Draft legislation regarding implementation of E-commerce Directive put out for public consultation
The Ministry of Finance has put out for public consultation its draft legislation concerning the levying and collection of turnover tax in a cross-border Internet sales context, for stakeholders to respond until the 30th of October next.
The first portion of the European Union’s Directive on Electronic Commerce has been anchored in national legislation since the first of January of this year. The deadline for implementation of the next sections of the Directive – including the supplementary provisions – has been set at the first of January 2021. This will involve a major expansion of value-added tax levying using the MOSS (Mini One Stop Shop) system, whose application to date has remained confined to digital services provided to consumers by entrepreneurs based in a different Member State, but which will eventually straddle the full range of oriented services provided to consumers who are based in Member States other than that of the entrepreneur.
At this moment in time EU-based entrepreneurs who engage in remote sales to consumers of products tend to assume liability for the associated value-added tax in the consumer’s Member State. With effect from the first of January 2021 such supplies of products are to be taxed in the so-called consumer’s Member State, this being where the products in question were located at the time of their shipment or transport to the customer, and in consequence will involve allowances having to be made for the value-added tax regimes and rates of other Member States to a greater extent than is currently the case. The affected entrepreneurs have the option of using the One Stop Shop system in their own Member State for reporting and payment of the value-added tax due and payable in other Member States.
An exception is to be made to the rule that intra-Community remote sales should be taxed in the consumer’s Member State to accommodate the owners of smaller businesses that are based in just the one Member State whose cross-border annual sales total less than 10,000 euros. These business owners will continue to have domestic value-added tax liability at the locally prevailing tax rate.
The value-added tax exemption that currently applies to inbound shipments of products originating with non-EU based entrepreneurs the net asset value of which does not exceed 22 euros is to be abolished.
Non-EU based entrepreneurs who sell cross-border digital services to EU-based consumers will be liable for value-added tax on the relevant services in the consumer’s Member State of residence. The One Stop Shop system will be available to entrepreneurs for filing their value-added tax returns and making the corresponding payments. The application of the scheme in question is to be expanded to include the full range of services performed by non-EU based entrepreneurs to EU-based consumers that are liable for value-added tax in the relevant Member State(s).
Suppliers of shipments of products from outside the EU will be given the opportunity of reporting and paying the associated value-added tax using the import module. This new application of the One Stop Shop system enables any entrepreneur who makes use of it to report and pay the value-added tax no longer to be involved in the tax levying at the moment of actual import. The import module is confined to products whose value does not exceed 150 euros. Excisable products such as wine and tobacco-based products are excluded.
Much of the remote sales of products take place using trading platforms. These platforms are to become liable for any value-added tax on sales that are rendered due and payable by non-EU based entrepreneurs.
A deferred payment scheme is to be introduced for postal and courier services involving no security having to be put up for the value-added tax charge on parcels from outside the EU where the supplier is not a user of the new import module.