Issues facing online marketplaces in the face of new EU VAT rules

December 16, 2022

The new EU VAT regulations that came into force on July 1, online marketplaces and their sellers will have much greater compliance obligations.

Assessing liability

When is the marketplace liable? This is the question being asked by marketplaces around the world in the face of the July 1 VAT regulation changes in the EU.

Marketplaces will be responsible for calculating and collecting VAT on transactions they provide to EU-based customers in the following cases:

  • The sellers in a marketplace are outside the EU, but the goods being sold are already in the EU.
  • The goods are imported from outside the EU and have a shipping value not exceeding €150.
  • Incorporation of sellers

    The July 1 explanatory notes explicitly state that the marketplace "must consider the person selling goods through an electronic interface as a taxable person and the person buying the goods as a non-taxable person, unless it has information to the contrary."

    In addition the marketplace "must have a verification process in place to assess whether deliveries from this underlying supplier do not qualify it as a taxable person."

    As a result of these obligations, it is necessary for markets to implement a rigorous vendor onboarding process. Once onboarded, there must also be a periodic reassessment of sellers and the products they sell.

    In the event that vendors are not compliant, in some EU jurisdictions the marketplace may be jointly and severally liable for its VAT.

    Product classification and VAT calculation

    It is necessary to regularly re-evaluate the products sold by sellers, as the classification of products has a significant impact on the application of VAT.

    Ecommerce must know what types of products are sold on their platform in order to ensure that VAT is calculated correctly. This approach applies to products that benefit from standard and reduced VAT rates.

    Reporting and record keeping

    The Import One Stop Shop (IOSS) was introduced. The IOSS can be used by sellers (inside and outside the EU) with sales of low value goods (€150) in one shipment.

    Pre-registration for both IOSS opened in the EU on April 1, 2021. IOSS registration is optional. Opting for IOSS registration provides a much better customer experience.

    Invoicing obligations

    Marketplaces must now issue invoices that comply with the new rules.

    As tax liability will now be allocated on a line item basis, a basket of products may require multiple invoices to be issued to the same buyer. This is due to the possibility of liability being dispersed among multiple sellers and the marketplace itself, each requiring a separate invoice.

    In the case of a reseller of goods, he will be legally obliged to issue an invoice for each transaction when the goods are in the EU.

    These VAT reporting obligations for ecommerce, can be easily met by applying technology to determine the correct VAT treatment of sales of goods at the time of purchase.

    Companies like Crossborderit have helped thousands of ecommerce companies through their IOSS representation to ship easily and smoothly to the EU.

    Contact the Crossborderit team to get the advice you need on the new IOSS and also be your IOSS Representative.

    Simply sign up and let Crossborderit take care of the rest.

    Damon Baca


    Crossborderit (CBIT)