Closing VAT loopholes for sales through online platforms

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This article is brought to you in association with the European Parliament.


MEPs on Thursday voted on measures specifying how large online platforms are to contribute to closing loopholes that hinder the collection of VAT.

The new rules, led through Parliament by Ondřej Kovařík (Renew, CZ), would help member states recover around €5 billion in tax revenues lost in the e-commerce sector every year – a figure expected to rise to €7 billion by 2020. In 2017, the unpaid VAT due from all economic sectors in the EU was calculated to stand at around €137 billion.
The directive put to the vote on Thursday supplements the general provisions laid down in the VAT e-commerce directive, approved in 2017 and due to enter into force in 2021. It details how online platforms such as the marketplaces of Amazon, E-Bay or Alibaba are to execute the responsibility they will have from 2021 to ensure that VAT is collected on sales to EU consumers.
Notably, the rules detail the records that platforms must keep on the sales made to help national authorities calculate how much VAT is due, even when sellers from outside the EU have not complied with paying the VAT. Currently, it is difficult for member states to obtain the VAT due on goods sold from outside the EU if the seller does not properly declare these sales.
MEPs have agreed on the changes to the Commission proposal put forward by member states to clarify which member state will be administratively competent for a specific sale, and when an online platform is to be considered as having a role in a sale, and therefore ultimately responsible for ensuring the VAT is collected. MEPs also agreed that the reporting requirements should be supplemented to obtain a breakdown of the VAT due per member state.
Mr Kovařík said, “We need a VAT Regime which is fit for the digital age. Modernising the e-commerce rules will simplify VAT procedures across the single market. This Directive will also contribute to closing existing loopholes that hinder VAT collection.
These new measures are a good example of rules that are fit for the digital age and which will benefit particularly smaller enterprises which aim to do business across the EU.”
Next steps
The council will now need to adopt the final position on this directive. The European Parliament has a consultative role.
Background
The internet has dramatically revolutionised shopping. As a result, the existing rules contained in the 2006 VAT directive are insufficient to know when, how much and where VAT should be collected and to ensure it is effectively collected.
The OECD has estimated that around 67% of e-commerce supplies of goods are made via digital platforms, and the vast majority of these only through the three biggest platforms.

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