Currently (and up to December 2020) taxable persons established in the EU and which supply goods to private persons in another EU-Member State are required to obtain a VAT identification number and charge VAT as per the rules and rates applicable in the EU Member State of the end customer when the distance selling threshold of the Member State of destination is exceeded. These rules apply when the goods are transported by the supplier. When the distance sales threshold is exceeded (Malta’s threshold is €35,000), the taxable person must pay VAT in the Member State of arrival of the goods instead of the Member State. The current distance sales rules oblige the supplier to be VAT registered in all EU Member States where such supplier needs to pay VAT.
As of 1st June 2021 the distance selling rules will change on three important aspects:
I. Taxable persons which carry out distance sales will no longer be required to register for VAT in each Member State to which they supply goods. Instead, taxable persons can opt to file VAT returns in their Member State of establishment thereby avoiding the need to register for VAT and filing VAT returns in all EU Member States where VAT is due. The taxable person would register under a One Stop Shop (equivalent to the MOSS applicable to electronically supplier services) and would file only one VAT return in the Member State of establishment, settling the VAT due in each EU Member State only in its own Member State. The Member State of the One Stop Shop registration will send the VAT return and payment to the EU Member State where the VAT is due.
II. The distance sales threshold will be abolished. Therefore, the taxable persons will have to pay VAT in the Member State of arrival of the goods from their first distance sale onwards, although a VAT registration in each Member State can be avoided through a one stop shop return. Notwithstanding this, small entrepreneurs may still benefit from a simplification applies, which is available when the small entrepreneur is established in only one EU Member State and its distance sales and digital services (telecommunications, broadcasting and electronic services) sales to private consumers, does not exceed €10,000 on an annual basis. Under the simplification procedure, the small entrepreneur can still opt to charge VAT on its distance sales in the Member State of departure (and on electronically supplied services in the Member State of establishment).
III. The scope of the distance sales rules is extended to also cover cases where the supplier indirectly intervenes in the transport (no longer restricted to cases the goods are transported by or on behalf of the supplier), thereby ensuring that the distance sales rules will also apply where the private persons handles the transport directly with the transporter.
It is expected that taxable persons conducting distance sales would opt for the One Stop Shop rather than maintaining a VAT registration and submitting VAT returns and VAT payments in each of the Member State of the goods arrival. However, it is to be noted that input VAT cannot be claimed through the One Stop Shop and therefore in such case the taxable person would need to file a claim for refund of foreign VAT, in terms of Council Directive 2008/9/EC.