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A Lively Market for Cross­‐Border eCommerce EU DEF 10-12-2019

A Lively Market For Cross­‐Border ECommerce EU DEF 10-12-2019

Index

Presentation

  • 2016 – Now: Partner – BMGR Chartered Accountants & Legal Advisors.
  • 2016 – Now: Established and major partner – Financial, Accountancy and Tax, Marketing and Strategy Director in Amazing Eataly Limited (trading as UnKnownItaly), based in Edinburgh (UK). UnKnownItaly is a warm-hearted business specializing in the importation and sale of Italian genuine and fine quality food & beverage in Scotland and UK.
  • 2010 – 2011: Master’s Course in Business Arbitration – Foundation of Chartered Accountants in Milan.
  • 2003 – 2004: Master’s Degree in Management, Business, Administrative and Financial Consulting – Università Cattolica del Sacro Cuore in Piacenza (Italy).
  • 2000 – Now: Chartered professional Advisor at the Court for Company Restructuring and re Organization.
  • 1991 – 1995: Degree in Economics and Management – Università Cattolica del Sacro Cuore in Milan.
  • 1998 – Now: Chartered Accountant, Tax and Legal Advisor.

BMGR Specialized in professional consulting services, supporting the costumer in all his operational needs, focused on:

  • Administrative, Accountancy & Tax Services, Market Analysis, Economics, Financial and International Planning
  • Business structuring and consolidation of new settled companies and business units of non-resident companies, especially operating in Italy and UK, in the EU market, Law and Taxation System.
  • Vat Registration and Declarations, Unified Tax Return, Property Tax declaration, Tax and Vat consolidation, registration of contracts with the Revenue Agency
  • Contract Management and Invoicing between Italian and foreign subsidiaries
  • Optimization of the Operating and Management System for complete automaton of data and reports
  • Preparation of procedures with the various business areas in order to monitor and optimize compatible data flows, purchasing procedures, expense reports, use of company assets, communication between the various company areas.

European eCommerce Market:
a big opportunity for cross-border

  • Revenue in the eCommerce market will amounts to US$346,155 m in 2019.
  • Revenue is expected to show an annual growth rate (CAGR 2019-2023) of 8.5%, resulting in a market volume of US $479,131 m by 2023.
  • The market’s largest segment is Fashion with a market volume of US$100,128 m in 2019.
  • User penetration is 70.1% in 2019 and is expected to hit 76.1% by 2023.
  • The average revenue per user (ARPU) currently amounts to US$582.43.

Source: Statista

European Union

The European Union (EU) is an economic and political partnership between 28 European Countries. The Eurozone identifies the 19 Countries that have adopted a common currency (euro).

European Union

Ecommerce Europe

Ecommerce Europe Logo

E-commerce Europe is the voice of the European digital commerce sector; through its 20 national e-commerce associations act at European level to help legislators create a better framework for online merchants, so that their sales can grow further.

E-commerce Europe National Association Members

European Population continues to increase (millions)

European Population continues to increase

f=forecast (confirmed)
Source: Ecommerce Europe

GDP* of Europe is 17 trillion euros and increasing

GDP of Europe is 17 trillion euros and increasing

*Gross Domestic Product (GDP)
Source: Ecommerce Europe

25-54 year-olds purchase most frequently online

25-54 year-olds purchase most frequently online

Source: Ecommerce Europe

Students & the highly-educated shop online more regularly

Students & the highly-educated shop online more regularly

Source: Ecommerce Europe

Most spent between 100–500€ over the last 3 months

Most spent between 100–500 Euro over the last 3 months

Source: Ecommerce Europe

Clothes & Sports and Travel remain most purchased online

Clothes & Sports and Travel remain most purchased online

Source: Ecommerce Europe

Southern European Ecommerce is on the rise

Southern European Ecommerce is on the rise

eCommerce in United Kingdom

Bandiera Regno Unito

Quick introduction

  • Population: 66.1 million
  • Currency: Pound sterling
  • VAT: 20%
  • GDP per capita: 33.918 euro
  • LPI Ranking*: 8
icona grafico

