New VAT rules

The increased interest in online shopping, triggered by the pandemic, has coincided with the entry into force of changes in VAT regulations on e-commerce transactions. These changes result from the solutions adopted by the European Commission. The so-called e-commerce package is currently being discussed in the Polish Parliament. Poland has till the end of June this year to implement the EU regulations.

The new VAT regulations will apply to various types of online transactions. Therefore it is worthwhile to analyze their impact on your business.

Below is a summary of the most important planned changes in VAT on e-commerce along with information about the services we offer to clients conducting e-commerce transactions.

What will change?

„OSS” procedure

How was it so far?

• The VAT provisions provided for special rules of accounting for sales transactions where goods were shipped from one EU country to a consumer (i.e. an entity not required to account for VAT) located in another EU country. These transactions were defined by the VAT Act as "distance selling".

• In the case of "distance selling" transactions, the VAT registration threshold in the Member State where the consumer was located had to be monitored - this threshold was either EUR 35,000.00 or EUR 100,000.00.

• If the threshold for distance selling was not exceeded, the sale of goods could still be taxed at the VAT rates applicable in the country of dispatch (e.g. if goods were sent from Poland, Polish VAT rates could be applied). On the other hand, if you exceeded the threshold in the country of consumption, you had to register for VAT purposes in this country and settle local VAT there (e.g. if goods were sent from Poland to consumers in France and you exceeded the threshold applicable to distance selling in France, you had to register for VAT purposes in France).

• Until now, taxpayers were able to account for VAT on so-called TBE services (i.e. telecommunications, broadcasting and electronic services) provided to EU consumers under the "MOSS" procedure. Thanks to the application of the "MOSS" procedure, there was no need to register for VAT purposes in the countries of consumption - as the "MOSS" procedure made it possible to settle VAT on electronic services provided to consumers from different EU countries within one VAT return.

• In the case of providing services to EU consumers (other than TBE services) where the place of supply was in the country of consumption, you generally had to register for VAT in the country of consumption and account for local VAT there.

How will it be?

• The concept of "Intra-Community Distance Sales of Goods" is to be introduced into the VAT Act ("ICDSG"), which will replace the concept of "distance selling".

• The thresholds for distance selling transactions to EU consumers will change - there will be a single threshold of EUR 10 000 for all EU countries, beyond which there will be an obligation to account for VAT on distance selling transactions in the country of consumption. In order to determine whether the threshold has been exceeded, it will be necessary to add up the total value of supplies of goods made within the scope of the ICDSG as well as the value of TBE services (i.e. telecommunication, broadcasting and electronic services) provided to EU consumers.

• Once the EUR 10 000 threshold is exceeded, the taxpayers will have a choice of how to account for foreign VAT on distance selling transactions (i.e., ICDSG) and electronic services (TBE services) - they will be able to register for VAT in the country where the consumers are located (i.e., as was the case until now) or use the "OSS" procedure.

• A new procedure called One Stop Shop ("OSS") will appear, as an extension of the "MOSS" procedure.

• The "OSS" procedure will allow all ICDSG transactions and TBE services to be reported on a single VAT return. This VAT return will be filed quarterly in the so-called "country of identification" and will contain amounts expressed in EUR. It will be possible to choose the country of "identification" (i.e., the country in which one wishes to account for VAT under the "OSS"). The tax authorities of the "country of identification" will then allocate the VAT to the countries of consumption.

• The "OSS" procedure will also cover services provided to consumers for which the place of supply is the country of consumption (e.g., real estate services, passenger transportation services, culture, arts, sports, science, education, entertainment, etc.).

„IOSS” procedure

How was it so far?

• The VAT Act did not provide a specific definition for transactions involving shipment of goods from third countries to EU consumers.

• Imports of goods contained in consignments of a value not exceeding EUR 22 sent from a third country directly to a consignee in Poland were exempt from VAT, but the exemption did not apply to distance selling transactions (including transactions performed by online stores).

How will it be?

• A definition of "remote sale of imported goods" will be introduced into the VAT Act (abbreviated as "RSIG").

• The VAT exemption for imported goods of small value (i.e. up to EUR 22) will be abolished.

• There will be a new procedure called "IOSS" - its essence will be the exemption from import VAT of goods of small value (i.e. if the value of the consignment does not exceed EUR 150) sent from a third country to a consumer in an EU country. However, the seller will be required to charge VAT at the time of sale of the goods to the EU consumer (at the VAT rates applicable in the countries of consumption). VAT on the sale will be declared via "IOSS" in the country of identification.

• "IOSS" will allow VAT to be accounted for on sales of goods to consumers from different EU countries.

• In order to use the "IOSS", the taxpayer who is not established in EU will have to appoint an intermediary.

• If the "IOSS" is not applied (although it could be), a second mechanism will be available to simplify the accounting for VAT on importation of goods in consignments with a value not exceeding EUR 150. The import VAT will be collected from the person for whom the goods are destined (the consumer) by the person making the customs declaration (e.g. postal operator, courier company, customs agency), who will pay this collected VAT to customs.

• Above the 150 EUR limit, transactions will have to be settled according to general rules.

NOTE

• Registration for the "OSS" and “IOSS” procedures is already possible in Poland via website podatki.gov.pl.

• Sellers using the "OSS" and “IOSS” procedures will be, as a rule, required to charge VAT at the rates applicable in the countries of consumption. This means that before using these procedures, it is recommended to determine the VAT rates for goods sold through the distance selling system / services provided to EU consumers.

Settling VAT through online platforms

How was it so far?

• Online platforms through which suppliers offered and sold their goods were generally not treated as suppliers of goods.

How will it be?

• It will be a legal fiction that in certain situations defined by the VAT Act, online platforms will be treated as if they were making a supply of goods to consumers (even though they are not actually making such a supply).  In such a situation, online platforms will be obliged to collect and account for the VAT due.

What support do we offer?

We offer the following types of services to clients interested in e-commerce:

Tax advisory services

• As an international consulting firm, we operate as a global partnership. Thanks to the fact that we are one integrated team of specialists, exchanging knowledge and experience, we are able to support you in projects requiring knowledge of different tax jurisdictions.

• In connection with the planned changes in VAT on e-commerce, we offer our clients support in the following areas, among others:
  • analysis of the optimal settlement method for e-commerce transactions due to the type of business conducted,
  • assistance in the implementation of new OSS / IOSS procedures (analysis of requirements, development of the procedure implementation process),
  • assistance in defining the obligations related to VAT settlements by online platforms,
  • registration for the purpose of OSS/IOSS procedures,
  • verification of VAT rates in other EU countries,
  • verification of foreign VAT regulations in terms of reporting within OSS procedure,
  • internal audit in order to verify the correctness of settlements resulting from the application of OSS/IOSS procedure,
  • representation services in order to benefit from the IOSS procedure,
  • support in tax audits carried out by Polish and foreign tax administrations.

• We take an individual approach to our clients, which is why we are also open to your needs and suggestions regarding the scope of services.

VAT compliance services

• As part of an international consulting group, at Mazars we combine local tax and accounting expertise with the experience of our colleagues from other countries.

• Should you wish to use OSS or IOSS procedures, but do not have the resources to settle the VAT yourself, we are ready to provide you with VAT compliance services tailored to the specific needs of your business.