E-commerce: New VAT Rules Proposed by the Commission

On December 1st 2016, the European Commission published a set of proposed amendments to the EU VAT legislation currently in force (the “Proposal”). The suggested measures aim at improving the VAT environment for e-commerce businesses in the EU with a particular focus on small and medium size enterprises.

With (intended) effect as of January 1st 2018, the Proposal provides that a supplier may opt to locate cross-border electronically supplied services in the Member State of establishment of the service provider, in case the total volume of such cross-border electronic supplies carried out by the supplier does not exceed EUR 10,000.- in the contemplated calendar year. Under the standard rules these services are located in the Member State of the recipient. This option should allow start-ups and small businesses to avoid the obligation to register in multiple Member States or to use the mini-one-stop-shop scheme.

Other simplification measures notably include the extension of the possibility to apply the invoicing and record keeping rules applicable in the Member State in which the supplier is established instead of the Member State in which the supply is deemed to be located. The same should apply with respect to the collection of pieces of evidence by small and medium size enterprises when assessing where their customer is based.

The Proposal furthermore intends to extend the scope of the mini-one-stop-shop scheme allowing businesses to avoid multiple registrations and to report and pay the VAT collected to one single VAT authority. The scheme is notably planned to be opened, as from January 1st 2018, to taxable persons who are not established in the EU but are nevertheless registered in a Member State e.g. because they carry out occasional transactions subject to VAT in that Member State. In addition, as from January 1st 2021, the scheme will be extended to distance sales of goods and to services other than electronically supplied services.This measure is a major step forward in administrative simplification and should be welcomed by a large number of small and medium size enterprises.

Finally, the Commission seems to recognise the current inconsistency in the taxation of physical books/journals and e-books/e-papers, as it suggests to allow Member States to align the rates applicable to both types of publications.

"Should the Commission proposal be adopted, Luxembourg could apply its super-reduced rate of 3% to e-publications as from January 1st 2018."