New rules on the charging of value-added tax in e-commerce are coming into force in the EU. They are designed to encourage European businesses to compete with companies that operate outside the EU and therefore do not pay VAT there.
New rules on the collection of value-added tax in electronic commerce are due to come into force in the EU on Thursday. They have been in preparation, but not implemented, for 28 years. In that time, the market has changed dramatically. The main aim now is to encourage European business to compete with companies that operate outside the EU and therefore do not pay such taxes there. The increase in VAT promises additional revenues to the European treasury of around €7 billion a year.
Belgian customs administrator general Christian Vanderwaren said buyers would have to be involved in implementing the new rules:
“The consumer will have to check whether VAT has been added to the original price of the goods. If not, transport costs and customs duties will also have to be paid. After that, the new amount for the purchase will have to be found out. The additional cost in Belgium will be approximately 30% of the original price.
For companies, e-commerce transactions become more complicated. Firstly, goods cheaper than €22, from which they were previously exempt, will be subject to value-added tax. Secondly, companies from outside the EU with invoices over €10,000 will have to register on a single EU-wide website. Belgium’s chief customs officer continues:
“The change will be that non-European companies will be able to register at a single European location. This is called the One Stop Shop. If a company does not choose this system, it will have to register in all EU member states and complete all customs formalities.
This will have economic consequences not only for EU firms and their partners. Antonio Gigliotti, director of financial consultancy Fiscal focus, believes that the VAT reform could also have an impact on international trade as a whole.
“China is very unhappy with the operation. The risks are increasing for him, it will be more difficult for him to open a business in Europe. From July 1 we will see what happens next and what countermeasures countries like China will take”.
Brussels hopes that the reform will make VAT evasion impossible. It is expected to make it easier for companies to declare their goods and transactions. It will be more difficult for customers, who will have to include all costs in the final price when buying goods online if it does not include this tax.