EU mulls marketplace Chinese VAT liability shift

Tue 6th Jun 2017

The EU Parliament’s Committee on Economic and Monetary Affairs (ECON) has proposed to make online marketplaces liable for VAT on goods sold on their portals by non-EU merchants.

The obligation would apply to online platforms where there is a risk of VAT not being paid by suppliers based in third countries (not resident in an EU28 state). It would only apply on merchants with a turnover above €1million per annum and the individual sales worth more than €150.

The UK last year imposed potential limited liabilitiy measures on the marketplaces for non-EU VAT-fradulent merchants which they allowed to continue to sell despite HMRC warnings.  HMRC has estimated that fraud by Chinese Sellers on marketplaces may be costing the UK up to £1.5billion per annum.

ECON included the requirement in a series of amendments to the European Commission’s VAT Action Plan. The move may be aimed at tackling the problem of Chinese Sellers committing VAT fraud, but any measure must be applied in equal measure to EU businesses too.

The VAT Action Plan proposes a range of VAT reforms and anti-VAT fraud measures to be phased in over the next five years.  Other changes included in the ECON amendments include reducing the admin burden around the proposed One-Stop-Shop for B2C goods sales.

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