Ecommerce facts & figures

  • Internet penetration: 95%
  • % of e-Shoppers: 81%
  • X-border shoppers: 36%
  • Growth 2016-2017: 8.26%

Delivery Method Preference Use

  • Home delivery during the day 72%
  • Delivered to my mailbox/ Multi-occupancy mailbox by carrier 42%
  • Home delivery during the evening 27%
  • Collect it myself from a distribution point 25%
mappa Regno Unito

eCommerce Environment

When it comes to e-commerce United Kingdom is the absolute leader in Europe.
UK e-shoppers shop more and spend more compared to other EU countries.
Now that the e-commerce leader is leaving the European Digital Single Market it brings uncertainty for online sellers and buyers.

*LPI: Logistic Performance Index

eCommerce in Italy

Bandiera Italia

Quick introduction

  • Population: 59.3 million
  • Currency: Euro
  • VAT: 22%
  • GDP per capita: 26.309 euro
  • LPI Ranking: 21
icona grafico

Ecommerce facts & figures

  • Internet penetration: 70%
  • % of e-Shoppers: 34%
  • X-border shoppers: 15%
  • Growth 2016-2017: 17.33%

Delivery Method Preference Use

  • Delivered to my mailbox 23%
  • Home delivery during the day 77%
  • Delivery on workplaces 13%
  • Unsure, I don’t know 0%
mappa Italia

eCommerce Environment

Fashion is the most lucrative segment in online shopping.
Amazon is the most popular B2C online shopping destination.

eCommerce in France

bandiera Francia

Quick introduction

  • Population: 65 million
  • Currency: Euro
  • VAT: 20%
  • GDP per capita: 33.351 euro
  • LPI Ranking: 16
icona grafico

Ecommerce facts & figures

  • Internet penetration: 88%
  • % of e-Shoppers: 67%
  • X-border shoppers: 28%
  • Growth 2016-2017: 14.3%

Delivery Method Preference Use

  • Home or workplace delivery 89%
  • Shipping to a pick-up & go location 85%
  • Delivery in-store (click & collect) 36%
  • Delivery in deposit 11%
mappa Francia

eCommerce Environment

France’s ecommerce market is typical of Europe.
There is also some interesting activity in several key areas, like a fast-growing grocery sector.
France also has one of the highest return rates in the world, although high return rates are very common to European markets.

eCommerce in Germany

Bandiera Germania

Quick introduction

  • Population: 82.1 million
  • Currency: Euro
  • VAT: 19%
  • GDP per capita: 35.256 euro
  • LPI Ranking: 1
icona grafico

Ecommerce facts & figures

  • Internet penetration: 91%
  • % of e-Shoppers: 77%
  • X-border shoppers: 25%
  • Growth 2016-2017: 9.5%

Delivery Method Preference Use

  • Delivered to my mailbox 23%
  • Home delivery during the day/evening 77% / 17%
  • Delivery on workplaces 13%
  • Unsure, I don’t know 0%
Mappa Germania

eCommerce Environment

German consumers value familiarity, and are much more likely to purchase from a recognized webshop rather than an international shop.
To get around this, foreign retailers should ensure they have a .de domain if possible to instill a bit more trust and familiarity.
Additionally, according to German law, consumers have a right to return their online purchases within 14 days with no explanation, which is an issue to consider when expanding to Germany.

eCommerce in Spain

Bandiera Spagna

Quick introduction

  • Population: 46 million
  • Currency: Euro
  • VAT: 21%
  • GDP per capita: 24.594 euro
  • LPI Ranking: 23
icona grafico

Ecommerce facts & figures

  • Internet penetration: 85%
  • % of e-Shoppers: 57%
  • X-border shoppers: 27%
  • Growth 2016-2017: 15.23%

