New EU VAT and E-Commerce legislation: an overview by Jochen Meischke
Since the 1992 Maastricht Treaty, free movement of goods has been in place within member states of the European Union. This also applies to web shops that sell abroad. Excise duties, such as Value Added Tax (VAT), differ considerably from country to country. New European legislation is now aiming to change that. Starting July 1st, European web shops have to charge the VAT of the country in which the customer resides. In addition, a declaration must be made in the individual member states or the so-called Union scheme can be used (more on this later). An important detail: these new rules apply to web shops with a turnover of € 10,000 or more outside the Netherlands. Does this apply to your business? Then read up on what the new rules mean for you.
Cut-off point at 10K foreign sales
If you are an (online) entrepreneur and you deliver products from the Netherlands to customers from another European member state (or business customers without a VAT number), then you are doing what the government formally calls "distance selling". The most common type of distance selling is through web shops. Here, the € 10,000 turnover mentioned before is important: does less than €10,000 of your turnover come from other EU countries?
Then you may charge these customers the Dutch VAT rates and use the so called OSS union scheme.
Do you have more than € 10,000 in turnover with customers from other member states? Then you have to charge their local VAT rate. It does not stop there: you must also be able to display the applying prices in your webshop. So visitors from other member states must be able to see their correct (total) price when they order goods from you.
VAT exemption for cheap packages outside the EU is cancelled
Simultaneously with this change, the VAT exemption for packages from outside the European Union with a value under € 22 will also be changed. This exemption will expire completely. Ordering something small from, for example, China via AliExpress can suddenly become a lot more expensive. This can have major consequences for some online retailers and web shops that are specifically catering to products in this price range.
Don’t wait too long
The Dutch Tax and Customs Administration (‘Belastingdienst’) has created a page (in Dutch) where you can find more information about the new European rules regarding VAT, web shops and e-commerce. See also this overview from the European Commission. July 1 may not seem right around the corner, but don't wait too long with adjustments in your webshop. This way you will not be faced with unpleasant surprises this summer and you‘ll be offering your customers correct services right from the start when the new rules apply. Do you want go through the necessary adjustments for your Shopify webshop with Code?
Don’t hesitate to contact us. We are happy to help you!