VAT digital package in force since 01.07.21 - need for action by many companies

On 01.07.2021, far-reaching changes for many businesses and online traders came into force as a result of the VAT digital package.

Which online shops are affected by the new regulations?

The new regulations apply to operators of online shops who

  • Deliver to consumers throughout the EU and
  • achieve a turnover of more than € 10,000 per calendar year
  • have not waived a supply threshold regulation

What has changed as a result of the digital VAT package?

As of 01.07.2021, the previous delivery threshold regulation will no longer apply and will be replaced by the so-called distance selling regulation. In contrast to the previous regulation, this regulation only provides for a turnover threshold of € 10,000.

As soon as the turnover threshold of € 10,000.00 is exceeded, online traders are obliged to register and pay VAT in every EU member state in which the subsequent deliveries take place.

Example: An operator of an online shop from Germany with a turnover of more than € 10,000 delivers goods to a consumer from Sweden. According to the regulation applicable from 01.07.2021, VAT must be paid in Sweden according to the law applicable there. Tax registration in Sweden will be required.

Registration required in every EU member state?

The so-called One-Stop-Shop procedure (OSS procedure) will be introduced. The procedure allows you to register voluntarily with the German Federal Central Tax Office (Bundeszentralamt für Steuern ) and to transmit the accruing foreign turnover taxes centrally in a tax return.

Therefore, you do not have to register in several Member States for a fee.

Problem: Price quotations with different VAT rates in the EU member states

The new regulation leads to legal problems with the question of how you, as the operator of an online shop, have to indicate the prices of goods since 01.07.2021. This is because European tax law is not uniformly regulated and different VAT rates therefore apply in the respective EU member states.

However, according to the Price Indication Ordinance, operators of online shops are obliged to indicate gross total prices for goods. In addition, it must be indicated that value added tax is included (e.g. by stating "incl. VAT"). They must therefore include and take into account the VAT rates of the 26 EU member states.

We will be happy to advise you on how you can meet the new legal requirements.

With kind regards

Christopher Pillat, LL.M. (Intellectual Property Law)