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On 1 July 2021, the Electronic Commerce Directives Implementation Act came into force. This regulation is important for online shops, among others, but certainly also for all other entrepreneurs who supply goods to customers who are not VAT registered.
Belastingdienst's automation systems are not ready yet. Therefore, a so-called emergency trail is being used. This means that VAT returns submitted in the Netherlands via the new OSS (see below) are (largely) processed manually for the time being.
Distance selling
The place of delivery of goods transported or shipped in connection with the delivery is where the goods arrive, if:
- the customer is a non-BTW customer[1] and;
- the goods are directly or indirectly transported or dispatched by or on behalf of the entrepreneur making the delivery[2] and;
- the threshold is exceeded[3] and;
- it does not concern the supply of:
- goods delivered after assembly or installation by or on behalf of the supplier;
- new means of transport;
- second-hand goods, works of art, collectors' items and antiques, if supplied under the margin scheme;
- goods using the auction scheme.
Example
A consumer residing in Germany orders a watch from an online shop based in the Netherlands. The online shop sends the watch as a postal parcel to the German customer.
Elaboration
Because the goods are supplied to a non-VAT trader and dispatched by the online shop, the place of supply for VAT purposes is in the Member State of arrival (Germany).
Except when the total turnover realised in the calendar year by the online shop with such deliveries in Germany did not exceed the threshold.
The distance selling scheme achieves the objective of VAT. This objective implies that VAT should weigh on the consumption of the supply. This should, of course, be the VAT of the country where the consumption takes place (destination country principle).
The distance selling scheme prevents VAT from giving a competitive advantage. Because the supply is subject to the VAT of the country of residence of the customer, entrepreneurs established in that country are not put at a competitive disadvantage due to lower VAT pressure (rates) in other member states.
VAT liability in another Member State
Therefore, the consequence of applying the distance selling scheme is that the place of supply for VAT is where the purchasing consumer resides. As a result, the entrepreneur has to pay the VAT of the country where the purchasing consumer lives. To do so, this entrepreneur must report to the tax authorities of the country concerned and remit VAT there based on the regulations applicable in that country.
Example
On the supply described in the previous example, the webshop does not pay 21% Dutch VAT to the Dutch tax authorities, but 19% German Mehrwertseuer to the German tax authorities (assuming, of course, that the threshold is exceeded).
Although the distance sales, after exceeding the threshold, are taxed in the other member state, they must also be accounted for in the Dutch VAT return under section 3c (Installation/remote sales within the EU).
Customer resides outside the EU
If the purchasing consumer lives outside the European Union, the distance selling scheme does not apply. The supplied good is then exported from the European Union. In respect of such a supply, VAT is due at the rate of 0%. VAT may be due on importation into the customer's country of residence. This depends on the VAT rules of the country concerned.
Simplification/one-stop shop system
One threshold
From 1 July 2021, the thresholds applicable separately per member state have been replaced by a single threshold applicable to the total turnover within the EU. This threshold is €10,000 per calendar year. As a result, from 1 July 2021, entrepreneurs will be subject to VAT much more quickly in the Member States where their customers are established.
For this threshold, the total turnover relating to:
- all distance sales of goods, and;
- all telecommunications, broadcasting and electronic services provided to non-VAT operators.
This threshold applies only to traders established in only one Member State. Traders established in several Member States are therefore directly liable for VAT for all their distance sales in the Member State where their customers are established or resident.
One-stop shop
The remittance of VAT in individual Member States has been simplified through what is known as a one-stop shop (OSS) system. This system means that VAT for distance sales can be declared and remitted in all member states through a one-stop shop in the member state value performing trader is established.
The use of this one-stop shop system is a choice. The main rule remains that traders pay VAT in the Member State where the place of supply for VAT is located.
A trader who opts for the application of the one-stop shop system makes that choice in respect of all intra-Community distance sales and electronic services. It is not possible to opt for the one-stop shop system in relation to one Member State and pay VAT in that Member State in another.
