New rules for geoblocking and VAT
Good news for companies and consumers who buy and sell online.
The New Year has brought good news for companies and consumers who buy and sell online with the approval of new rules for geoblocking* and VAT aimed at boosting e-commerce in EU.
Previously seen as one of the main barriers to adopting and expanding trade, this new system, according to the European Commission, “will make it easier for consumers and companies, in particular start-ups and SMEs, to buy and sell goods and services across borders online”.
The aim is to make the distribution of receipts fairer between member states, ensuring the end consumer pays the VAT applicable in their own country. Consequently, the rule will also help member states recover the roughly €5 billion in VAT lost every year on these transactions.
This new legislation on buying and selling goods and services online will be phased in by 2021.
Another of the announced changes relates to the need to only register a company selling online once on a single platform – the VAT One Stop Shop – instead of the current situation whereby a company has to register in the VAT system for each EU country it wants to trade in.
As far as geoblocking is concerned, after long negotiations the European Parliament, European Council and European Commission have announced a political agreement to adopt legislation putting an end to unjustified geographical restrictions.
For the end consumer, these new changes mean they can buy online goods and services from a foreign country as freely as from their own. For companies, the end to this situation means greater legal protection to operate in a country other than their own.
However, these directives reveal three pre-determined situations where there is a reason or set criteria justifying different treatment for consumers according to their member state: the sale of goods without physical delivery, the sale of services provided via internet and the sale of services provided at a specific physical location.
Let’s wait and see what the rules for geoblocking and VAT will bring for this year 2018.
*Geoblocking is a term used to refer to unjustified barriers that are placed on consumers when they wish to buy goods and services on the internet from traders located in a Member State other than their own, for reasons related to their nationality, place of residence or place of establishment.