New European VAT: What it is and how it affects e-commerce

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New year, new life, goes the well-known saying. In this case, for the European community, new life includes a change in the way VAT is taxed. Under this new European VAT, a company that makes sales to a final consumer in a country other than its own must apply the appropriate local VAT rate.

This change (among others) has been in force since January 1st throughout the European Union, but the scope of this change in the perception of VAT in the e-commerce world has not yet been fully quantified.

[Tweet “Sales made to other countries will be subject to VAT according to the country of destination.”]


Who benefits from this new European VAT?
In principle, this set of new instructions for the application of VAT seeks netherlands phone number example to give competitive advantages to regional enterprises, that is, small and medium-sized companies as opposed to multinational giants that tend to use countries with lower tax burdens.

Who does it hurt?
Ironically, the first people it harms are those it seeks to benefit or protect: regional companies that are small enough to be exempt from VAT in their territory . In concrete figures: approximately 250,000 businesses in Europe, many of them dedicated to the online sale of products and services.

What are the new rules?
The package of changes to VAT seeks to better control e-commerce transactions with a series of measures, including:

Identify the country of the final consumer with two non-conflicting tests (to apply the appropriate VAT amount).
Store information about each transaction for 10 years.
Issuance of electronic invoice, at the request of the consumer.
Report VAT collected in a timely manner.
Comply with VAT regimes according to each country.
Each member country of the European Community has a minimum value for applying VAT on transactions between different countries. However, the new impositions force the standardization of a minimum value for taxing such transactions, therefore it will now be necessary to apply VAT on amounts as low as one euro for the sole fact of selling a product outside the country of origin.

In order to control the normal compliance with tax guidelines, the European Union already has the support of the different tax agencies and secretariats of its member countries to cross-check data and closely monitor operations.