VAT Working Group
The mission of the VAT (Value Added Tax) working group (“VAT WG”) is to examine the developments proposed by the EU in VAT legislation and take appropriate actions for its members. This includes understanding the EU plans on VAT, keeping members of PostEurop’s European Affairs Committee (“EAC”) informed, and acting upon these plans to influence EU actions.
The VAT WG is involved in elaborating on the provisions laid down in the EU Council Directive 2017/2455 (“VAT e-commerce Directive” or “Directive”) published last 5th December 2017, in which some changes to intra-community distance sales of goods and services, as well as to the distance sales of small consignment imported from third countries were introduced.
Main Activities and Achievements
On 18th December 2015, the VAT WG submitted a position paper in reply to the public consultation launched by European Commission in September 2015 in respect of the commitment in the Digital Single Market strategy to present a proposal in 2016 on modernizing VAT for cross-border e-commerce.
The position paper, published by VAT WG in association with Customs WG, was supported almost unanimously by PostEurop member States.
The position paper highlighted the postal sector specificities’ and the impacts on it deriving from the proposed reform. It was specified that the removal of the VAT exemption for the importation of small consignments from suppliers in third countries will increase the costs of trade with the EU, slow down the operational processes and require significant investment by many stakeholders including economic operators, customs agencies and intermediary in order to collect smaller amount of VAT on a larger proportion of items.
In addition, on 20th May 2016, the VAT Expert Group (VEG) has issued an opinion on the Action Plan on VAT. The VEG welcomed the initiative of the EU Commission to further explore possible options for implementing the destination principle in B2B cross-border trade in order to ensure a level playing field between EU cross-border and domestic transactions and, at the same time, tackling the problem of VAT fraud. However, concerns again were raised regarding the abolishment of the low value threshold for small consignments and its effect on the postal sector.
New VAT rules for cross-border e-commerce
On 5st December 2017 the European Commission published the VAT e-commerce Directive which amend Directive 2006/112/EC and Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and distance sales of goods.
The provisions that could have a direct impact on the activities of postal sector are the following:
- the removal of the existing VAT exemption for the importation of small consignments from third countries (the so called “de minimis threshold”, below 10 or 22 EUR depending on each EU Member State).
The abolishment of the current VAT threshold on imports of small consignments from suppliers located in third countries in a B2C transaction will mean that, at full speed, all imports of goods will be subject to VAT, regardless of their intrinsic value.
- the extension of the existing Mini One Stop Shop (MOSS) to distance sales of goods from third countries.
This provision extends the MOSS system (which is currently used only for telecommunications, broadcasting and electronic services) to distance sales of goods from non-EU countries with an intrinsic value not exceeding 150 EUR. This system (which is called Import One Stop Shop – IOSS) will allow the seller (or an intermediary on his behalf) to register in a single Member State of his choice and to charge, at the time of the online sales, to the customer at the VAT rate applicable in the Member State where the customer is located.
- the introduction of simplified arrangements for global declaration and payment of import VAT for importers of goods destined for final consumer where VAT has not been paid through the IOSS system.
Where VAT is not collected through the IOSS system and for goods under an intrinsic value of 150 EUR destined for final consumers in the EU, the Directive introduces simplified arrangements where VAT is collected directly from the final recipient of the goods by the person presenting the goods to customs, such as postal operators or express couriers.
The Directive is the final act of a journey that started few years ago when the European Commission's Directorate General for Taxation and Customs Union (DG TAXUD) commissioned Deloitte a study on the application of VAT in the cross-border e-commerce situations.
During the study two workshops were organized by Deloitte, where the most relevant stakeholders in the e-commerce market (such as Ebay, Amazon, express couriers and PostEurop, representing postal operators) were invited and four specific meetings (including three Fiscalis) by DG TAXUD.
Considering the huge effects on postal sector deriving from the removal of the VAT exemption on importation of small consignment, the VAT WG has commissioned to Copenhagen Economics a study which could estimate these impacts in terms of costs for the entire system.
The study, published on November 2017, highlighted that:
- the new rules will involve that the cost of collecting VAT will exceed the collected revenue, violating a good tax policy principle according to which the cost of collection must be lower than the tax collected;
- removing the de minimis threshold comes at significant cost to the European economy;
- EU consumers will bear, at the end, costs from the removal of the de minimis threshold;
- the macroeconomic benefits of removing the de minimis threshold are negligible: the positive impact is driven by simplifying measures (most noticeable the extension of the MOSS system), not from the removal of the de minimis threshold.
In addition, PostEurop VAT Working Group has organized three specific meetings with DG TAXUD in the recent years, in order to highlight the criticism that for postal sector deriving from the application of the new rules. During the last meeting held in June 2018, in particular, the Commission gave some interesting informal clarifications on the main issues deriving from the provisions laid down in the Directive, although not all the problems have been solved yet.
Considering that new rules included in the Directive have a direct impact also on Customs side, during 2018 and the beginning of 2019 three specific joint meeting between PostEurop VAT and Customs WG was organized in order to find the best solutions that could mitigate the principal effects on both side deriving from the new adopted provisions.
In one of these meetings, the participant agreed on the proposal of organizing a specific management meeting between PE (represented by President, Secretary General and the Chairman of Customs and VAT WGs) and Directors of the Commission (Director Customs and Director Indirect Taxation and Tax Administration). This high-level meeting was arranged on last 10th October 2018 and, at the end, the Commission’s representatives has proposed to continue the close cooperation and work together giving their availability for a second high-level meeting for the near future.
Finally, last December 2018, the Commission published two proposals of Implementing Regulations to the VAT e-commerce Directive in which some clarifications related in particular to the activities of electronic interfaces (like marketplace, platform or portal) were made. The proposals was approved during the ECOFIN meeting on 12th March 2019.
Starting from 2017, PostEurop is involved with five of its members in the Customs 2020 Project Group, whose objective is to discuss and adopt recommendations on import and export customs formalities related to low value consignments.
The purpose of this Project Group is to provide technical assessment and analysis of current day to day practices and issues that were identified in the sector in order to facilitate decision-makers and stakeholders in their appraisal of options for solutions.
The Project Group is focusing on exploring possibilities to adapt and streamline customs formalities for clearing low value consignments that are released into or out of the customs territory of the EU so that they can be adequately applied to e-commerce trade. Members of PostEurop VAT WG are participating to the Project Group, together with some Customs WG’s representatives.
The Council of the European Union has adopted on 27th June 2016 the Directive 2016/1065 as regards the treatment of vouchers. According to the mentioned Directive:
- discount vouchers, transport tickets, admission tickets to cinemas and museums and postage stamps are excluded;
- each member states have until 31st December 2018 to implement the new rules;
- rules will apply to vouchers issued after 31st December 2018.
Exemption for public postal services
The VAT WG is always involved in monitoring the situation at European Union level of the VAT exemption for public postal services, according to Article 132.1.a of the Directive 2006/12/EC of 28 November 2006.
Updated on 27 March 2019