5th December 2017

EC: VAT and new rules for e-commerce sales

Member States have agreed today on practical new measures to support the digital economy when it comes to VAT compliance, which can currently place heavy burdens on small companies operating online. The new rules should help to accelerate growth for online businesses, in particular startups and SMEs. The measures include:


  • New rules allowing companies that sell goods online to take care of all their VAT obligations in the EU through a digital online portal ('One Stop Shop'), hosted by their own tax administration and in their own language. These rules already exist for online sellers of electronic services ('e-services');
  • For the first time, large online marketplaces will be made responsible for ensuring VAT is collected on sales on their platforms that are made by companies in non-EU countries to EU consumers. This includes sales of goods that are already being stored by non-EU companies in warehouses (so-called 'fulfilment centres') within the EU which can often be used to sell goods fraudulently VAT free to consumers in the EU.
  • To support start-ups and micro-businesses, the introduction of a yearly VAT threshold of €10,000 under which cross-border sales to other countries within the EU are treated as domestic sales for online companies, with VAT paid to their own tax administration. This goes hand in hand with other initiatives such as single invoicing rules. Our aim is to make trading in the single market as similar as possible to trading at home for these companies. On top of this, companies selling cross-border with less than €100,000 cross-border sales will benefit from simplified rules;
  • The removal of the current exemption from VAT for imports of small consignments worth not more than €22 from outside the EU, which leads to unfair competition and distortion for EU companies.


These new rules will have a major effect for companies selling goods and services online that will now be able to benefit from fairer rules, lower compliance costs and reduced administrative burdens. Member States and citizens will benefit from additional VAT revenues of €7 billion annually and a more competitive market in the EU.


Companies that sell e-services such as mobile phone apps can already sell to customers in other Member States while only registering for VAT in their home Member State. They account for all their VAT in a single quarterly return, through an online portal hosted by their home tax administration. VAT revenues are then transferred from the home tax administration to the relevant Member States to which the company has sold e-services to consumers.

The new rules mean that this simplification for e-services will be made available for online sellers of goods and other services as well. At the moment, companies that sell goods or services other than e-services online in other Member States are obliged to register for VAT in all the other EU countries in which they sell to consumers. This adds significant costs and burdens to their operating costs. A move to the single EU VAT portal will be up to 95% less costly for these businesses.

Online sales of goods will be taxed in the same way and at the same rates as their physical equivalents in shops, while the same VAT rate will be charged in the Member State where the EU consumer is based, regardless of where an online retailer is based.

Online companies selling goods and/or e-services cross-border for up to €10 000 yearly will now be able to treat these sales similarly to their domestic sales and therefore deal only with their national tax authority and domestic VAT rules. On top of this, companies selling cross-border with less than €100,000 cross-border sales per year currently need two pieces of evidence to identify the location of their customers. Once the new rules come into force, only one piece of evidence should suffice for these traders. This should provide SMEs with simpler rules (a 'soft landing') on their VAT obligations.


Read the press release.

Members of the American Chamber of Commerce in the Czech Republic