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E-commerce VAT Reforms: An Irish Guide


E-commerce VAT Reforms_ An Irish GuideThe Irish Revenue Commissioners and the European Commission have released new guidance for online marketplaces and digital platforms on the VAT e-commerce rules that are to be introduced from July 1, 2021.

As part of wider reforms, online marketplaces and platforms that facilitate supplies of goods to consumers in Ireland will newly become responsible for ensuring the collection and payment of value-added tax.

Specifically, under the new rules, an online marketplace or platform will be deemed to be making the supplies when they facilitate: 

  • the importation of goods from outside the EU in consignments of an intrinsic value not exceeding €150, regardless of where the underlying supplier is established; and/or
  • intra-EU distance sales of goods and domestic supplies of goods, regardless of the value of goods, where the underlying supplier is established outside the EU.

These and other changes are being introduced in Ireland, and across all the EU member states, based on provisions included in two EU Directives adopted in December 2017 and November 2019 (Directive 2017/2455 and Directive 2019/1995), which are being transposed into Irish law through a Regulation.

Another key change from July 1, 2021, will be the repeal of the current VAT exemption for goods in small consignments of a value of up to €22. From July 1, all goods imported into the EU will be subject to VAT, irrespective of their value.

VAT Administration Reforms

To reduce the administrative burden on importers, a new Import One Stop Shop (IOSS) will be introduced. This will be used for the importation of low-value goods — those not exceeding an intrinsic value of €150, excluding goods subject to excise duty.

The IOSS scheme will allow suppliers importing goods into the EU to declare and pay the VAT due on those goods by submitting a monthly return via the IOSS in the member state where they have registered for the scheme.

Where the IOSS is used, the supplier will charge VAT to the customer at the time of the supply and the goods will not be subject to VAT at the time of importation.

Where the import OSS is not used, a second simplification mechanism will be available for imports. Under this option, import VAT may be collected from customers by the customs declarant – the postal operator, courier firm, or customs agent, etc. – which will pay it to the customs authorities via a monthly payment.

By simplifying the collection of import VAT when consumers buy goods online, the new VAT e-commerce package is intended to increase compliance rates among e-commerce stakeholders.

New One-Stop-Shop

A final change will transform the current VAT Mini One Stop Shop into a One-Stop-Shop.

The VAT Mini One Stop Shop (VAT MOSS) is an electronic system allowing taxable persons supplying telecommunications, broadcasting, and electronic (TBE) services to consumers in the EU to declare and pay the VAT due in all EU member states in one single member state.

As from July 1, 2021, VAT MOSS will be extended to all business-to-consumer services taking place in member states where the supplier is not established, and also to intra-Community distance sales of goods and certain domestic supplies of goods. From that date, it will be known simply as the One-Stop-Shop (OSS).

Under the plans, the two schemes currently covered by MOSS – the Union scheme and the non-Union scheme – will remain in place, but their scope will be extended.

Importantly, the scope of the non-Union scheme (for taxable persons not established in the EU supplying TBE services) will be extended to all services supplied to consumers that take place in a member state in accordance with the place-of-supply rules.

This means that, as from July 1, 2021, businesses not established in the EU that supply services to EU consumers will not need to register for VAT in each member state in which their supplies of services take place. Instead, the VAT due on these supplies can be declared and paid in one single member state via the One Stop Shop. Further, suppliers will not be obligated to appoint a tax representative to use the non-Union scheme.

Guidance Available

As well as the new Tax and Duty Manual from the Irish Revenue Commissioners, taxpayers can refer to detailed guidance released by the European Commission in September 2020.

Specifically, the Commission has released a VAT Explanatory Note focusing on the removal of low-value consignment relief and the One-Stop-Shop changes, and also a Customs Guidance Document, which is intended to complement the VAT Explanatory Notes with further clarification and practical examples on the customs rules, formalities, and processes applicable to imports and the returning of low-value e-commerce goods.

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