European Commission proposes new VAT laws


The European Commission recently published new proposals which should simplify current European VAT laws for e-commerce businesses. According to the European Commission, the proposals “will allow consumers and companies, in particular start-ups and SMEs, to buy and sell goods and services more easily online” (source: Additionally, Europe recently banned unjustified ‘geo-blocking’. The EC also intends to take action against VAT fraud from non-European countries by lifting the exemption from VAT for products worth less than 22 euros. 

The European Commission proposes that entrepreneurs should pay VAT in the Member State of the purchaser. The new measures should save European businesses an estimated 2,3 billion euros annually.

The Mini One Stop Shop (MOSS), which is currently in place to simplify administrative processes for businesses who offer digital services and products, should be extended to businesses dealing in physical products. This online portal for VAT payments will help SMEs in particular and should stimulate cross border e-commerce.

Additionally Europe recently banned geo-blocking, which is a form of internet censorship whereby certain users are denied access (or only have limited access) to certain content on a website depending on their location. Forbidding geo-blocking is an important step in creating a ‘single market’, according to the EU. Furthermore in order to counter fraud, the VAT exemption applied to imported (non-EU) products worth less than 22 euros will be lifted. The VAT exemption currently puts EU businesses “at a clear disadvantage”. The exemption also results in cases of fraud since products are intentionally undervalued in order to benefit from it.

The proposed measures are definitely a step in the right direction, but do not solve all problems and restrictions surrounding cross border sales in Europe. Entrepreneurs are still subjected to 75 different VAT rates. Finally, it may take a couple of years before the proposed laws are actually implemented.