The purpose behind the changes
Sales made to consumers within the EU, both as part of the trading between member states (as well as Northern Ireland) and in terms of import from third countries – including from Great Britain (England, Wales and Scotland) – are, to a large extent carried out via online marketplaces. The EU has been long struggling with effective collection of VAT on such transactions, especially in the case of sellers from outside the EU. In fact, the main challenge posed by sales via electronic interfaces is related to the relatively high administrative burden and costs of settling tax on such transactions borne by companies and fiscal administrations.
Marketplace as a VAT payer
To tackle this issue, the EU VAT e-commerce package brought a raft of provisions imposing a requirement to collect VAT on taxpayers, facilitating certain categories of supplies via electronic interfaces. The main goal is to shift the burden of performing duties stipulated by VAT provisions from a relatively wide group of companies (the ‘deemed suppliers’) to a much smaller group of electronic interface operators.
To achieve it, a new Article 14a was added to the EU VAT Directive, providing that where a taxable person facilitates, through the use of an electronic interface such as a marketplace, platform, portal, or similar means,
- distance sales of goods imported from third countries in consignments of an intrinsic value not exceeding €150
- the supply of goods within the Community by taxable persons not established within the Community to a non-taxable person, those taxable persons shall be deemed to have received and supplied those goods themselves
The above provisions create the fiction that taxable persons facilitating the supplies made by underlying suppliers through the use of an electronic interface are in fact:
- deemed to have received (purchased) those goods themselves (an assumption is made that a B2B supply of goods takes place between the underlying supplier and the electronic interface) and
- deemed to have supplied those goods themselves (an assumption is made that a B2C supply of goods takes place between the electronic interface and the end buyer – that is, the consumer, who actually purchases the goods).
As a result, the underlying supply will have no VAT effects (it will remain VAT transparent), while VAT effects will be brought by the two deemed supplies, where the dispatch or transport of the goods will be always assigned to the deemed supply made by the electronic interfaces to the end buyer. For sales of imported goods, the first supply (between the underlying supplier and the electronic interface, B2B) will be taxed in the third country (the country of dispatch), while in the case of supply of goods within the Community, the amended regulations will provide for exemption with the right of deduction (in Poland 0 % VAT rate).
Consequently, the second B2C supply, that is the one taking place between the electronic interface and the consumer, will be in fact subject to real taxation. This means that the electronic interface operator (such as Amazon, eBay, Alibaba) will be treated as a VAT payer performing supplies of goods to the consumer, with all the consequences it gives rise to, especially in terms of settling, declaring, and documenting such a transaction. Importantly, the electronic interface will be able to apply the VAT-OSS [One-stop shop] and VAT-IOSS [Import one-stop shop] procedures on the same terms as other taxpayers.
It should be kept in mind, however, that this new rule of taxation will relate solely to electronic interfaces that facilitate the specific types of supplies (that is, the distance-sales of goods imported from third countries in consignments of an intrinsic value not exceeding €150; the supply of goods within the Community by taxable persons not established within the Community to a non-taxable person).
A British company sells low-value goods (that is, goods with a value not exceeding €150) to customers in the EU via an electronic interface that facilitate the supplies (an online marketplace). The goods are dispatched directly from a place outside the EU, including Great Britain (England, Wales and Scotland), to customers in the EU (the EU member state of importation is the member state of final destination of goods). The electronic interface is registered for IOSS.
In this situation, the electronic interface becomes the deemed supplier because it facilitates supply of goods with a value not exceeding €150 which are send from a third country. The electronic interface is liable to fulfil the VAT obligations regarding the sales (charge and collect VAT from a customer). The electronic interface registered for the IOSS submits IOSS VAT return containing all IOSS VAT sales of low value goods in the EU broken down per member state of destination and per VAT rate and shows the total VAT due in the EU.
The British company should ensure that the electronic interface has all information about the dispatch or transport of goods taking place from a place outside the territory of EU and should keep evidence of the goods being dispatch or transported in his records.
A British company sells low-value goods (that is with a value not exceeding €150) to customers in Poland via its own online shop. The goods are dispatched directly from a place outside the EU (such as Great Britain (England, Wales and Scotland)) to the customers in Poland (the EU member state of importation is also the member state of final destination of goods).
As of 1 July 2021, all low-value goods imported into EU are subject to VAT.
The British company can register in the IOSS. In such a case, the supply of goods is subject to VAT in Poland. The import of goods will be exempted from import VAT.
If the British company does not register in the IOSS, the place of supply of goods will be Great Britain (the distance-sale of imported goods will not be subject to VAT in EU). However, in such a case, the import of goods will be subject to VAT in Poland.
A British company (established in Great Britain – England, Wales or Scotland) sells goods via an electronic interface that facilitates the supplies (online marketplace). The goods are in stock in Poland. The goods are sent from a Polish warehouse to the Polish consumer.
In this situation, the platform (an online marketplace) will be treated as a deemed supplier because the seller from whom the consumer purchased the goods is a third-country entity. In the case of goods located in the EU (a warehouse in Poland or other EU country), the platform's tax obligation applies to the situation when it facilitates supplies made by firms from third countries (for example, a British seller) to EU consumers (for example, a Polish buyer).
The platform will be obliged to settle VAT and fulfill other obligations (such as invoicing, reporting) related to this supply.
Operator managing an electronic interface
As noted in the explanatory notes to the draft bill implementing the provisions of VAT e-commerce package into the Polish legislation, an “electronic interface” shall mean any device or software allowing to establish contact between the user who is the seller and the user who makes the purchase. The provisions of the amended VAT Act (Article 7a(1)) intentionally list only examples of possible types of electronic interfaces in order to also cover the types thereof that may appear in the future.
Details on what should be understood as “facilitating” are provided by Article 5b of the Council Implementing Regulation (EU) 2019/2026 of 21 November 2019 amending Implementing Regulation (EU) No 282/2011 as well as by the European Commission's Explanatory Notes.
In practice, doubts may arise whether in a specific case we are dealing with an operator managing an "electronic interface" within the meaning of the above-mentioned regulations and whether the electronic interface is used to facilitate sales.
In theory, each case should be assessed on an individual basis, considering the type of business activity carried out by the entity, the purpose of the implemented provisions, and individual actions encompassed by services provided to sellers.
In a situation where we deal with the electronic interface obligated to collect VAT, further considerations should include the operators’ responsibility for VAT collection (within the scope of information on transactions obtained from the sellers) and how the marketplace’s position may be secured in this regard.
The record-keeping obligations
Importantly, according to the VAT e-commerce package provisions, selected operators of electronic interfaces, used to provide services and supply goods to consumers within the EU, shall keep electronic records of these transactions, made available electronically on request to the competent tax authorities.