From 1 July 2021, marketplaces may become the deemed supplier and VAT collector when they facilitate certain cross-border B2C transactions for third-party sellers.
They would therefore be liable to collect, report and remit the VAT due from the consumer. Whilst the marketplace takes on the VAT rights and obligations of the sale, they do not take on other obligations, such as product liabilities.
To understand where the new rules will apply, the following should be considered:
What is a ‘marketplace’?
The EU Council refers to ‘electronic interfaces’, which includes online marketplaces, platforms, portals or similar means. The role of the marketplace is to introduce customers and sellers offering goods for sale, and who then enter into a contract which results in a taxable supply.
When is the marketplace facilitating the sale?
A marketplace is considered to be facilitating a sale if:
- It controls the terms and conditions of the sale;
- It authorises the charge to the customer in respect of the payment for the supply; and/or
- It orders or delivers the goods.
It is not considered to facilitate the sale if it only provides one of the following services:
- Payment processing;
- Listing or advertising the goods;
- Redirecting customers to other marketplaces.
Which transactions are in scope?
The new VAT treatment will apply when the marketplace is facilitating a B2C sale for:
- Imports by EU and non-EU sellers not exceeding €150; and
- Goods sold by a non-EU seller of any value on a cross border or domestic basis.
Once a deemed supply has been identified, a new two-stage VAT transaction process must be applied.
Two-stage VAT transaction for deemed supplier marketplace sales
Under the new rules, once a seller and customer have agreed a sale, the existing single transaction procedure between the seller and customer will be split into two from a VAT perspective:
- The seller will sell the goods to the marketplace– for imported goods, the sale will be deemed to occur outside the EU. For goods in the EU this supply will be zero-rated and will allow the seller to reclaim any VAT it incurs on purchases.
- The marketplace will sell the goods to the consumer – VAT will be charged based on the rate in force in the consumer’s country. The VAT is due at the earliest of the marketplace receiving the order, commitment, or order to pay from the consumer.
What are the implications?
Post 1 July 2021, marketplaces will be responsible for charging and collecting VAT on deemed supplier transactions although the marketplace will not take on product liability or regulatory obligations. In order for the marketplace to become the deemed seller, it must be facilitating the sale and once a deemed supply has been identified, the two-stage VAT transaction process must be applied.
If you would like any advice please email enquiries@cowgills.co.uk and one of the team will be in touch.
Disclaimer
The information was correct at time of publishing but may now be out of date.
