Currently, marketplace platforms for VAT only facilitate and are not involved in the actual transactions, so they have no obligation to remit VAT for their vendors. To ease VAT collection in the EU, this rule will change. In certain instances, marketplaces facilitating sales to EU consumers for VAT purposes will become deemed sellers of the products. The supply by the original vendor to the platform will be exempt from VAT.
Under the new rules, online platforms and marketplaces will be responsible for collecting VAT due in the countries of destination in two specific circumstances:
- Imported goods with a maximum value of €150
- Sales by non-EU vendors to EU consumers
All other transactions facilitated by a marketplace will still trigger VAT liability for the original vendor, not the platform—that includes any sales where the vendor, country of origin and country of destination are all within the EU.
By way of example, imagine a Dutch vendor selling to France from an EU stock point. For this sale, French VAT should be reported by the vendor via the Dutch one-stop-shop (OSS) return. However, the same Dutch vendor selling products that are imported and do not have a value exceeding €150—in this scenario, French VAT will need to be reported by the marketplace.
For U.S.-based vendors, different scenarios may apply. If a U.S. vendor sells products through a platform from an EU stock point (local fulfillment), French VAT will be collected by the marketplace. If the U.S. vendor sells from their stock in the U.S., and the value of the products does not exceed €150, French VAT will be collected by the platform or marketplace. However, if the U.S. vendor dispatches products from the U.S. with a value above €150, import VAT will be collected by the vendor.
The upcoming VAT changes in the EU will be quite impactful both for marketplaces and online vendors. Smaller retailers selling directly to consumers in the EU will need to maintain additional VAT rates and arrange for new reporting methods. Larger merchants will have to evaluate if they need to continue foreign VAT registrations or if they can reduce their compliance burden by canceling a few of those registrations.
Marketplaces will now be pulled into VAT requirements for sales, which sellers are currently responsible for.
So, for most actors involved in selling products to final consumers in the EU, timely action is required. Those not prepared for new requirements and without the right tax technology solution will expose themselves to non-compliance risks.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.