In its call for evidence, the EU Commission asked for views primarily on how Council Regulation (EU) No 904/2010 on administrative cooperation and combating fraud in the field of value added tax, particularly the 2018 amendment, has been applied in practice.
Although this regulation mostly relates to cooperation between EU Member States, the Commission also asked for feedback on how the rules set out in the VAT e-commerce package have been applied since they entered into force on 1 July 2021. ICAEW’s Tax Faculty focussed on this area of the call for evidence, as the e-commerce rules have a significant impact on UK businesses trading with the EU.
The faculty sought views from members on how the VAT e-commerce package is affecting UK businesses. On the basis of this feedback, it submitted four key points for the Commission to consider:
- The e-commerce rules are designed to reduce the need for multiple VAT registrations. However, a UK e-commerce business may still require three EU registrations: two one stop shop (OSS) registrations and one import one stop shop (IOSS) registration.
- The IOSS can only be used for consignments under €150. Although the faculty appreciates that this threshold is in line with the customs duty threshold, it is considered to be too low for many businesses. Many consignments sent from the UK to the EU will exceed this threshold. As a result, businesses will require their customers to act as importer to avoid a requirement to register for VAT in the relevant Member State. A revised threshold of €1,000 was suggested.
- Feedback from members suggested that many small- to medium-size businesses have stopped selling to the EU. The need for, and cost of, representation, and the potential for multiple registrations, mean it is not cost-effective for them to do so.
- The Commission’s explanatory notes on the OSS provide an illustrative list of services that could be declared via the non-Union OSS. Some businesses consider this to be an exhaustive list. It was suggested that this is clarified, as the OSS can be used for all types of services supplied to consumers.
The faculty noted the importance of the first two points in the fight against fraud. Cooperation between tax authorities would be easier if the number of EU VAT registrations any one business was required to hold was reduced.
Read ICAEW REP 59/22 in full.
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