Delivery Method Preference Use

  • Home delivery during the day/evening 53% / 46%
  • Delivered to my mailbox by mail carrier 30%
  • Delivery on workplace 11%
  • Unsure, I don’t know 2%
Mappa Spagna

eCommerce Environment

Fashion is the most lucrative segment. 17% of those buying apparel items in 2017 purchased online, indicating the importance of the in- store experience when buying fashion items.
Some of the most popular B2C online shopping destinations for Spaniards include Amazon.es, Milanuncios, Aliexpress and eBay.
The potential in this market can be demonstrated by the expansion into the country by
Richard Liu, the CEO of Chinese online retailer JD Group.

eCommerce in Poland

Bandiera Polonia

Quick introduction

  • Population: 38.2 million
  • Currency: Polish Zloty (PLN)
  • VAT: 23%
  • GDP per capita: 11.158 euro
  • LPI Ranking: 9
icona grafico

Ecommerce facts & figures

  • Internet penetration: 72%
  • % of e-Shoppers: 49.33%
  • X-border shoppers: 6%
  • Growth 2016-2017: 10.47%

Delivery Method Preference Use

  • Delivered to my mailbox 22%
  • Home delivery during the day/evening 65 / 29%
  • Collect it myself from a Distribution point 16%
  • Collect it from the online store’’s physical store 14%
Mappa Polonia

eCommerce Environment

Fashion is the most lucrative ecommerce segment.
In Poland, e-commerce is one of the most important drivers for economic development, contributing to the rapid growth of logistics operations.

eCommerce in Czech Republic

Bandiera Repubblica Ceca

Quick introduction

  • Population: 10.6 million
  • Currency: Czech Koruna (CZK)
  • VAT: 21%
  • GDP per capita: 16.545 euro
  • LPI Ranking: 31
icona grafico

Ecommerce facts & figures

  • Internet penetration: 85%
  • % of e-Shoppers: 60.33%
  • X-border shoppers: 11%
  • Growth 2016-2017: 11.73%

Delivery Method Preference Use

  • Delivery at home 83%
  • Delivery to a parcel shop 39%
  • Delivery to a post office / Post station 36%
  • Delivered at work 24%
Mappa Repubblica Ceca

eCommerce Environment

The number of Czechs shopping online (65%) follows closely to the EU-28 average of 68%.
This trend of following the EU-28 average continues when it comes to the amounts spent on ecommerce in 2017.
Looking to Q1 2018, Czech online consumers are in the top five countries within Europe when it comes to ‘the willingness to shop’.
In fact, 43% of non-food and technical goods are sold via the internet
.

Implications of Brexit on cross-border eCommerce in EU

  • The drop of the Pound Stirling will not off-set the tremendous loss in shoppers convenience with long parcel delivery times.
    • If a shopper is willing to wait long for a parcel delivery because of the price difference, the UK will always lose to China.
  • Moreover, shoppers will also have to pay customs duties, which can for some product categories be very high.
    • The number 1 e-commerce product category is clothing and that is an area where high customs duties still occur.
Implications of Brexit on cross-border eCommerce in EU

Amazon is the most important Marketplace for eCommerce

  • Since 2010, the company has significantly expanded its presence in Europe, investing in infrastructure, real estate, services and jobs.
  • In 2019, Amazon expanded its business in 8 European countries: Austria, Czechia, France, Germany, Ireland, Italy, Poland and the United Kingdom creating 11,580 jobs.
  • The company operates distribution or fulfillment centres, corporate offices, customer service centres, delivery stations and development centres across these countries.
Amazon is the most important Marketplace for eCommerce

How much money does Amazon make in Europe?

In net revenue terms, Europe is the largest single international market for Amazon, representing over half of its international business.
Net revenue in 2018 was EUR 27.9 billion ($31.4 billion).

How much money does Amazon make in Europe

2st Part: EU Balanced solution for taxing the Digital Economy

A Level Playing Field for the EU Digital Market

The eCommerce sector is at a turning point. Now more then ever, the decision taken by EU Policymakers determine the success of retailers globally.

What makes an e-retailer competitive in a global market is profoundly changing.

A Level Playing Field for the EU Digital Market

Businesses have to operate in a globalized business environment where a company’s competitive edge depends on access to new technologies, data, the capacity to operate efficiently cross-border and to adapt rapidly to evolving consumer behavior.

