EU proposes simplifying VAT rules to boost online trade

BRUSSELS (Reuters) - The European Commission proposed simplifying value-added sales tax (VAT) requirements for online retailers on Thursday, the final piece in a series of measures to boost Internet commerce across the European Union.

The European Union flag is seen flying, at the border of Gibraltar with Spain, in the British overseas territory of Gibraltar, historically claimed by Spain, June 27, 2016, after Britain voted to leave the European Union in the EU Brexit referendum. REUTERS/Jon Nazca

The Commision has already published plans to make parcel deliveries more affordable, protect consumers when they buy online and to limit “geo-blocking”, the practice of barring consumers in one country from buying from a provider in another.

“We are delivering on our promises to unlock e-commerce in Europe ... Now we simplify VAT rules: the last piece in the puzzle,” said Andrus Ansip, the Commission’s vice president for digital affairs.

Currently, online traders of goods have to register for VAT in each of the EU countries to which they sell goods, a significant barrier given it can cost about 8,000 euros ($8,500) to comply per country.

Under new rules, on some of which Reuters reported last week, European companies selling goods online will be able to cover all their VAT obligations across the bloc via their own national tax authorities.

The Commission said simplified rules on VAT would save EU businesses 2.3 billion euros and would also make it easier for smaller companies to trade across borders.

To support start-ups and small traders, companies would be able to sell up to 10,000 euros to other countries in the EU and treat them as domestic sales subject to local VAT rules.

For larger businesses, but still selling less than 100,000 euros across borders, they would no longer need to provide two pieces of evidence to identify the location of customers. In future, one piece would suffice.

The proposals are part of an EU drive to reduce “red tape” and show it is working for its citizens in the face of a crisis of confidence following Britain’s vote to leave the bloc and the rise of populist euroskeptic parties.

The new rules should also ensure VAT is paid in the country of the final consumer and help governments recoup some 5 billion euros of last VAT from online sales per year.

Editing by Alastair Macdonald