VAT reform for e-commerce: major changes where planned initially for 1 January 2021 but finally postponed to 1 July 2021

Since 1 January 2020, the solidarity for VAT payment for online marketplaces could be established following a 3-step procedure:

• STEP 1: If there are suspicions that a person is evading their obligations to declare or pay VAT, the French tax authorities (FTA) may report the person to the operator of the online plat-form, which must then take “measures to enable the person to regularise their situation”. The online marketplace will have to notify the tax authorities of the measures taken.
• STEP 2: If the presumptions persist after one month from the notification of the measures taken by the online marketplace or, if it has not made said notification, the FTA may issue a formal notice to the platform to take additional measures or, if not, to exclude the person concerned from the online platform. The online marketplace will have to notify the FTA of the measures taken.
• STEP 3: If the aforementioned measures or exclusion are not implemented after one month following the notification, or in the absence of said notification by the online marketplace, the tax due by the person will be solitarily due by the online marketplace.

As of 1 July 2021, online platform operators will no longer be concerned by this measure for:

• distance sales of goods imported from third countries or territories, the value of which does not exceed €150, or
• supplies of goods within the EU carried out by taxable persons established in non-EU countries.

For these goods, the online platform operators will be considered as of that date as having received and supplied the goods (i.e. as buyers/resellers). Initially, these new rules were scheduled to come into force on 1 January 2021 but, due to the Covid-19 pandemic, EU Member States agreed to postpone their entry into force by 6 months. Consequently, as of 1 July 2021, online marketplaces will be subject to VAT for those distance sales.

In brief, from 1 July 2021, online marketplaces will be:

• Subject to VAT for:

›distance sales of goods imported from third countries or territories, the value of which does not exceed €150 (no threshold requested for the overall amount of imports – see below for more details); OR
›supplies of goods within the EU carried out by taxable persons established in non-EU countries.

• Solidarity for VAT payment, if the French tax authorities started the 3-step procedure, for all others transactions, i.e. for:

›distance sales of goods imported from third countries or territories, the value of which exceed €150;›all supplies of goods within the EU carried out by taxable persons established in EU countries.

In addition, please note that the distance selling regime will change according to the Directive UE/2017/2455 as of 1 July 2021 (here also, the entry into force was initially planned for 1 January 2021 but, due to the Covid-19 crisis, member states agreed to postpone their entry into force to 1 July 2021). It is important to note here that the thresh-old for distance selling, the exceeding of which leads to the localisation of the distance sale for intra-Community supply of goods in the State of arrival of the goods, will be harmonised and reduced to €10,000. This threshold will no longer be determined at the level of each Member State, but for all distance sales carried out by an operator in the European Union.

Lastly, a new category of distance selling will be created for supplies of goods dispatched from a third country to a non-VAT taxable person: distance selling of imported goods. These transactions will be subjected to a specific regime when the value does not exceed €150 (this new regime will not be concerned by the threshold of €10,000).