What changed in the EU VAT rules?

1. The minimum declared value limit for goods imported to the EU from non-EU countries will be abolished.  Goods with a declared value less than € 22 will not be subject to VAT exemption anymore. From 01.07.2021 goods of any value that are imported to the EU will be subject to VAT.
   
   
2. The current distance sales thresholds for cross-border trading within the EU (i.e. from one EU country to another) will also be abolished. Starting from 01.07.2021 merchants located (domiciled) in the EU with annual sales more than EUR 10 000 will remit VAT in the country of destination (i.e. the EU country to which the goods are shipped).
   
   
3. Businesses operating marketplaces such as Joom will be treated as deemed suppliers for VAT purposes in some cases. In particular, for the single consignment with goods which value is less than 150 Euro Joom shall account for and pay VAT:
   
   

   	Threshold per consignment	How VAT will be paid	Who shall issue an invoice	How VAT will be collected
   Non-EU merchant sells goods to an EU based customer	Up to EUR 150	Joom will pay VAT directly to the tax authorities	Joom	Joom adds the VAT amount to the total order price automatically**
   	EUR 150 or over	VAT and customs duties shall be paid at the moment of importation	Merchant	Joom adds the VAT amount to the total order price automatically**
   Non-EU merchant stores goods in the EU warehouse and then sell to the customer located in the EU	Up to or over EUR 150	Joom will pay VAT directly to the tax authorities	Joom	Joom adds the VAT amount to the total order price automatically**
   EU merchant sells goods to an EU customer and such goods are dispatched from a non-EU country	Up to EUR 150	Joom will pay VAT directly to the tax authorities	Joom	Joom adds the VAT amount to the total order price automatically**
   	EUR 150 or over	VAT and customs duties shall be paid at the moment of importation*	Merchant	Joom adds the VAT amount to the total order price automatically**
   EU merchant sells/ stores goods in a warehouse located in the EU and sells goods to the EU customer	Up to or over EUR 150	Merchant shall account for and pay VAT to the tax authorities	Merchant	Joom does not add the VAT***
   Non-EU based merchant selling products located in the EU-based warehouse and at the moment of sale any other EU legal entity has the ownership over such products (i.e. such products were resold to any third or affiliated EU-based legal entity)****	Up to or over EUR 150	Merchant shall account for and pay VAT to the tax authorities	Merchant	Joom does not add the VAT***

    

*If a merchant ships online, Joom Logistics will pay the VAT at the moment of importation. If a merchant ships offline, VAT amount will be compensated to merchant via Orders (R) invoice; Joom expects merchants to ship such orders via DDP logistic channel so that the logistic company pays VAT at the moment of importation, but if the VAT will be paid by the customer, we will refund this amount back to customer via Refund (RCM) invoices.

** Merchants must ensure that the product price and shipping price they provide do not include the VAT amount.

*** Merchants should provide product price including VAT amount.

****Merchant should provide Warehouse resale contract for such warehouses.

Please note that a deemed supplier status of Joom will not affect your obligations related to the product safety and other obligations you may have in regard to your EU customers.

What changed for Joom?

The new EU VAT rules provide new obligations for the online e-commerce platforms:

1. Joom will account for VAT and will pay VAT amounts directly to the EU tax authorities.
2. In order to fulfil the record-keeping obligations, Joom will keep certain information about merchants and sales made on the platform for as long as 10 years from the date of sale. You must ensure that all the information about you and your sales made on the platform is correct and valid.
3. Joom will issue invoices to the customers for the sales accounted by Joom to pay VAT. You have to ensure that you do not issue invoices for such sales.
4. If you organize the dispatch or transport of goods sold on Joom to your customers without using the services provided by Joom Logistics, and Joom is responsible for accounting and collecting the EU VAT (as per the table above), you have to ensure that prior to the delivery you contact Joom for information needed to comply with the new EU VAT regulations.
5. Joom will ask you to provide more information about your local warehouses in the EU. You have to ensure that you provide correct and valid information on the ownership over the goods stored in such warehouses located in the EU or any other information requested.

What should merchants do before 1 July 2021?

For the items for which you will be responsible for accounting and paying VAT:

• VAT amounts will be added to the price automatically when the user enters the final delivery destination information and such destination is within the EU except for consignments that are sold by EU merchants from local warehouses. You must ensure that the product price and shipping price you provide do not include the VAT amount.
• For the cases when you are an non-EU based merchant selling products located in the EU-based warehouse and at the moment of sale any other legal entity has the ownership over such products (i.e. such products were resold to any third or affiliated EU-based legal entity), VAT amounts will not be added to the price by Joom, as for such sales you will be responsible for accounting and paying the EU VAT.
• You should ensure that you comply with all applicable rules of the country of destination (i.e. the country of the user who ordered your goods), including the invoicing rules.
• You will be solely responsible for compliance with any tax obligations, including payment of VAT, filing of VAT returns and any other obligations applicable.

For the items for which Joom will be responsible for accounting and paying the VAT:

• If you are an EU-based merchant and your products are outside of the EU at the point of sale (i.e. at the moment when the order is made by the user on the platform), you shall notify us immediately so we ensure the correct collection of VAT for such sales.
• If you are a non-EU based merchant selling products located in the EU-based warehouse and at the moment of sale any other legal entity has the ownership over such products (i.e. such products were resold to any third or affiliated EU-based legal entity), you shall notify us immediately to ensure that Joom is not responsible for accounting and paying the VAT.

Where can you find more information on the new EU VAT rules?

Information on the EU Commission official resources:

https://ec.europa.eu/taxation_customs/business/vat/modernising-vat-cross-border-ecommerce_en

Modernising VAT for e-commerce: Question and Answer:

https://ec.europa.eu/commission/presscorner/detail/en/MEMO_16_3746

VAT for e-commerce:

https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce_en

Explanatory Notes on VAT e-commerce rules:

https://ec.europa.eu/taxation_customs/sites/taxation/files/vatecommerceexplanatory_28102020_en.pdf

Nothing stated above constitutes legal advice and should not be relied upon as such. This article is for informational purposes only and may be updated by Joom from time to time. In case you have questions as to how you should properly adjust your business to the new EU VAT rules or have any questions or concerns regarding the upcoming changes and their implications, please contact your legal and tax advisors.