On Tuesday, June 30, the Cabinet of Ministers (CM) considered amendments to the Value Added Tax (VAT) Law prepared by the Ministry of Finance (MoF). The aim of the draft law is to determine the rules for simplifying the application of VAT in the field of e-commerce, ensuring a fair competitive environment at the European Union (EU) level for all entrepreneurs, regardless of their country of registration, the Ministry informs.
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Digital platforms enable companies, especially small ones, to effectively gain new customers in the global market. Recent studies show that 57% of cross-border deliveries of goods are made through the three largest digital platforms, with many other platforms operating locally and in geographical clusters. In order to protect Member States’ revenues and create a level playing field for e-commerce at EU level, a framework for VAT on e-commerce transactions was created in 2017 with the entry into force of certain rules on 1 January 2019 (Phase I of the amendments). but the basic rules should enter into force on 1 January 2021 (Phase II of the amendment).
From 2021, the scope of the special VAT regime will be extended, making it possible to register in one Member State and pay VAT on any transactions carried out in the e-environment under the special VAT regime. In addition, the VAT exemption for low value consignments of € 22 will be abolished in 2021, which currently puts businesses operating in the EU at a disadvantage compared to businesses in third countries and territories. This will ensure a level playing field for all operators, regardless of their country of establishment. Subsequently, VAT will be charged on consignments received from third countries and territories, regardless of the value of the consignment.
At present, businesses can only register for VAT purposes in one Member State if they provide electronic communications, broadcasting and electronically supplied services and have opted for a special VAT regime, the mini-one-stop scheme (Mini One Stop Shop – MOSS). From 2021, the MOSS non-EU regime is intended to apply to any services provided by a non-EU VAT payer to non-VAT payers. In turn, the MOSS union regime is intended to apply to any provision of services and distance selling of goods within the EU. A new special scheme for the distance marketing of goods imported from third countries or territories will also be introduced (Import One Stop Shop – IOSS), covering consignments of goods other than excise goods, the fair value of which does not exceed EUR 150.
The Saeima will still decide on the draft law. It can be viewed on the Cabinet of Ministers’ website.
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