E-commerce, the sales of goods and services online, has become the primary income stream for many freelancers and self-employed people and even more so in light of the impact of the pandemic on proximity working. This, therefore, has all sorts of implications depending on how you are invoicing your clients, processing payments and where you AND your client is located. We are living in a global world, so let’s break down some new changes for all you global gals (and thems, and hims) who may need some guidance if you are selling your services or physical goods online.
Some of you may find you need to go this extra step, beyond the basics for freelancers and VAT. The aim of these new rules is to reduce the administrative burden and costs for the e-commerce industry and to create a level playing field for E.U. and non-E.U. companies. Today, non-E.U. sellers often do not charge E.U. VAT on their sales in the E.U..
The essence of the new rules is that for distance sales, the seller (almost) always has to charge VAT in the buyer's Member State. In principle, this is also the case if the goods come from a third country and are therefore imported beforehand. Originally planned for January 1, 2021, the entry into force was postponed to July 1, 2021 due to the corona crisis.
At the E.U. level, this timely implementation of the digital package / e-commerce package shows the prioritized implementation of the strategy for the digital single market. By extending the applicability of the central contact point (one stop shop), online / mail order retailers, in particular, are exempted from the obligation to register their customers for VAT in each E.U. member state. The planned regulations and simplifications are therefore to be welcomed in particular from an administrative / IT-technical point of view for entrepreneurs and practitioners. This leads to a reduction in administrative work and thus also to cost savings in the long term. In addition, legal certainty is created through uniform threshold values and simple application of the law when issuing invoices.
Abolition of the existing thresholds for intra-Community distance sales to non-entrepreneurs and introduction of a simplification measure for such distance sales
According to the previous regulations, the seller may continue to charge the VAT of his country of residence on these cross-border intra-community distance sales as long as his sales in the buyer's Member State do not exceed a certain threshold. These thresholds are now being abolished. If the seller's intra-Community turnover from distance sales (and from telecommunications, broadcasting and electronically provided services) exceeds the annual threshold of EUR 10,000, they must immediately invoice the VAT of the Member State of the B2C customer.
From now on, however, the seller can carry out all of his compliance obligations through the OSS portal ("one-stop-shop" or "one stop shop"). A separate VAT identification number in each individual member state is no longer required, except in the Member States in which one has a registered office or warehouse. Even sellers who are not based in the E.U. can use this procedure. As soon as a company decides to use the OSS, all sales in Member States that do not have a warehouse must be made using the OSS.
However, the application of the OSS procedure is not an obligation. One can still choose to continue doing everything through local VAT identification numbers and declarations. Of course, regardless, the stands obligations of the German tax. And of course, these were changes long in the works, but do tie in with the way Corona is changing the economy.