Understanding the VAT regime for distance sales

Specific VAT rules in e-commerce

The e-commerce sector is governed by specific VAT rules. These are mainly aimed at defining a specific category of operations, the distance selling of goods (VAD), and to establish a special regime for supplies of goods facilitated by electronic interfaces (marketplaces, platforms, etc.).

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This regime introduces a taxation scheme called “purchase-resale”, where the platform is considered to have purchased and then resold the property (Administrative Doctrine - BOI-TVA-CHAMP-10-10-40-40). Specific rules also apply to designate who is liable for VAT when goods are imported.

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It is crucial to note that these provisions only apply in Metropolitan France, excluding overseas collectivities.

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What is a distance sale of goods (VAD)?

VADs are deliveries of goods that comply with specific territoriality rules. Some may be subject to the purchase-resale scheme if an electronic interface is used, and others may benefit from one-stop shops for the declaration and payment of VAT at the European level. These points are dealt with below.

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According to article 256 II bis of the CGI, an operation is a VAD if it meets three cumulative conditions.

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Condition 1: The dispatch or transport of the goods

The good must be shipped or transported from one territory to another. There are two main categories:

• Intra-community distance selling (VAD-IC) : The property starts from one EU Member State to arrive in another Member State. note : The flow of goods involving overseas communities is never qualified as VAD-IC.

• Distance selling of imported goods (VAD-BI) : The good starts from a country or territory outside the EU to arrive in a Member State. note : Flows between overseas communities and mainland France may constitute VAD-BI (Administrative Doctrine - BOI-TVA-GEO-20-40).

The place of departure is the last place where the good is located before it is sent directly to the customer (for example, a storage warehouse).

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Condition 2: The nature of the goods delivered

In principle, all assets are concerned, with the notable exception of:

• New means of transport.
• Goods delivered after assembly or installation by the supplier.

Important notes :

• Les excisable products (alcohol, tobacco, etc.) follow the VAD regime (except for the IOSS counter).
• Les second-hand goods, works of art, collectibles or antiques also fall under the VADs. However, if they are subject to the margin VAT regime, it is the rules of this regime that take precedence (Administrative Doctrine - BOI-TVA-CHAMP-20-20-30).

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Condition 3: The quality of the purchaser

Delivery must be made to persons not subject to VAT or equivalent, such as:

• A natural person who is not subject to taxation (an individual).
• A non-taxable legal entity benefiting from a specific exemption (embassies, international organizations, etc.).
• A purchaser benefiting from the regime derogating from the taxation of intra-community acquisitions (PBRD), under certain conditions (Administrative Doctrine - BOI-TVA-CHAMP-10-10-40-20).

Where are distance sales taxed (territoriality rules)?

By way of derogation from the principle of taxation at the place of departure of the property (Administrative Doctrine - BOI-TVA-CHAMP-20-20-10), articles 258 and 258 A of the CGI set specific territoriality rules for VADs.

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Territoriality of intra-community distance sales (VAD-IC)

The principle is simple: a VAD-IC is taxable in the Member State of arrival of the expedition. Thus, a VAD-IC sent to France is taxable in France (article 258 A of the CGI).

Exception for small operators:As an exception, for an operator established in a single EU Member State, its VAD-ICs remain taxable in its country of departure as long as the total annual amount of its VAD-ICs and its provision of electronic services to individuals in the EU does not exceed €10,000 excluding VAT.

• An operator can relinquish this exception and opt for taxation in the country of arrival. This option is then valid for two years.
• Single window registration OSS-UE (One Stop Shop) is tantamount to renouncing this preferential regime, as it involves systematic taxation in the Member State of destination (Administrative Doctrine - BOI-TVA-DECLA-20-20-60-10).

Territoriality of distance sales of imported goods (VAD-BI)

The rules for VAD-BI are more complex and depend on the import scheme.

• VAD-BI “indirect” (goods imported into Member State A and then transported to a customer in Member State B, for example France): The sale is still taxable in France (Member State of final arrival). The operator must manage import VAT in the first country of entry (A) to avoid double taxation.
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• VAD-BI “direct” (goods imported directly into France for a French customer): The sale is taxable in France only if:
  • The operator uses the one-stop shop IOSS (Import One Stop Shop);
  • OR the operator is referred to as the liable for import VAT.
  • lookout : If a direct VAD-BI of a value greater than €150 is facilitated by an electronic interface, the sale itself is considered not taxable in the EU. Import VAT is then due by the end customer and is not deductible for the platform (Administrative Doctrine - BOI-TVA-DED-10-20).

The role of electronic interfaces: the purchase-resale scheme

When an electronic interface (marketplace, platform) “facilitates” a sale, the law considers it to have personally acquired and delivered the property (article 256, V-2° of the CGI) .This fiscal mechanism has the consequence of splitting the transaction in two:

1. A sale (exempt from VAT) from the original seller to the platform.
2. A sale from the platform to the end customer. It is this second operation that is qualified as VAD and to which transport is linked.