An operator liable for VAT in one or more Member States, for example if domestic supplies are carried out in that Member State, cannot opt for the one-stop shop system. This operator must therefore register in all Member States where customers of distance sales and electronic services reside.
Traders opting for the one-location system must cancel their VAT identification numbers in all other Member States (if possible).
PLEASE NOTE: despite VAT being declared via the Dutch tax authorities under the one-stop-shop system, all levy rules (such as, for example, the rate) of the country of residence of the customer must of course be applied. The European Union website contains an overview of the VAT rules, as they apply in the member states: https://europa.eu/youreurope/business/taxation/vat/vat-rules-rates/index_nl.htm.
And there is the possibility to check the VAT rate in member states by type of performance: https://ec.europa.eu/taxation_customs/tedb/vatSearchForm.html
Example
The German Mehrwertsteuer in our example does not have to be remitted by the Dutch webshop in Germany. The remittance is done through the Dutch counter and is settled by the Dutch government with the German government.
However, with regard to the German Mehrwertsteuer paid in the Netherlands, all German rules must be complied with. Thus, not the Dutch rate (of 21%), but the German rate (of 19%) must be used.
The VAT declaration through the one-stop-shop system must be done in addition to the regular Dutch VAT declaration. This VAT declaration must be done every quarter, even in quarters in which no qualifying distance sales (or services) were made.
The one-stop shop can only be used for the remittance of VAT.
Entrepreneurs paying VAT on expenses or investments in (or more) other European Union member state(s) must opt for registration in the relevant country.
Invoice
For the preparation of a VAT invoice, in the context of distance sales and electronic services, the rules of the Member State where the performing entrepreneur is established apply. Obviously if and insofar as a VAT invoice is drawn up (this is not required in most cases for supplies to non-entrepreneurs).
Administrative obligations
Checking the accuracy of VAT returns submitted via the One Stop Shop is, of course, the responsibility of the authorities of the Member State where the VAT has to be paid. A number of Member States have agreed that requests for information regarding these declarations go through the Member State where the declaration was submitted with the One Stop Shop. In the Netherlands, this is included in Article 28x of the Turnover Tax Act 1968.
These records must contain the following information[4]:
- the Member State where the service is provided;
- the type of service provided;
- the date on which the service was provided;
- the taxable amount with indication of the currency used;
- any subsequent increase or decrease in the taxable amount;
- The VAT rate applied;
- The amount of VAT due indicating the currency used;
- the date and amount of payments received;
- any advance payments received before the service has been provided;
- if an invoice is issued, the details mentioned on the invoice;
- the name of the customer, if known to the taxpayer;
- details of where the customer is located or has its domicile or usual residence.
The data required under this information obligation must be provided electronically to the authorities of the Member State of residence of the purchasing consumer.
REMEMBER: the retention obligation for (this part of) the records is longer (i.e. it is 10 years) than the general retention obligation (of 7 years).
This note describes the elements of the bill most commonly encountered in practice. Differing situations require further consideration.
This note is intended to set out the scheme in broad terms. For the sake of readability, matters have therefore been simplified. VWG is not liable for the consequences of actions taken or not taken as a result of this memorandum.
[1] This amounts to all customers who cannot purchase the goods on a (valid) VAT identification number. In addition to genuine private individuals, this may include, for example, entrepreneurs who apply the small business scheme or agricultural scheme in their Member State of establishment. Or governments, acting in their capacity as public authorities.
[2] In the Court of Justice judgment of 18 June 2020, no C-276/18 (Crack grease), the question is whether the transport of the goods is carried out by or on behalf of the supplier of the goods. The Court decides that this is the case where the supplier plays a determining role in initiating the shipment or transport of the goods and in organising its essential stages.
[3] See hiena.
[4] Implementing regulation EU 282/2011.