EU VAT regulation change: managing e-commerce challenges and opportunities

Changes to VAT regulation level the playing field for EU businesses, improve tax compliance, and streamline VAT processes for cross-border e-commerce. But the impact for direct sellers, marketplaces, and shippers, has been immediate and significant.  

Reducing the VAT threshold to €0  

The European Union’s VAT e-commerce package went into effect on July 1, 2021. It  altered how VAT is collected on goods imported into the EU, especially those with a value under 22 euros.  

What you need to know about the rules that change EU VAT e-commerce and imports: 

• No VAT Exemption: VAT to be collected on all imports, regardless of value 
• One-Stop Shop (OSS) System: Simplifies VAT compliance for e-commerce businesses. Sellers register in one EU country to manage VAT for sales across all EU member states 
• Import One-Stop Shop (IOSS): For goods imported into the EU, IOSS simplifies the collection and remittance of VAT on low-value shipments (under €150) by enabling sellers to collect VAT at the point of sale and remit it to the EU tax authorities. 

Making VAT applicable on shipments under 22 euros has created change bigger than a mere adjustment; it’s a change in approach that demands a fresh perspective on how VAT is calculated, collected, and remitted for lower-value shipments across the EU.  

The change has highlighted how the industries that form the backbone of global trade are interconnected and that global commerce solutions are now needed. Each entity—from individual sellers to large shipping networks—now faces the challenge of integrating more complex and onerous VAT regulation requirements into their tax management operations. 

The postal and shipping community has had to innovate and adapt, adopting digital tax solutions that streamline VAT processes and support VAT compliance. But this transition is not just about meeting regulatory demands. It’s about  embracing an opportunity to enhance efficiency and transparency in cross-border transactions. 

Download our on-demand panel webcast to hear from experts at Taxamo, ShipperHQ, Adobe, and Mirakl. They explore the challenges created and offer specific examples of what businesses can do to alleviate administrative burden, stay compliant, and free up tax team time for more strategic activity.  

As we move forward, collaboration and forward-thinking will be the best way to address e-commerce challenges and opportunities. Business should work together to align industry sector practices with the shifting tax regulations. Tax technologies from Vertex can help meet the challenges and turn them into advantages. 

Embrace the change. Lead with innovation. Redefine how your VAT is managed.