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Significant VAT changes for cross-border e-Commerce

Starting July 1, 2021 VAT rules on cross-border business-to-consumer (B2C) e-commerce activities also changed in Malta. The rationale for these changes was to overcome obstacles to cross-border online sales and address challenges arising from VAT regimes for distance sales of goods and importing low-value shipments.

The main changes are the following.

Online sellers, including online marketplaces/platforms can register in one EU Member State and this will be valid for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU. They will benefit from a reduction in red tape of up to 95% by registering with the new One Stop Shop (OSS).

The existing thresholds for e-commerce of goods within the EU will be abolished and replaced by a new EU-wide threshold of EUR 10 000. Below this EUR 10 000 threshold, the supplies of TBE (telecommunications, broadcasting and electronic) services and distance sales of goods within the EU may remain subject to VAT in the Member State where the taxable person is established.

Special provisions are introduced whereby online marketplaces/platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves (“deemed supplier”).

In addition, new record keeping requirements are introduced for online marketplaces/platforms facilitating supplies of goods and services, including where such online marketplaces/platform are not a deemed supplier.

The VAT exemption at importation of small consignments of a value up to EUR 22 will be removed. This means all goods imported in the EU will now be subject to VAT.

But help is at hand! A new special scheme for e-commerce of low goods imported from third territories or third countries will be created. The Import One Stop Shop (IOSS) has been created to simplify the declaration and payment of VAT. 

Finally, simplification measures for distance sales of imported goods in consignments not exceeding EUR 150 will be introduced, in case the IOSS is not used (special arrangements).

What transactions are included in the new VAT changes?

  • Distance sales of goods within the EU carried out by suppliers or deemed suppliers;
  • Domestic sales of goods by deemed suppliers;
  • Supplies of services by EU and non-EU sellers to consumers in the EU;
  • Distance sales of goods imported from third territories or third countries carried out by suppliers and deemed suppliers, except for goods subject to excise duties.

The benefits of the new provisions are wide and varied

  • Consumers will appreciate knowing that when buying goods online from outside or inside the EU, the VAT rate applied is the same as for goods acquired in their home country – the new rules make sure that VAT is paid where consumption of goods takes place
  • EU businesses will be able to grow in a simplified, fairer environment and overcome the barriers to cross-border online sales – the European Digital Single Market aims to make technology work for people in a fair and competitive digital economy;
  • EU citizens will see public revenues increase – thanks to increased VAT payments and less VAT fraud, all Member States will benefit.

The Future Of OSS

Simplifying business processes is one of the European Union’s targets, and in this case, I see it going in the right direction. While the full picture of how OSS will change the industry is not clear yet, so far, it looks promising. In fact, we’re already seeing how the new rules can help smaller sellers.

We have seen companies that have been able to increase sales by up to 20 percent now that the fear of additional administrative hurdles and costs associated with crossing the threshold have disappeared. We will keep an eye on these continuing developments, but we believe the new system has the potential to help smaller sellers and clean up online marketplaces.


This article provides general information only and does not replace professional advice in any way. It is recommended to consult a qualified professional before making any important decisions regarding financial, legal or other matters. The author and the publication are not responsible for any errors or damages caused by the use of the information contained in this article.

Sergio Passariello
Sergio Passariello
Founder of the "Malta Business" network, a consulting, development and business organization network in Malta. CEO of Euromed International Trade which deals with business internationalization and commercial development. CEO of the Mediterranean Academy of Culture, Technology and Commerce, MFHEA licensed higher education institution. Founder of the CETA BUSINESS FORUM and the CETA BUSINESS NETWORK, the first digital entrepreneurial ecosystem to enhance the relationship between Europe and Canada.
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