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In brief

On 30 September 2020, the European Commission published Explanatory Notes on the new VAT e-commerce rules that apply from 1 July 2021, which change how VAT applies to imports and distance sales of goods in the EU. These extensive Explanatory Notes explain and clarify the upcoming VAT rules and provide practical guidance for electronic interfaces (e.g. marketplaces or platforms), suppliers and logistic service providers involved in e-commerce.

Due to COVID-19, the implementation of the VAT e-commerce rules was postponed by six months from 1 January 2021 to 1 July 2021; however, the European Commission recently indicated that further postponement will not occur. Businesses must now urgently prepare for the new rules. The Explanatory Notes offer some useful guidance for this exercise. Although they are not legally binding, it is our experience that all EU member states adhere to the views set out in such notes. After all, representatives of all EU member states were involved in drafting them.

The new VAT rules are intended to combat VAT fraud, facilitate cross-border trade and ensure fair competition for EU businesses. We cannot predict whether these objectives will be met. What we do know, however, is that these rules may require a complete overhaul of current business practice.


The Explanatory Notes provide guidance on the following elements of the new VAT e-commerce rules.

VAT Liability for Online Platforms and Marketplaces

The new VAT rules particularly affect operators of electronic interfaces (online platforms or marketplaces). As of 1 July 2021, such operators must pay the VAT due on certain sales of goods facilitated via their interface. A supply from the third party supplier to the operator will be deemed to occur, followed by a deemed supply (including VAT) by the operator to the consumer. The operator is responsible for accounting for VAT on the latter supply, but only if transactions are facilitated, which is – unfortunately – a rather opaque legal concept. The guidance included in the Explanatory Notes on this topic is therefore very welcome. Areas of uncertainty remain, however, for example with respect to the liability of an operator where it relies on incorrect transaction data provided by a merchant to determine VAT due.

VAT on All Import Shipments

The current exemption for the importation of small consignments (up to EUR 22) will be removed. Instead a new special scheme for distance sales of imported goods may be used for consignments with an intrinsic value not exceeding EUR 150 to report VAT due on those imported goods. This IOSS (Import One Stop Shop) allows reporting and payment of VAT due in all member states through a single registration.

The Explanatory Notes provide for examples of how this IOSS will work in practice and explain concepts such as intermediaries and IOSS VAT identification number.

Distance Sales Simplified

The currently applicable – country specific – thresholds for distance sales of goods will be abolished and replaced by an EU-wide threshold of EUR 10.000 for distance sales of goods and TBE (telecommunication, broadcasting and electronically supplied) services together. Below this threshold VAT is due in the country of the EU supplier. In all other cases, VAT is due in the country where the customer receives the supplies. EU suppliers may however opt to disregard this threshold altogether.
The Explanatory Notes explain the new rules together with some helpful case studies.

One Stop Shop for (Nearly) All

The current VAT MOSS (Mini One Stop Shop) under which TBE-suppliers may use a single registration for payment of the VAT due in all other Member States will be extended to include all B2C services, intra-EU distance sales and certain domestic supplies of goods. This extended facility is referred to as OSS (One Stop Shop).
The Explanatory Notes address the intricacies of this new regime, which consists of a Union-Scheme and a Non-Union Scheme.

Special Arrangements for Logistic Services Providers

Special arrangements are introduced for the importation of goods where neither IOSS, nor the standard VAT collection mechanism are being used. This involves a major overhaul of existing procedures. Postal operators, express carriers and other logistic services providers must urgently prepare for this new situation.

Intrinsic Value Explained

The Explanatory Notes contain a glossary that is rather straightforward for most concepts. Interestingly enough, the glossary does define intrinsic value and how this value can be reduced by separately mentioning transport and insurance costs on the invoice. Only consignments with an intrinsic value not exceeding EUR150 can use the IOSS. This scheme could reduce administrative burden for taxpayers engaged in e-commerce importing into the EU.

Action Needed

Navigating and implementing the new VAT e-commerce rules should be on the top of the agenda of every operator in the digital economy right now. Of course, we are pleased to assist you with the EU-wide implementation of the new rules.


Ana Royuela is a partner in Baker McKenzie’s Tax Practice Group in Barcelona. She regularly handles complex tax matters, as well as tax controversies and litigation. Ms. Royuela has spoken at local and international conferences and client seminars on topics related to her field. She has contributed articles on indirect taxation and tax proceedings to various economic journals, including BNA International Indirect Taxes Journal and lectured on public tax administration. She joined the Firm in 1999.


Kathryn Sewell is a Senior VAT Adviser in Baker McKenzie Services London office.