How to prepare for the big bang of VAT on e-commerce

A real revolution will take place from 1 July on VAT in e-commerce

Last year, a report by the financial inspectorate revealed that 98% of the sellers registered on the "marketplace", e-commerce platforms such as Amazon, Cdiscount or Aliexpress, are not registered for VAT in France. The report indicated that out of 25,459 sellers checked on the marketplaces, only 538 were in order with the tax authorities. The European commission puts the fraud at €7bn for the whole EU.

Yet the law is clear. From an annual turnover of 35,000 euros, e-merchants are in principle required to appoint a tax representative in France to fulfil their obligations. In practice, only about ten pharmacies play this role, representing a total of 300 wholesalers, according to Bercy.

In 2021, a new concept will be introduced in the General Tax Code (CGI), in article 256 II bis. It concerns deliveries of goods shipped or transported by the supplier or on his behalf from third countries to private individuals within the European Union. This is the very definition of dropshipping.

From 2021, the VAD will be recognised, even if the seller's intervention in the delivery of the good is indirect. As a result, there will no longer be any possible dissociation at the tax level between the delivery and the sale of a good.

VAT paid by platforms

Above all, the Internet platforms that sell on behalf of third parties, the marketplaces, will become liable for value added tax for the traders whose products they offer. For the government, the objective is clear, to remedy fraud and recover the billions of euros of VAT evaporated via these distribution channels whose economic weight is exploding.

Online platforms facilitating sales will become VAT-supported and will see their obligations increase: for example, they will be required to keep a record of transactions for 10 years. The administration will be able to collect and exploit this data in search of occult activities, sale of counterfeit goods or false domiciliations abroad.

The concerned companies were given a reprieve because of the Covid crisis: the new rules - valid throughout Europe - were supposed to come into force on 1 January 2021.

« This is a very heavy project, with complex technical adaptations and very substantial reporting work. "says a representative of the sector. E-commerce players will prepare for this "big bang" by working hand in hand with Bercy's services over the coming months.