EU Online Sellers Hail VAT Reform as ‘Game Changer’

Keep up with the latest developments and legal issues in the telecommunications and emerging technology sectors, with exclusive access to a comprehensive collection of telecommunications law news,...

By Joe Kirwin

Dec. 1 — European electronic commerce merchants hailed proposals to expand the European Union one-stop-shop system for collecting and distributing value-added tax for all cross-border online sales as a “game changer.’'

However, the e-commerce specialists lamented the failure to address a patchwork of more than 75 VAT rates throughout the EU due to varying exemptions across the 28-nation bloc.

Ecommerce Europe, which represents more than 25,000 online sellers in the EU, said the proposed expansion of MOSS will remove one of the biggest barriers that currently impede cross-border online sales in the EU.

“Dealing with 28 different VAT rules and tax administrations is complicated and burdensome for online merchants, especially for smaller ones,’' the trade association said in a Dec. 1 statement. “The extension of the MOSS is a game changer for e-commerce.’'

Ecommerce Europe also noted, however, that even with the extension of the MOSS to all online merchants, the group still have to deal with 75 different VAT rates in the 28 EU member states.

The changes are part of European Commission VAT reform proposals released Dec. 1 designed to boost electronic commerce and digital publishing by reducing some rates and revising costly bureaucratic procedures that large and small companies currently face when trying to sell goods online across borders.

“Companies that sell abroad online will now deal with VAT in the same way as they would for sales in their own countries,’' said Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, at a Dec. 1 news conference. “This means reduced costs for companies, reduced prices for consumers and increased revenue for governments.”

SME Benefits, Small Parcel Penalties

Other components in the proposal, which must gain the unanimous consent of all 28 EU member states before becoming law, include:

  •  businesses with online sales of 10,000 or less can use VAT rules in their home country when doing cross-border sales in another EU country;
  •  small imported parcels to the EU worth 22 euros or more ($23.50) will no longer be allowed VAT free entry into the EU in order to clamp down on fraudulently priced packages.

MOSS

More than a year ago, EU electronic service companies in the telecommunications, broadcasting and other sectors began using a new VAT system known as MOSS—the Mini-One-Stop-Shop. Instead of having to deal with processing VAT in every country in which a vendor does business, the MOSS systems allows companies to file VAT to its home country tax authority, which then transfers the VAT to the country in which the consumer resides.

“The MOSS has been a huge success,’' said European Digital Market Vice President Andrus Ansip at a Dec. 1 press conference. “It has increased revenues by more than 3 billion euros ($3.18 billion) for member states.’'

Newspaper Lifeline

European book and newspaper publishers welcomed proposals that would allow them to charge reduced VAT rates equal to printed publications as “vital’’ to their digital future.

European newspapers, facing dramatic declines in print sales but increases in online purchases, have lobbied hard to allow them to charge VAT on digital sales equal to the reduced rates—in some cases zero rates—allowed for printed publications in many EU member countries.

“This proposal is essential for ensuring press publishers a sustainable future in the digital environment,’' European Newspaper Publisher Association President Carlo Perrone said in a Dec. 1 statement.

He added that the disparity currently between print and digital “no longer reflects reality as citizens consume press content across all existing platforms—paper, the internet, mobile, tablets or social media.’'

Young Readers

The European Publishers Council expressed relief at the new proposal. If approved, it will override a judgment by the European Court of Justice which declared reduced VAT rates for e-books, allowed in France and Luxembourg, to be illegal.

“For publishers, this is crucial to attract new users, especially young readers who expect the digital price to be lower than print and do not accept that higher prices are due to VAT rates,’' Nikolas Moschakis, policy adviser at the European Publishers Council, told Bloomberg BNA in an Dec. 1 e-mail.

To contact the reporter on this story: Joe Kirwin in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

For More Information

The differing European Commission proposals for reform of VAT rules and lower VAT rates for digital publications are at https://ec.europa.eu/taxation_customs/business/vat/vat-legislation-proposed_en.

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Tech & Telecom on Bloomberg Law