VAT and e-commerce: what rules apply?

Coming into force on July 1, 2021, the VAT reform for e-commerce aims to ensure fair competition between players in the online sales market. What are the main changes envisaged by this reform? Discover the new rules applicable.

E-commerce: 129 billion euros generated by 2021

Since the introduction of containment in the wake of the Covid-19 crisis, online shopping has risen sharply.

While in 2019 the volume of global e-commerce had already risen by 4% to $26.7 trillion, equivalent to a third of GDP, in 2020 the upward trend continued. Indeed, restrictions introduced as part of the health crisis have pushed the share of online sales from 16% to 19% of total retail sales, according to estimates in a report published by UNCTAD (United Nations Conference on Trade and Development) on May 3, 2021.

In France, the e-commerce sector exceeded 129 billion euros in 2021, marking an increase of 15.1% versus 8.5% in 2020. Over this period, Internet sales sites recorded more than 2.1 billion transactions, an increase of 16%, states FEVAD in a press release dated February 3, 2022 entitled "Bilan du e-commerce en France en 2021: les Français ont dépensé 199 milliards d'euros sur internet".

Introduction of a single VAT threshold for online sales

Implemented in response to the significant growth in online sales, the reform of VAT on e-commerce introduces a single threshold. Until now, companies had to pay this tax in the Member State from which they originated, as long as their distance-selling sales in this territory did not reach a specific annual threshold. This threshold was either 35,000 or 100,000 euros, depending on the country.

From now on, a single threshold of 10,000 euros will apply, above which VAT must be declared and paid in the Member State of consumption. This new rule means that platforms facilitating online sales of goods imported from third countries may now be liable for VAT.

A one-stop shop for declaring and paying VAT

Another key point of the reform is the creation of a one-stop shop that can be used for distance sales located within the European Union and to non-taxable persons. These may be distance sales of intra-Community goods, or sales of goods from a third country in consignments worth 150 euros or less.

This new one-stop shop enables the companies concerned to benefit from a simplified declaration system. They no longer have to register in each of the Member States in which they operate.

The One-Stop VAT Shop (OSS), available from July 1, 2021, replaces the Mini-Office (MOSS) introduced on January 1, 2015. It covers a wider range of transactions and introduces additional simplifications.