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Tuesday, 02 January 2018 14:00

VAT reform for electronic commerce

The VAT applied to electronic commerce will begin to be governed by new rules this year 2018. The Ministers of Economy and Finance of the European Union (Ecofin) approved some measures with which they intend to update and improve the system.

Your interest? Facilitate the collection of VAT for online purchases. Among the reasons that justify these measures, is the purpose of reducing the 150 million imports free of VAT that arrive in the EU each year. Many of them result from shipments of less than 22 euros that are made from other destinations, and generate an embezzlement of about 5 billion euros.

With the proposed reforms it is estimated that this figure can be reduced by 80%. In addition to that, it is hoped that businesses can take advantage of the benefits of the single market and undertake more competitive actions in world markets.


Companies (especially SMEs and micro companies) can make their payments online through a single window. Although for the sale of mobile applications, this section already exists. It will be extended to other companies so that they can declare and cancel their taxes, without having to register in each EU State.

Likewise, this modality includes an additional portal for the commercialization of products or services from countries not belonging to the community club, as long as the amount is less than 150 euros.

On the other hand, the bylaws establish that the VAT will be paid in the country of the user and the platform will be authorized to receive VAT from the remote negotiations.

In addition to this, the tax of emerging companies on cross-border operations, with amounts of less than 10 thousand euros, may be processed in national territory.

And, as if that were not enough, simplified calculations will be applied to SMEs, when revenues do not exceed 100 thousand euros.


Translating the benefits in economic profitability, it is important to say that cross-border businesses will be able to reduce the disbursements for compliance with taxes, by 1000 million euros per year.

This is significant, considering that in comparison with companies that operate only at the national level, those of international scope incur 11% more expenses. For that reason, many refuse to join this economic activity.

In fact, it is estimated that the costs generated by the declarations in each country that is operated can reach 8 thousand euros. This shows the difference of existing regulations between the various nations.

The measures planned so far pass because the simplification actions for domestic sales are introduced in 2019. It will probably extend (until 2021) the single window, as well as the exclusion of minor shipments.

The deadline for transferring the rules to the legal statutes of each country will be two years, starting on December 31, 2018.


One of the most celebrated provisions was the reduction of taxation to e-Book and electronic journals. By aligning the VAT of the printed and digital publications, allowing both to have a lower value, we seek to put an end to the imbalance that exists in some areas.

However, it has become clear that it is not a mandatory opinion, but an optional decision of each country.

It has also been applauded that initiatives such as the single window allow to achieve a general saving of 2,300 million euros, a reduction in the administrative burden of companies (95%), and an increase in collections.

The experts talk about 7 billion euros that countries can use to strengthen their social policies.

Writings SF Lawyers