New VAT Rules for cross border e-commerce
18 June 2021
The Cyprus Tax Department issued an announcement on 19 May 2021 in respect of the new VAT rules relating to cross-border e-commerce transactions between businesses and consumers (B2C). These new rules will enter into force from 1st of July 2021.
The new VAT e-commerce rules are based on the EU Directives 2017/2455 and 2019/1995 and the EU guideline 2019/2026 whose purpose is to introduce a simplified VAT system for businesses which transact electronically with customers within the EU. The existing Mini One Stop Shop (MOSS) will be extended to a One Stop Shop (OSS). The OSS will now apply to the provision or supply of all goods and services to end consumers situated within the EU by businesses which are based both within the EU and outside the EU (with an establishment within EU). Businesses will now be able to utilize the OSS system to account for VAT in only one EU country eliminating the need to register and account for VAT in multiple countries within the EU and therefore reducing their compliance and administration costs.
Additionally, the current exemption threshold of euro 17 for distance sales of goods dispatched from outside the EU to EU resident consumers is withdrawn with the introduction of a new Import One Stop Shop (IOSS) which will cover imports of all goods of a value up to euro 150. In this case VAT will be charged at the point of sale (the buyer will be charged VAT at the time of purchase thus avoiding customs clearance). The use of IOSS is not compulsory.
Our dedicated tax teams are always at your disposal for discussion and analysis of how the above changes may affect your business.