Changes in the place of taxation of consumers in e-commerce based on European Directives, which stipulate that for online purchases of goods and services from EU Member States or from third countries the consumer will pay the VAT applicable in his country, come with a package of six harmonizing bills discussed today in the Parliamentary Committee on Finance.
Therefore, the Cypriot consumer will pay the VAT applicable in Cyprus for his online purchases.
A spokesman for the Ministry of Finance told the Finance Committee that due to globalization and the increasing use of e-commerce, it has become necessary to change and adopt new e-commerce regimes. These schemes, he explained, are aimed at reducing the administrative burden for businesses and sellers, but also for tax administrations. They also aim to protect Member States' tax revenues and create a level playing field for businesses, he said.
According to a representative of the Tax Department, from 1 July 2021 every taxable person who sells goods or provides services to consumers in the various Member States must impose and pay the tax rate applicable in the country of the consumer.
Therefore, the obligation to collect VAT correctly and to reimburse it correctly in the consumer Member State is regulated and this, as mentioned, has the effect of reducing administrative costs.
"The package is a European framework adopted by all Member States with the intention of securing the revenue of all Member States in relation to consumer markets. It has not changed or modified anything in relation to any transaction between companies. "It changes where VAT is paid in cases of purchases of goods and services by consumers in the various Member States," explained the representative of the Tax Department.
For example, when a Cypriot consumer buys a pair of shoes from Greece, the Greek supplier must from 1 July impose the VAT applicable to this good in Cyprus, ie 19%. If the purchase was made before the 1st of July, 24% VAT would be imposed, which is valid in Greece.
In order to reimburse VAT in the consumer Member State, the supplier must either be registered in the normal VAT scheme of that Member State, or be registered in the special scheme in the Member State of establishment, through which he must submit a special VAT return collected from consumers in other Member States to be reimbursed in those Member States to which it is due.
With regard to the new import regime, under the same regulation, a supplier who sends goods from a third country to Europe is obliged to impose and reimburse VAT in the consumer Member State. This presupposes that he either registers in all the Member States in which he has consumers or chooses a Member State, in which he appoints a representative to make his declarations and to collect on his behalf the VAT, which concerns the various consumers in the various Member States. For purchases from third countries, the tax exemption for purchases up to 150 euros is abolished. For larger markets, the imposition of an import duty also continues to apply.
These regulations are not expected, as the MPs were told, to have an impact on consumers, as they will pay the VAT of Cyprus for what they buy instead of the VAT of the state from which they buy the goods or services.
The harmonization bills were submitted to the Parliament in September, after the deadline for harmonization of the Cypriot legislation with the two Directives expired, which was June 30, 2021.