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EC proposes simpler VAT rules to help e-commerce businesses

European Commission sets out proposals for simplified tax rules to “unlock e-commerce and make it easier for online businesses”

The European Commission (EC) has proposed to simplify and improve VAT rules, removing barriers to online trading. 

The commission has set out a series of proposals, including putting in place simpler procedures for startups and small and medium-sized enterprises (SMEs) to sell their goods across different EU countries. The plan includes an EU-wide portal for online VAT payments and taking action against fraud from outside the EU.

The portal, dubbed a “one-stop shop”, is already being used for e-services, such as mobile apps, through which more than €3m in tax was collected last year. The EC said the new rules could help companies reduce their administrative burden by 95%.

Pierre Moscovici, commissioner for economic affairs, taxation and the customs union, said online businesses had long been asking the EC to make their lives easier. 

“Today we are doing that,” he said. “Companies big and small that sell abroad online will now deal with VAT in the same way as they would for sales in their own countries. That means less time wasted, less red tape and fewer costs. 

“We are also simplifying rules for micro-businesses and startups, allowing them to tap into new markets more easily. Our proposals mean that European governments stand to gain an additional €100m a week to spend on services for their citizens.”

Currently, e-commerce businesses have to register for VAT in each country in which they have customers, which can be a significant expense for small companies and startups. 

Under the new proposals, companies can sell goods worth up to €10,000 a year to customers in other EU countries, but must still follow the VAT rules in their home country.

The rules will also be simpler for larger businesses selling goods worth up to €100,000 a year. The measures could come into force by 2018 on e-services and by 2021 for online goods, the EC said.

Earlier this year, a group of tech supplier bodies across the EU called on the EC to keep its promise for an effective digital single market after concerns were raised that recent proposals were seen as “overly proscriptive and fail to embrace the benefits of the digital revolution”. 

Andrus Ansip, vice-president for the digital single market, said the EC was delivering on its promise to “unlock e-commerce in Europe”. 

“We have already proposed to make parcel delivery more affordable and efficient, to protect consumers better when they buy online and to tackle unjustified geo-blocking,” he said. “Now we simplify VAT rules – the last piece in the puzzle. 

“These proposals will not only boost businesses, especially the smallest ones and startups, but will also make public services more efficient and increase cooperation across borders.”

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