New VAT rules for e-commerce from 2021
The recent publication of Law 47/2020 of 24 August introduces several changes to the VAT system in Portugal, with regard to electronic commerce and international trade.
New VAT rules in Portugal
This Law, which comes into force on 1 January 2021, transposes Articles 2 and 3 of Council Directive (EU) 2017/2455 of 5 December 2017 and Council Directive (EU) 2019/1995 of 21 November 2019, amending the VAT Code, the Intra-Community Transactions VAT Scheme (RITI) and complementary legislation relating to this tax, in the context of the treatment of e-commerce. The republic act also includes RITI, with the wording of the law now published.
The new rules aim to ensure correct taxation of the digital economy and simplify VAT obligations for businesses engaged in cross-border sales of goods or services, ensuring the proper functioning of the internal market and the competitiveness of EU businesses.
Main changes to be taken into account
Some of the most significant changes for businesses supplying goods by e-commerce are as follows:
- In the case of distance sales by EU businesses to final consumers established in another Member State, the rule of taxation becomes that of destination, i.e. the tax must be assessed and paid in the country of destination of the final consumer.
- The import of small consignments, worth up to 22 euros, from third countries by customers within the EU will now be taxed with import VAT.
- Extending the scope of the one-stop shop for VAT, subject to certain conditions. Businesses supplying goods imported from third countries or territories to customers within the EU will have the option to make use of the One Stop Shop and will therefore only have to file a single VAT return for all their distance sales from countries outside the EU. The one-stop shop can only be used for shipments of up to ?150. If a business chooses to use the one-stop shop mechanism, it will be allowed, under certain conditions, to apply an exemption from VAT for the import of goods, allowing rapid customs clearance.
- For small traders whose annual turnover remains below EUR 10 000 and who are established in only one Member State, VAT can be collected and paid in the country where the transport of the goods begins.
- For traders from third countries who do not opt for the "one-stop shop" mechanism, there will be a special scheme for collecting VAT on importation. A second mechanism will therefore be available where import VAT will be charged to customers by the customs declarant who will in turn declare it and pay it to the customs authorities by means of a monthly electronic declaration payment. This removes the need to pay import VAT directly at the customs border. This special arrangement has certain conditions and only applies to consignments with an intrinsic value of up to 150 euros.
- Electronic interfaces such as marketplaces or digital platforms will now be considered suppliers for sales of goods made through them. They will be responsible for collecting VAT on sales on their platforms which are made by businesses outside the EU to their consumers.
In January 2020 some changes concerning the means of proof of dispatch or transport of goods had already entered into force for the application of the VAT exemption on intra-Community transactions. Learn about these changes in this article.