Postponed for six months because of the health crisis, the European VAT reform on B-to-C e-commerce for imported goods will come into force on 1 July. This tax change will have organisational and structural implications for marketplaces.
The year 2020 marked a real turning point for marketplaces: the health crisis and the repeated confinements boosted the activity of these e-commerce professionals in an unprecedented way. All the more so as many companies and sectors have had to accelerate their digitalisation, making marketplaces a model whose value is no longer in question. So much so that its business model is constantly being questioned. The latest example? The VAT reform that will come into force on 1 July 2021. But what are the practical impacts for operators?
A paradigm shift: the marketplace becomes responsible for collecting VAT in certain cases
The purpose of a marketplace is to connect customer-buyers directly with suppliers, without having to manage or finance stocks. The history of the marketplace can be divided into three generations. The first was dedicated to B-to-C trade based on product catalogues, and Amazon has now taken the concept to the extreme. Then came the so-called "service" marketplaces (Uber, Blablacar, Airbnb, etc.) and, finally, a third, more recent generation, on the B-to-B market.
As marketplaces have become increasingly important in the digital ecosystem over the last ten years, a legal vacuum has developed as some merchants did not collect VAT from their buyers, as products imported from outside the European Union were not subject to VAT. This competition was perceived as unfair by other merchants and the 2021 reform put an end to it. The marketplace thus becomes the "presumed merchant" for VAT purposes and will therefore have to declare, collect and pay VAT in the merchant's place in certain cases.
An organisational and transparency evolution
In concrete terms, what will be the consequences for marketplaces? First of all, they will have to identify the flows to be put in place. Indeed, this new regulation now requires marketplaces to collect and pay VAT in two cases
if the products are shipped from a third country to the EU and with a price below 150 euros,
in the case of intra-European delivery with a merchant established outside the EU.
Depending on the case, marketplace solutions will have to allow for automatic and traceable collection of VAT either by the merchant or by the trader.
Another feature is that there used to be a turnover threshold for each EU country below which a merchant was allowed to declare VAT in his own country. In the new reform, a threshold of EUR 10 000 has been established for a merchant's total intra-EU turnover. In order to facilitate the return and collection of VAT, the European Union has set up two one-stop shops, the OSS (one stop shop) and the IOSS (import one stop shop). Registration should be done now in order to be able to declare VAT for the month of July.
In short, this VAT reform will have a very significant impact on marketplaces. On the one hand, at the technical and functional level, because it is necessary to develop the platforms to take into account these new regulations which impact the core of their operation. On the other hand, the question arises as to how the market will react to these new regulations. Indeed, operators and merchants were using this loophole in the tax system to offer very attractive prices. How will they change their strategy in the light of this new situation? The answer will be given in a few months.