The coronavirus and the resulting closures of stores have prompted consumers to do their shopping online more than ever, either at local webshops or at major players abroad. A lot of retailers have recently jumped on the bandwagon of e-commerce and have (further) shaped their online store. E-commerce has its own set of VAT rules which, with the expansion of the Mini One Stop Shop (MOSS) to the One Stop Shop (OSS), will change dramatically from 1 July. But not only these new VAT rules should be taken into account, also legally the specific regulations should not be lost sight of.
1 VAT rules e-commerce
1.1 Current Arrangements for Distance Selling
The online sale of goods via a webshop or online marketplace such as Bol.com, whereby the goods are shipped from a country other than the country of arrival, are referred to as distance sales for VAT purposes. To determine whether a supply is taxable in Belgium, the legislator has provided different rules for determining the place of supply depending on the type of supply. It is therefore possible that the place of supply according to VAT law differs from the actual place of supply. The place of supply for distance selling is generally where the transport begins. Belgian web shops selling to Dutch, French or German individuals (B2C) may therefore, in principle, charge Belgian VAT.
To prevent e-commerce players from systematically locating in countries with the lowest VAT rates, threshold amounts were introduced for distance sales in a B2C relationship. Depending on the Member State of arrival of the goods, this threshold is €35,000 or €100,000 on an annual basis. Once the seller has exceeded this threshold, a different place of supply rule comes into effect and the Member State of arrival of the transport is treated as the place of supply for VAT purposes and local VAT must be charged. Given that many countries have opted to introduce the €35,000 threshold, online traders are soon faced with a VAT registration in several EU Member States. This involves a lot of additional formalities and therefore costs. For this reason, the applicable rules were reviewed and this led to the introduction of the new OSS scheme. Within the OSS there are various regulations. Below we will only discuss the most relevant regulation for Belgian web shops, the Union Regulation.
1.2 OSS UNION REGULATION as of July 1, 2021
Intra-community distance sales
As of July 1, 2021, the aforementioned thresholds for distance selling are abolished, which means that in principle, local VAT must be charged on the first B2C sale to a non-Belgian customer. Spanish VAT will be payable on sales to Spanish private individuals, and German VAT to German private individuals.
Consequently, as of July 1, products will be subject to different VAT rates since the VAT rates are different in each member state. This local VAT can be declared and paid via the one-stop-shop system (OSS). This avoids the seller having to register for VAT in each Member State. The use of the OSS is however optional; the seller liable for VAT can still opt to register individually for VAT in the various Member States. However, a combination of both systems is not possible.
Unfortunately, the OSS Union Regulation does not provide simplification for the following situations that frequently occur in the world of e-commerce. The seller will still need to register locally for VAT:
- Webshop sales realized through a stock held in another member state;
- Webshop sales realized through the system of dropshipping where the supplier delivers directly to the end customer.
Starting online retailers or online retailers with limited sales in other EU countries can opt to make use of the exemption for micro enterprises. This allows them to continue to subject such sales to Belgian VAT if they are joint on an annual basis are less than €10,000 excluding VAT. The assessment of whether the threshold has been exceeded must therefore be made for all distance sales together and not per Member State, and this for both the previous and the current calendar year. Note that this threshold already existed for electronic services (TBE) that had to be declared via the MOSS declaration. The threshold therefore applies to both TBE services and intra-Community distance sales.
|So, for Belgian webshops selling goods and shipping from Belgium to individuals in other member states, the Union rule, in summary, means the following:
- From July 1, 2021, VAT must be charged and paid from the member state of arrival of the transport.
- They may choose to:
- Report the VAT of all member states of arrival in one return (OSS) that they submit in Belgium via Intervat and also pay in one go; or
- Register individually for VAT in all member states where they are liable for VAT and submit periodic VAT returns there.
- If the total turnover of distance sales is less than €10,000 excluding VAT, the seller can opt for the micro-enterprise scheme and may, by exception, continue to charge Belgian VAT. The above regulation does not apply as long as the threshold is not exceeded.
B2C services taxable in another member state
In addition to intra-Community distance selling, it will also be possible to use the OSS scheme to declare and pay VAT on certain services provided to individuals in other countries that are subject to VAT there. Examples include work on immovable property and cab services. Entrepreneurs who provide such services will therefore be less likely to be confronted with local VAT registrations.
2 Legal focal points
In addition to a number of important issues regarding VAT, opening a web store also entails a number of legal obligations.
In what follows, we outline some of the important obligations and concerns for you as a business.
2.1 Distance selling regulations
When selling goods and/or services to consumers through e-commerce, the regulations on distance selling apply.
The main (focus) points of these regulations are the pre-contractual information requirements and the right of withdrawal.
- Pre-contractual information obligations
When making an online sale, a seller must first comply with a number of pre-contractual legal information obligations.
These obligations include informing consumers in an unambiguous and clear manner and in clear and understandable language about a number of company details before the consumer places an order in a company's webshop, including, among others:
- The main characteristics of the goods and/or services;
- The company's identity information (including the company number and trade name);
- The company's contact information (geographic address establishment, tel, fax and email address);
- The total price of the goods or services, all taxes included;
- If a right of withdrawal exists: the conditions, period and modalities for exercising that right, and the model form for withdrawal or the non-existence of a right of withdrawal or the circumstances in which the consumer loses his right of withdrawal (see below);
- Return / withdrawal right
Consumers who purchase goods and/or services via the Internet have a statutory right of withdrawal, except in special circumstances. This right of withdrawal means that the consumer for a period of fourteen calendar days can renounce his/her online purchase and return the purchased goods. The cost of return is the responsibility of the consumer.
However, there are a number of exceptions to this right of withdrawal. For example, the online consumer does not have a right of withdrawal in case of:
- the delivery of goods that spoil quickly or with a limited shelf life, for example, fresh fruit or vegetables;
- The delivery of custom-made goods, for example, a custom-made wedding dress;
- The delivery of sealed goods that are not suitable for return for reasons of health protection or hygiene and whose seal has been broken after delivery, for example cosmetics (lipstick, ...);
2.2 Prohibition of geoblocking
Since the end of December 2018, geoblocking has been banned throughout the European Union, with a few exceptions.
Geoblocking (geographical blocking) means denying or slightly restricting access to products and/or services for online shoppers (consumers or companies that use products and/or services exclusively for end use) based on the nationality or residence of the shopper in question.
In concrete terms, this means that customers can only order products and/or services on the website of their member state. As a result, they are bound by the prices on their member state's website.
This practice is thus prohibited.
However, the customer can give his/her express consent with the redirection to the website of his/her Member State, but then the original website(s) that this shopper wanted to consult must always remain accessible to him/her.
In summary, there are many legal obligations that the entrepreneur must comply with when opening a web store. If you want to make sure that your webshop/website is VAT-secured or legally secure, do not hesitate to contact us at firstname.lastname@example.org. We will be happy to help you further.