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New E-Commerce VAT Rules

2 July 2021

Antoinette Scerri


2 July 2021

Overcoming the barriers to cross-border online sales – this was the primary aim as announced in the Commission’s 2015 Communication ‘A Digital Single Market Strategy for Europe’ and the 2016 Communication on an action plan on VAT ‘Towards a single EU VAT area – Time to decide’.

1st July 2021 brings to affect a number of amendments to Directive 2006/112/EC (the VAT Directive) in relation to the VAT rules applicable to cross-border business-to-consumer (B2C) e-commerce activities.

In particular, the changes will address challenges arising from the VAT regimes for distance sales of goods and from the importation of low value consignments, namely:

1. As EU businesses selling goods online to final consumers located in other Member States need to register and account for VAT in the Member State of the consumer when their sales exceed the distance sales threshold, this imposes a significant administrative burden on traders and impedes the development of intra-EU online trade.

2. Since a VAT exemption is granted for the import of low value goods up to EUR 22 and this exemption leads to abusive practices, Member States lose part of their tax revenues.

3. Since non-EU businesses selling goods from 3rd countries to consumers in the EU can make VAT-free supplies into the EU and are not required to register for VAT, they profit from a clear commercial advantage compared to their EU established competitors. The new rules will place EU businesses on equal footing with non-EU businesses that according to the rules in force before July 2021 do not have to charge VAT, will simplify VAT obligations for businesses engaged in cross-border e-commerce and will deepen the EU single market.

These changes have been incorporated in Maltese VAT legislation through the publication of various legal notices.

Contact us to know more how these changes affect your business!

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