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EU proposes simplifying VAT rules to boost online trade

In a series of measures to boost internet commerce across the European Union, the European Commission has proposed simplifying value-added sales tax (VAT) requirements for online retailers. The Commission has already made its plans public in order to make parcel deliveries more affordable, protect consumers when they buy online and to limit geo-blocking, the practice of barring consumers in one country from buying from a provider in another.

Currently, online traders of goods have to register for VAT in each of the EU countries to which they sell goods, a significant barrier given it can cost about €8,000 euros to comply per country. Under the new rules, European companies selling goods online will be able to cover all their VAT obligations across the bloc via their own national tax authorities. The Commission said simplified rules on VAT would save EU businesses €2.3 billion and would also make it easier for smaller companies to trade across borders.

To support start-ups and small traders, companies would be able to sell goods upto €10,000 to other countries in the EU and treat them as domestic sales subject to local VAT rules. For larger businesses, they would no longer be needed to provide two pieces of evidence to identify the location of customers. In future, one piece would suffice. The proposals are part of an EU drive to reduce ‘red tape’ and show it is working for its citizens in the face of a crisis of confidence following Britain's vote to leave the bloc and the rise of populist eurosceptic parties. The new rules will also ensure VAT is paid in the country of the final consumer and help governments recoup some €5 billion of last VAT from online sales per year.