Portugal & VAT e-commerce package – distance sales of goods within the EU
Note: rules concerning supply of TBE ( supplies of telecommunications, broadcasting and electronic services in the EU) and import of low value consignments have also changed but they are not covered by these comments
The 2021 E-Commerce VAT reform
The 2021 E-Commerce VAT reform is set on 3 fundamental principles:
- Make cross-border VAT compliance easier
- Level the playing field between EU and non-EU sellers
- Close the VAT gap and collect more revenue
The changes will go live on 1 July 2021 and will cover:
- distance sales of goods within the EU
- abolition of the current € 22 import VAT relief and
- liability of the online marketplaces for collection of VAT
Here is a quick summary of the main changes for distance sales of goods within the EU.
Distance Sales of goods within the EU
Distance Sales of goods are typically referred to as B2C sales, i.e. sale of goods which are dispatched or transported from a business in one EU Member State to a private customer in another EU Member State. A typical example is selling goods over the internet cross-border.
Current and Future rules
|Sellers charge VAT of the Member State of departure of the goods until they reach the annual business threshold imposed by the Member State of destination of the goods. The thresholds vary across the EU (e.g.: € 35 000 in Portugal and € 100 000 in Germany)||Sellers charge VAT of the Member State of departure of the goods until they reach the annual business threshold imposed by the Member State of destination of the goods. This threshold will be the same for each EU Member State, € 10 000 but it will cover both distance sales of goods and TBE services provided in each Member State|
|After the destination’s State threshold is reached, the Seller must register for VAT in that Member State and start charging VAT of that State on future sales going forward (the Seller stops charging the VAT of the country of departure of goods and starts charging VAT of the destination country)||After the € 10 000 threshold is reached, the seller may either:
|To put it simply: a Portuguese company selling online to private clients in Spain charges Portuguese VAT until it reaches € 35 000 sales in a year. From that moment onwards the Portuguese company should register for VAT in Spain and start charging and paying Spanish VAT instead of the Portuguese one||To put it simply: a Portuguese company reaching the online sales threshold for Spain, can instead of registering for VAT in Spain, pay the Spanish VAT through its Portuguese tax portal, Portal das Finanças, using the OSS|
Non-EU-Sellers and the new regime for distance sales of goods within the EU
A non-EU seller will also be able to use the OSS regime for distance sales of goods within the EU, and can opt to nominate the Portuguese VAT number as its tax identification number to report all EU online sales (any Member State will be eligible).
In this case, a tax representative will be requested to the non-EU seller by Portugal (other EU countries wave this obligation).
In case the non-EU seller uses a marketplace (e.g..: Amazon) the collection of VAT will be made by the market place through the OSS.
Invoicing requirements in Portugal
All taxpayers using Portugal as the Member State of tax identification will be required to issue invoices in accordance with the Portuguese VAT law requirements. In this respect, one of the main and most onerous requirements to comply with is the adoption of certified invoicing set out to take place as of 01.07.2021.
Exceptions to be noted – stocks in warehouses
Sellers holding stocks in warehouses in other Member States will still have to keep VAT registrations in those Member States.
Possible extension to 1 January 2022?
The effective date of the E-Commerce VAT Package has been postponed until 1 July 2021 (initially 1 January 2021). As Germany and the Netherlands have indicated the need to an additional six-month deadline extension, there is a risk that the new rules will operate in practice in 1 January 2022.
What should you prepare for:
- List your online sales market in the EU
- Identify the business turnover for each EU market
- Identify if you hold stocks in warehouses any EU country
- Validate the option to pay the VAT due through your country’s One Stop Shop