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What operations are affected by this diagram?

This purchase-resale pattern only applies to sales to non-taxable persons and in two specific cases:

1. For goods already in the EU (VAD-IC or internal deliveries): Only when the original seller is not established in the European Union.
2. For imported goods (VAD-BI) : Only for shipments with intrinsic value does not exceed €150, regardless of where the seller is established.
   • note : The intrinsic value corresponds to the price of the goods, excluding transport and insurance costs if they are invoiced separately.

How to declare and pay VAT: one-stop shops (OSS and IOSS)?

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To simplify the obligations of businesses, the EU has put in place special optional regimes, called “One Stop Shop”. They allow VAT due in several Member States to be declared and paid via a single portal in a single country (the Member State of identification). The tax administration of this country is then responsible for repaying the VAT to the other Member States concerned (Administrative Doctrine - BOI-TVA-DECLA-20-20-60).

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The “OSS EU” regime (for transactions within the EU)

The “OSS EU” one-stop shop (provided for in article 298 sexdecies G of the CGI) is mainly aimed at taxable persons established in the EU (or with a permanent establishment). It covers:

• Les intra-community distance sales of goods (VAD-IC).
• Les provision of services to individuals in Member States where the company is not established.
• Les internal deliveries facilitated by an electronic interface when the seller is outside the EU.

Businesses not established in the EU can also access it for their VAD-ICs, but they must generally appoint a fiscal representative (Administrative Doctrine - BOI-TVA-DECLA-20-20-60-10).

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The “IOSS” regime (for imported goods of low value)

The “IOSS” one-stop shop (Import One Stop Shop, article 298 sexdecies H of the CGI) is dedicated to distance sales of imported goods (VAD-BI) from third countries, for shipments whose intrinsic value does not exceed €150. Products subject to excise duty are excluded.

Its major advantage is twofold:

1. Simplification : VAT is declared and paid via the one-stop shop.
2. Exemption on import : The goods are exempt from VAT during customs clearance, which simplifies and accelerates delivery to the end customer.

For companies not established in the EU (and outside Norway), the use of IOSS requires the designation of a intermediary established in the EU, who will be responsible for declarative and payment obligations (Administrative Doctrine - BOI-TVA-DECLA-20-20-60-10).

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The “OSS non-EU” regime (for services provided by companies outside the EU)

This regime (article 298 sexdecies F of the CGI) is specifically designed for businesses. not established in the EU who provide provision of services to individuals (B2C) in the European Union. It allows them to register for VAT in a single Member State in order to declare and pay the VAT due on all these services throughout the EU, without having to appoint a fiscal representative for these transactions.

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How do one-stop shops work (registration, declaration, payment)?

The use of single windows follows a clear procedure, from registration to declaration and payment (Administrative Doctrine - BOI-TVA-DECLA-20-20-60-20).

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Enrollment, Modification, and Exclusion

• Enrollment : Membership in a one-stop shop is done electronically on the portal of the tax administration of the selected Member State of identification (in France, via the professional area on impots.gouv.fr). A specific identification number is then assigned: the usual VAT number for the OSS, or a specific IOSS number for the import regime.
• Taking effect : For the OSS, the regime applies from the calendar quarter following registration (or earlier if the activity starts before). For IOSS, it applies as soon as the IOSS number is assigned.
• Cessation : The taxable person may leave the regime by informing the tax authorities with notice (15 days before the end of the term for the OSS, 15 days before the end of the month for the IOSS).
• Exclusion : The administration may exclude an operator in the event of systematic non-compliance with the rules (repeated failure to report or pay), cessation of activity or if it no longer meets the eligibility conditions. An exclusion is generally valid for two years and throughout the EU.

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Declaration, payment and deduction

• Declaration : Declarations are filed electronically, no later than the end of the month following the reporting period.
  • OSS (EU and non-EU) : Declaration quarterly.
  • IOSS : Declaration Monthly.
  • A “void” statement must be filed even in the absence of transactions.
• Payment : Full payment of the VAT due must be made no later than the same date as the declaration, by bank transfer, indicating the reference of the declaration.
• Corrections : Changes to previous declarations are made via adjustments to a subsequent declaration, within three years.
• VAT deduction : lookout, it is not possible to deduct input VAT (on purchases) via OSS or IOSS declarations. The VAT borne must be recovered via common law refund procedures (procedures known as the 9th or 13th Directive, see Administrative Doctrine - BOI-TVA-DED-50-20-30-10 and BOI-TVA-DED-50-20-30-10 and BOI-TVA-DED-50-20-30-40).

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Specificities of the IOSS number

The IOSS number is essential because it allows customs authorities to verify that VAT will be paid via the one-stop shop and to authorize theentry of goods exempt from VAT. It is therefore essential for operators to secure this number and to communicate it only to partners in the supply chain who need it for customs clearance (carriers, customs representatives).

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