On July 1, 2021, the VAT Digital Package introduced far-reaching changes for many businesses and online retailers.
Which online shops are affected by the new regulations?
The new regulations apply to operators of online shops that
- deliver to consumers EU-wide and
- achieve a turnover of over €10,000 per calendar year
- have not opted out of a distance selling threshold regulation
What has changed due to the VAT Digital Package?
As of July 1, 2021, the previous distance selling threshold regulation is abolished and replaced by the so-called distance sales regulation. Unlike before, this regulation only provides for a turnover threshold of €10,000.
It now applies that once the turnover threshold of €10,000 for online shops is exceeded, online retailers are obliged to register in each EU Member State where subsequent deliveries take place and remit VAT there.
Example: An online shop operator from Germany with a turnover exceeding €10,000 delivers goods to a consumer in Sweden. According to the regulation applicable from July 1, 2021, VAT must be remitted in Sweden in accordance with the law applicable there. Tax registration in Sweden becomes necessary.
Is registration required in every EU Member State?
The so-called One-Stop-Shop procedure (OSS procedure) is being introduced. This procedure allows you to voluntarily register with the German Federal Central Tax Office and centrally submit the accrued foreign VAT in a single tax return.
Therefore, you do not need to register at cost in multiple Member States.
Problem: Price indications with different VAT rates in EU Member States
The new regulation leads to legal issues regarding how you, as an online shop operator, must state product prices since July 1, 2021. This is because European tax law is not uniformly regulated, and therefore, different VAT rates apply in the respective EU Member States.
However, according to the Price Indication Ordinance, online shop operators are obliged to state total gross prices for goods. Furthermore, it must be indicated that VAT is included (e.g., by the note 'incl. VAT'). You must therefore calculate and consider the VAT rates of the 26 EU Member States.
We would be pleased to advise you on how you can meet the new legal requirements.
Kind regards
Christopher Pillat, LL.M. (Intellectual Property Law)
Attorney-at-Law
