EU ecommerce is facing one of the biggest VAT reforms yet. In addition to new turnover thresholds, it also regulates how your own sales are recorded in something called a one stop shop scheme. Important updates on how online merchants have to tax their foreign sales were expected to take effect at the beginning of this year. The new regulation has now been postponed to 1 July 2021. Our business partner Flagbit gives an overview of the changes. Our Community Maganger Moritz Naczenski also shares some hints and tips.
What’s been the rule for VAT contributions to date?
Within the framework of the European Union, each country has its own turnover threshold, which is set at different levels. For example, the turnover thresholds in France, Italy and Austria are set at €35,000. If, for example, a German online merchants remains below this turnover threshold, they can sell their products abroad at the German VAT bosnia and herzegovina telegram screening rate. But if this turnover threshold is exceeded, they are liable for tax in the respective country and registration is required there. This often results in time-consuming tax returns combined with language problems and conversion into foreign currencies. In short, the currently applicable regulations no longer cover today's ecommerce requirements.
The old regulations:
The turnover threshold differs from country to country
Registration is required in the respective country
Cumbersome tax returns and potential language problems
So what is changing from 1 July 2021?
With this new regulation, the previous turnover thresholds no longer apply and a cumulative threshold of €10,000 is set for all shipments to EU countries. For shipments that exceed this value, you’re liable to pay tax in every country you ship to. This is also described under the term ‘destination principle’. As an alternative, the one stop shop scheme offers a central point for simplified tax registration.