the whole EU.
Where do the opportunities lie?
The new rules offer a solution for this problem. In the new situation, it will be possible to account for all sales to consumers within the EU in one special return. This will of course make a big difference, as a webshop will no longer have to consider whether the VAT obligations are outweighed by the revenue. Logistics aside, VAT should no longer be much of a hurdle when it comes to selling goods to customers in the whole EU.
This is a great opportunity, because your potential market may increase substantially. Instead of 17 million potential clients, a Dutch webshop will soon have access to 450 million potential clients. As your market becomes 26 times larger, the turnover could increase significantly. Your webshop could flourish throughout the whole EU. In any case, VAT reporting obligations need no longer form a barrier to your success.
Additionally to using the new rules, it is also possible to obtain an exemption for import VAT under certain conditions. For businesses that import goods from for example, the USA, Asia or Great Britain, and then sell these goods to consumers in the EU, this is particularly advantageous, as it offers a cashflow advantage. After all, rather than you having to request a refund in a VAT return, the import VAT would (under certain conditions) no longer be effectively due at all.
All things considered, the new rules do not really restrict online shops in any way, nor add any useless bureaucracy. Quite the opposite: the new rules for e-commerce offer great opportunities for your webshop!
How can you benefit from these opportunities?
First of all, it is important to determine which aspects of the new rules apply to your webshop, and whether you wish to make use of the new rules (they are not mandatory). We have previously published extensively on the substantive provisions. This information can be found here.
Next, you need to discuss with your logistics partner whether the envisaged plans are feasible.
Also, we strongly advise you to enlist the help of a VAT advisor, to guide you through the process. It is also important to note that the new rules only allow for very limited retroactive application. It is therefore very important to have your preparations finalised before 1 July 2021, if your webshop wants to make full use of these opportunities.
This content was published more than six months ago. Because legislation and regulation is constantly evolving, we recommend that you contact your Baker Tilly consultant to find out whether this information is still current and has consequences (or offers opportunities) for your situation. Your consultant will be happy to discuss the latest state of affairs with you.
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