VAT for Online Businesses


The European Commission proposes to improve the Value Added Tax (VAT) environment for e-commerce businesses in the EU. These proposals will allow consumers and companies, in particular start-ups and SMEs, to buy and sell goods and services more easily online.

By introducing an EU-wide portal for online VAT payments (the ‘One Stop Shop’), VAT compliance expenses will be significantly reduced, saving businesses across the EU €2.3 billion a year, and thus improves competitiveness, resulting in administrative burden to reduce by circa 95%.

The new rules will also ensure that VAT is paid in the Member State of the final consumer, leading to a fairer distribution of tax revenues amongst EU countries.

These proposals would help Member States to recoup the current estimated €5 billion of lost VAT on online sales every year. Estimated lost revenues are likely to reach €7 billion by 2020 if no action is taken.

In particular, the European Commission proposed:

  • Making it easier for online businesses to access other markets;
  • New rules allowing companies that sell goods online to deal easily with all their EU VAT obligations in one place;
  • To simplify VAT rules for startups and micro-businesses selling online, VAT on cross-border sales under €10,000 will be handled domestically. SMEs will benefit from simpler procedures for cross-border sales of up to €100,000 to make life easier;
  • Action against VAT fraud from outside the EU, which can distort the market and create unfair competition; and
  • To enable Member States to apply the same VAT rates to e-publications as they do for their printed equivalents.

These legislative proposals will now be submitted to the European Parliament for consultation and to the Council for adoption.

More information about how Nexia BT can assist you with tax matters can be found online.