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VAT rules for online retailers simplified

The finance ministers of the European Union have agreed on simplified tax rules for online retailers. So, instead of registering for VAT in each EU country, online retailers in the future will be able to file a single tax return for the entire European Union. This should reduce costs for ecommerce companies and increase the tax revenues of EU countries.


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The Council of the European Union adopted these new rules yesterday, with Toomas Tõniste, Minister for Finance of Estonia, saying that this revamp of the rules will make the VAT system in Europe fit for the digital economy. “We will achieve both cost savings for businesses and increased tax revenues for the member states. This was a major priority for our presidency.”

Overall saving of €2.3 billion for businesses

The new rules also mean online retailers are no longer obliged to register for VAT in each of the member states in which they sell goods. Based on information from the European Commission, such obligations cost companies around 8 thousand euros for every EU country into which they sell. “The one-stop shop will generate an overall saving of €2.3 billion for businesses and a €7 billion increase in VAT revenues for member states”, the Commission estimates.

Simplification for start-ups and SMEs

For start-ups and small and medium-sized enterprises, things will get easier too. Below 10.000 euros in yearly cross-border online sales, these companies will be able to continue applying VAT rules used in its home country.

The new rules also remove an exemptions for parcels from outside the EU that are worth less than 22 euros. Around 150 million of these small consignments are currently imported free of VAT and many retailers are abusing the current system. “Whilst EU businesses have to apply VAT regardless of the value of the goods sold, imported goods benefit from the exemption and are often undervalued in order to do so.”