How will the changes of 2021 affect Marketplaces?

By / In MARKETPLACES / November 3, 2020

There are two main stages of the 2021 Online Marketplace (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.

Tax determination for marketplaces

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 UK customers, to come in. Online Marketplaces facilitating the sale will be responsible for collecting and accounting for VAT on 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;
  • An EU-based seller sells goods with a value of less than £135 to Businesses 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;
  • 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 are effective from 1 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;
  • B2C imported distance sales of goods less than €150 by EU/non-EU merchants (optional*).

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.

*Optional – if a Marketplace is IOSS registered B2C imported distance sales of goods less than €150 is a responsibility of this Marketplace. When a Marketplace chooses not to register for IOSS in the EU – VAT on import is a responsibility of a Merchant if they opted for IOSS or a customer when neither Merchant nor Marketplace haven’t registered for IOSS.

To learn more about managing tax obligations for online marketplaces, you can visit our API for online marketplace page.