B2C distant sales of goods by companies doing business in the European Union from a third country or territory: The new level playing field scenario

As much publicized in the media, since the 1st July 2021 there is a new scenario of the VAT treatment of the B2C distant sales of goods of companies operating from outside the European Union when selling to final consumers in any of the 27 member states.

This represents a drastic change in the previous existing status quo where most of these sales benefited from the, now eliminated, exemption for small parcels under 22 Euros, which created an unfair competition as regards the European companies engaged in this type of operations.

Now, since the 1st of July and with the exception resulting from the existence of a threshold for the case of EU companies, any B2C sale within the scope of the new regime will be eligible to the VAT applicable in the country where the final consumer is located, regardless that the same is made either:

• By an EU company that is not established in the same country where the final consumer,
• Or by a company from abroad of the EU VAT territory, so any third country or any of the territories which, regardless of appertain to a member state, are excluded from such a territory (i.e., as happens in Spain with the Canary Islands, Ceuta and Melilla).

The VAT regime for the e-commerce applicable to companies doing B2C business in the difference EU member introduces a level playing field for the said companies where both will be obliged to pay the corresponding VAT to their B2C distant sales to European final consumers, either:

• By following the general VAT regime of the countries involved,
• Or by applying for any of the optional special One Stop Shop (OSS) regimes, so to avoid having to register and comply with the formal obligations in the different member estates where the final consumers are located.

In any case, it is worthwhile noticing the existence of some specialities as to the VAT regime which only apply when the B2C transactions are carried out by companies which operate from outside the EU VAT territory, namely:

• The threshold of 10,000 Euros applicable to EU companies operating from one member state only does not apply. So B2C sales to final consumers in any member state will be eligible to the VAT of the country where the they are located in any case.

• Companies operating from outside the EU VAT territory can apply for the special OSS import regime (IOSS) when the goods must be imported previously to be delivered to the final consumers within the EU. In most cases this would require the appointment of an intermediary established in the EU that takes over the compliance with the formal VAT obligations.

• For the case that the IOSS does not apply, the liquidation of the VAT on the import of the goods by companies operating from outside the EU VAT territory to be delivered to final consumers within the EU are eligible to special import arrangement aiming to simplify the process.

• B2C supplies by companies operating from outside the EU VAT territory taking place via electronic interfaces (i.e. marketplaces such as Amazon, eBay or Ali express) may trigger the assumption that it is the interface which actually supplies the goods and substitutes the actual provider for VAT purposes, having to comply with the formal obligations.