New VAT Regulations for e-Commerce in Spain

Compounded with Covid-19 restrictions that pushed more consumers to shop online, the e-commerce industry made huge gains in 2020. Former Value-Added Tax (VAT) rules governing e-commerce transactions have proved to be an obsolete procedure that does not meet the current needs of the market.

This is the reason why EU Taxation and Customs Union introduced a series of new VAT rules on cross-border business-to-consumer (B2C) that Spain has transposed in its domestic law. This new e-commerce taxation system became effective on 1 July 2021 driving major changes to the former VAT distance selling regime.

It affects supplies of goods by businesses to private consumers (B2C) within the EU. Everyone in the e-commerce supply chain is affected, from online sellers and marketplaces/platforms both inside and outside the EU, to postal operators and couriers, customs and tax administrations, right through to consumers.

The most important aspect of the new VAT e-commerce rules in Spain are as follows:

Abolition of the EUR 35,000 threshold for distance sales
Under Spain’s current legislation, sellers in B2C transactions must charge VAT at the rate applicable in the country from which the goods are dispatched until the seller’s annual sales exceed EUR 35,000. Once the sales threshold is exceeded, the seller must register for VAT purposes in the country where the customer is located and charge VAT at the rate applicable in that country.

These distance sales thresholds (EUR 35,000 in Spain and up to EUR 100,000 or the EUR equivalent in other EU member states) are now replaced by a single EUR 10,000 threshold. For example, non-EU businesses making B2C supplies to Spanish customers will have to charge Spanish VAT if their sales turnover in the current calendar year exceeds EUR 10,000 (below this threshold, distance sales can be reported in the country of the provider).

A new one-stop-shop regime: the multiple EU VAT registrations requirement is removed
The obligation for a seller to register in each EU member state in which it makes supplies will be eliminated, and VAT on distance sales will be able to be paid by submitting the corresponding VAT return in the country in which the seller is established. The tax authorities of that member state will be responsible for collecting the VAT of each EU member state.

VAT import exemption for small consignments through a new electronic portal IOSS (Import One-Stop Shop). A new Import One Stop Shop (IOSS) electronic interface has been setup to facilitate the declaration and payment of import VAT on low-value goods from 1 July 2021. The VAT import exemption for consignments with a unit value up to EUR 22 will be replaced by an import VAT exemption for consignments with a value not exceeding EUR 150 where the sales are declared via the IOSS. Registration in IOSS is not mandatory for sellers, but if a seller elects not to register, the imports will be subject to VAT.

Introduction of “deemed supplier” status for online marketplaces
Online marketplaces that facilitate sales will become responsible for collecting VAT on distance sales of goods imported from third countries to private EU consumers. In cases where the value of the imports does not exceed EUR 150, the marketplace will be responsible for charging Spanish VAT rather than the VAT of the seller.

Companies making online sales to private consumers in Spain should carefully analyze their situations and be prepared for possible new compliance obligations. If the company applies for VAT registration in Spain, it will be possible to settle the VAT charge in each EU member state related to distance sales, thus simplifying compliance.

Should you need any further information about this new tax regime, please feel free to contact us at contact@orbis-alliance.com.