Law changes are coming from the European Union in the way sellers deal with other countries tax regime. More precisely, the way a Romanian company can sell in other countries will be simpler according to the law that will be in place starting July 1, says Theodor Artenie, Head of Tax, Noerr at BR’s 18th edition of BR’s Tax, Law & Lobby | Focus on Whistleblower.
What changes have taken place in the tax area of online commerce?
Online commerce saw a spectacular increase last year and this trend will continue this year. If we look at the statistics we would say that Romania is not yet where it should be. Statistics show that our country e-commerce sales, which include online transactions, account for 12% of the total, while the EU average is 20%. It is a good trend and it shows potential.
Currently, Romanian companies have a low penetration of sales in other markets. Among other reasons, one of them is the fiscal regime, namely VAT. When we sell in other countries we have to make sure we don’t have to pay VAT in another state. Until June 30, when the law will be changed, there are certain ceilings, of 35,000 euros and 100,000 euros, up to which VAT is not paid in another state. Over the ceiling, the trader is forced to register for tax purposes in that state.
Tax registration means administrative problems. It costs you the accountant, the relationship with the authorities, etc. That is why many traders prefer not to sell in other states. The same reason lies in the fact that many large sites abroad do not sell in Romania. If the sales volume is small, the expense of fiscal registration is not justified. From the point of view of the Romanian trader who discovers the online sales channel, the VAT issue is a strong discouraging factor.
From July 1, 2021, however, things will change. We will no longer need to register in the over 25 member states, we will be able to collect VAT in Romania, but applying the VAT rate from the consumer state. We will need to know where the product goes, the value of the sale, the applicable VAT rate, and at the end of the reporting period we can make a statement with each country. The VAT will be paid to the Romanian state, which will be settled later with each state. It seems complicated at first, but as it becomes a habit, traders will perceive it as an opportunity.
It will take infrastructure to operate. In the EU there is a system called one-stop-shop, a portal where you register and receive the right to sell in that country.
The new legislation also aims to regulate low-value imports from outside the European Union. With a ceiling of 10 euros, the products can now be imported without VAT, and on resale are taxed according to the seller’s compliance. Obviously, most of the time the seller does not pay taxes. The future law raises the ceiling to 150 euros and will be exempt from VAT, but on resale VAT is charged to the consumer. Additional customs controls will be carried out so that it is known which goods are to be sold to final consumers.
It is not easy to be prepared for the law that will come into force; until we have a national legislative package we cannot talk about preparation. But even if the beginning will be harder, there should be no problems later. And especially that opportunities will arise through this law. In fact, in 2024, something else will follow, a new law for payment processors, so that the transactions performed and declared can be compared with the payments registered by the processors.