As of 1 July 2021, there are changes to the way VAT is handled for online sales from businesses worldwide to consumers (that is, B2C) in the European Union (EU).
The goal is to make life much easier for those eCommerce businesses selling to consumers across the EU’s national borders, and thereby facilitating trade.
The changes can be utilised by businesses outside of the EU, including the UK.
The changes are commonly referred to as the EU VAT E-commerce Package and the two key components are One Stop Shop (OSS) and Import One Stop Shop (IOSS).
Any business that has been using the Mini One-Stop-Shop (MOSS) for certain kinds of digital services will already know of the benefits of this kind of simplification.
The new measures extend MOSS by opening it up to more services and also goods including those imported into the EU, thereby potentially simplifying VAT for many more kinds of sales.
It should be noted from the start that neither OSS nor IOSS are mandatory.
As an alternative, businesses can register for and then both account for and pay VAT in each of the EU countries in which they sell to consumers.
This is administratively onerous, of course, and is one of the reasons why OSS and IOSS were created.
It should also be noted that these new VAT measures are limited to online sales to consumers in the EU.
Business to business (B2B) sales from a business in the UK to a business in an EU country continue as they have following the end of the Brexit transition period. on 1 January 2021, which is to say, B2B sales of services are generally subject to the reverse charge.
Exports of goods should be zero rated, and are then subject to tax in the destination country through the application of import VAT.