December 19, 2016

The Commission has unveiled a series of measures to improve the Value Added Tax environment for e-commerce businesses in the EU. The proposals aim to allow consumers and companies, in particular start-ups and SMEs, to buy and sell goods and services more easily online and are part of the Commission’s Digital Single Market Strategy.

By introducing an EU wide portal for online VAT payments (the “One Stop Shop”), VAT compliance expenses will be significantly reduced, saving businesses across the EU €2.3 billion a year, the Commission says. The new rules will also ensure that VAT is paid in the Member State of the final consumer, leading to a fairer distribution of tax revenues amongst EU countries. The proposals would help Member States to recoup the current estimated €5 billion of lost VAT on online sales every year. Estimated lost revenues are likely to reach €7 billion by 2020. It is therefore essential that action is taken now, the Commission says.

The Commission is also delivering on its pledge to enable Member States to apply the same VAT rate to e-publications such as e-books and online newspapers as for their printed equivalents, removing provisions that excluded e-publications from the favourable tax treatment allowed for traditional printed publications (see item under “Publishing”).

Commissioner Andrus Ansip said: “We are delivering on our promises to unlock e-commerce in Europe. We have already proposed to make parcel delivery more affordable and efficient, to protect consumers better when they buy online and to tackle unjustified geo-blocking. Now we simplify VAT rules: the last piece in the puzzle. Today’s proposal will not only boost businesses, especially the smallest ones and startups, but also make public services more efficient and increase cooperation across borders”.

The Commission is proposing:

• new rules allowing companies that sell goods online to deal easily with all their EU VAT obligations in one place;
• to simplify VAT rules for startups and micro-businesses selling online; VAT on cross-border sales under €10,000 will be handled domestically. SMEs will benefit from simpler procedures for cross-border sales of up to €100,000 to make life easier;
• action against VAT fraud from outside the EU, which can distort the market and create unfair competition;
• to enable Member States to reduce VAT rates for e-publications such as e-books and online newspapers.

These legislative proposals will now be submitted to the European Parliament for consultation and to the Council for adoption. To read the Commission’s press release in full, click here.