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New VAT regulations in Ecommerce operations

Currently the e-commerce It gains followers every day regarding traditional commerce in a global world. These transactions of both goods and services involve the use of new payment methods such as credit cards that are channeled through Internet payment platforms.

Changes produced by Ecommerce

Ecommerce is changing business models, the forms of consumer behavior, as well as the economic relations and the national and international policies.

New consumer habits also mark the taxation of these operations that leads States to implement regulations in the case of community countries have EU regulations and guidelines as a reference. 

changes in Ecommerce VAT

Distance sales regulations

«Distance sales "are the deliveries of goods or the provision of services issued or transported by the seller, with the customer's address being a country different from that of the buyer."

The VII Annual Study of eCommerce in Spain 2020 determines that 72% of Spanish Internet users use the Internet to buy goods and services, this means 22.5 million people

In the specific case of Spain, on July 1, 2021, the Royal Decree 424/2021, of June 15, which modifies the Value Added Tax Regulation, Royal Decree 1624/1992, of December 29, the Regulation and other regulations linked to the billing and taxation of companies. This regulation had not been updated since 1993, so clearly given the advance of electronic commerce in the world, it was obsolete. 

  • Until July 1, 2021, the sales of products or services in an e-commerce within the EU, the VAT that was applied was the from the country of origin, unless the annual turnover of the ecommerce exceeded a certain amount which varied depending on the country (for example in Spain it was €35,000). 

A Spanish online store that sold products or services worth more than €35,000 a year to another community country, the seller had to register with the tax body of the country to which he was supplying the products and pay VAT in this country. .

  • Starting July 1, 2021 In European guidelines and national regulations, a threshold of 10,000 euros is established for these cross-border operations, below which they will be settled in the supplier's country of origin. If the annual billing to clients from other EU member states is greater than 10,000 euros, you must always invoice with the VAT rate of the buyer's country. 

As of July 1, 2021, the threshold of 10,000 euros will be the one who determines where and how to settle the VAT on intra-community sales..

If we had to summarize the objective of the community regulations on VAT that have been transferred to national regulation, it is: 

«Make the Community Digital Single Market prosper by eliminating barriers and current administrative complexity«

The EU has been establishing homogeneous gaming rules for years that apply to all countries:

  • Directive (EU) 2017/2455, of the Council, of December 5, 2017.
  • Directive (EU) 2019/1955, of the Council, of November 21, 2019.
  • Council Implementing Regulation (EU) 2019/2026.

In the 114-page document «Explanatory notes on VAT rules in electronic commerce» published by European Commission Directorate General of Taxation and Customs Union, Indirect Taxation and Tax Administration published in September 2020 improves understanding of EU VAT legislation.

Transactions that are regulated by these community guidelines and regulations; 

'These are deliveries of goods that must be dispatched or transported by the seller, directly or indirectly, or on his own account, from a Member State other than that of arrival of the shipment or transport to the customer; or from a third country or territory«

These directives regarding location of product sales and provision of services and their supervision must be transferred to national regulations before July 1, 2021. 

How does it work in Spain?

In the case of Spain, these European directives are regulated in Royal Decree Law 7/27 of April 27, the Royal Decree 424/2021, of June 15 (RD 424/2021), which modifies, among others, the Value Added Tax Regulation (RIVA). 

The basic objectives of these guidelines and regulations are: 

  1. The SIMPLIFICATION of the taxation of e-commerce operations.
  2. AVOID THE DOUBLE imposition.
  3.  Clearly determine THE PLACE OF TAXATION by the actors involved in the commercial operation, both of goods and services.
  4. Create one SINGLE WINDOW VAT tax settlement. 
  5. ESTABLISH A THRESHOLD to determine the VAT settlement of E-commerce operations between community countries. 
  6. REDUCE FRAUD of cross-border VAT, guaranteeing that intra-community states collect VAT from online commerce operations. 
  7. May all European companies COMPETE IN TRADE digital in IDENTICAL conditions. 
  8. REGULATE THE WORK OF THE MARKETPLACE or online sales platforms such as EBay, AliExpress or Amazon that bring together various ecommerce, will be considered sellers for VAT purposes, having to keep a 10-year record of the Ecommerce sales made as well as be responsible for guaranteeing the payment of VAT when they are exporters. non-EU countries sell through their interface. The final price paid by the consumer must include VAT.
  9. that the SMALL BUSINESSES ARE NOT HARMFUL due to the complexity of liquidating VAT when they operate within the community territory or being harmed by the bureaucracy involved in the liquidation of taxes on these operations.
  10. that the EXPORTERS FROM OUTSIDE THE EU do not see themselves favored over the Community by the small shipments that enter our Union. 
  11. Establish RULES OF GAME for imports carried out from a country located outside the European Union, which will be subject to VAT of the destination member state, regardless of the value of the import.
  12. DO NOT HURT INTRA-COMMUNITY ONLINE SELLERS Compared to the rest, the exemption of 22 euros for goods imported from outside the EU disappears, thus preventing importers from committing fraud by declaring a lower value of the goods and thus unfairly benefiting from this exemption..

The reform that comes into force on July 1; It will simplify, prevent fraud in online commerce operations and create a level playing field for different actors, contributing to achieving a sustainable digital future for European consumers.

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