How will the changes of 2021 affect Marketplaces?
There are two main stages of 2021 Online Marketplaces (OMP) changes:
- The first one – 1 st of January 2021 – is the end of the transition period and UK changes
- The second one – 1 of July 2021 is new EU rules for OMP
Let’s explain the main concept.
For tax purposes, marketplaces become deemed suppliers for most of the sales which OMP facilitates.
The first stage
01.01.2021 – is the end of the transition period for Brexit and the time for new rules, for Online Marketplaces that sell to the UK customers, to come in. Online Marketplaces facilitating the sale will be responsible for collecting and accounting for VAT at their platform.
Types of sales where OMP is responsible for collecting and accounting for VAT:
- 2C imported distant sales with a total value of less than £135. No more low-value relief is applied;
- B2C sales by non-GB merchants regardless of order value.
For the sales where OMP is not a deemed supplier, OPM must collect VAT data listed in HMRC Notes For 6 Years.
Examples of sales where a merchant is responsible for collecting and accounting for VAT:
- A UK based seller sells goods to the UK B2B or B2C buyer, and goods are kept in the UK;
- A EU based seller sells goods with a value less than £135 to Business with GB VAT number.
What steps need to be done to adjust to the New rules for OMP:
- Check all your sellers –and discover who is UK – based.
- Сheck that you have all the information needed for tax audit purposes and VAT calculation:
• Place of the establishment of a supplier;
• Description of goods;
• The taxable amount for VAT purposes (based on checkout price);
• “Ship from” location (based on the information available up to the point of check-out);
• Information on returns of goods and cancellations of the sale and other information.
- For import or export – collect Good Code according to the Classification https://www.gov.uk/guidance/finding-commodity-codes-for-imports-or-exports
- Set up a process to calculate tax in real-time and collect data for tax purposes.
The second stage
The EU’s new marketplace rules which are effective from 1 of July. Online marketplaces become a deemed supplier for:
- B2C intra-EU distance sales by non-EU merchants regardless of order value – Marketplace VAT collection through Union-OSS;
- (optional) B2C imported distance sales of goods less than 150 EUR by EU/non-EU merchant.
What all these changes will actually mean for your merchants, we will cover in another article, but the main aim is to remove obligations to calculate and collect VAT for those who sell B2C. Domestic VAT registrations will remain required for inventory placements across the EU.