A Level Playing Field for the EU Digital Market

Catching up with the growth of eCommerce and the pace of innovation in other markets, especially Asia Pacific, has lead EU policymakers to achieve a harmonized and efficient EU Digital Single Market, and equally important, a Global Level Playing Field.

A Level Playing Field for the EU Digital Market

New EU Value Added Tax (VAT) rules for eCommerce

The European Union (EU) has published new EU Value Added Tax (VAT) rules that are intended to reorganize the VAT regime for ecommerce.

Since online sales of goods and services are becoming more and more important the european VAT rules, which were drafted long before the boom of the internet, had to be updated.

New EU Value Added Tax (VAT) rules for eCommerce
VAT Moss (Mini One Stop Shop)

The first wave of new rules applicable as of 2019: it is a start…

The Moss Scheme

Currently Telecommunication, Broadcasting an Electronic Services, both B2B and B2C, are deemed to take place where the final customer is established implying that VAT is due in the EU Member State of the final customer.

Freccia

The MOSS SCHEME enables the service provider to report the turnover achieved and the VAT due per Member State concerned with a single electronic quarterly declaration (to be submitted in the Member State of establishment).

As from 2019, the EU has introduced a threshold of € 10.000 allowing EU service supplier to charge VAT in the Member State where the supplier is established.

Freccia

The use of the threshold is not obliged, implying that the service supplier can also opt to charge VAT in the Member State where the customer is established (this would be interesting in case for example a lower VAT rate is applicable for the services supplied).

An important note to take into account is that the threshold of €10,000 includes the telecommunication, broadcasting and electronic services supplied EU-wide in a B2C relationship (the threshold should thus not be seen per Member State).

the threshold of 10000 Euro

The MOSS Scheme

If a service supplier of telecommunication, broadcasting and electronic services does not exceed the EU-wide annual turnover of €10,000 in B2C cross-border sales, the supplier has the following 3 options:

  1. He charges VAT in the Member State where he is established;
  2. He charges VAT in the Member State where the customer is established, but makes use of the MOSS scheme (and therefore he does not require a local VAT identification number);
  3. He charges VAT in the Member State where the customer is established, via a local VAT Identification Number in the Member State of the customer.

If the threshold of €10,000 is exceeded, the supplier can only apply the last two options. If the supplier does not exceed the threshold of €10,000 but opts to apply option 2 or 3, the supplier is obliged to apply the option for at least two years.

If the threshold of €10,000 is exceeded

As of 2019, another threshold will be introduced for the number of pieces of evidence a service supplier of telecommunication, broadcasting and electronic services must keep to prove where his customer is located.

Currently the service supplier must keep two pieces of evidence (examples: the invoice address, the bank details used, the IP address used, etc.).

As of 2019, the service supplier only needs to keep one piece of evidence if his annual turnover of cross-border B2C sales of telecommunication, broadcasting and electronic services does not exceed the EU wide threshold of €100,000.

The MOSS Scheme

EU Threshold for No MOSS Services & Products

EU Threshold for No MOSS Services e Products 1
EU Threshold for No MOSS Services e Products 2

Extension of the MOSS: the OSS SCHEME from 1/1/2021

The MOSS SCHEME will be extended to the distance sales of goods and to all other B2C cross-border services, of which the services are deemed to take place in the Member State of the customer.

Extension of the MOSS

Currently, this implies that the supplier is obliged to request a local VAT identification number in the Member State of the consumer.

Requesting a VAT identification number and fulfilling/sumbitting all local VAT compliance obligations needs professional administrative assistance and consultancy.

As from 2021, the supplier of goods in a cross-border B2C relationship will not require multiple VAT identification numbers for the online sales of goods and services.

The supplier making use of the special scheme for distance sales of goods imported from third countries will be allowed to appoint a FISCAL RAPRESENTATIVE to fulfill the VAT obligations which come along from the use of the special OSS SCHEME. The supplier/trader as such will be granted a SPECIAL VAT IDENTIFICATION NUMBER, a so-called IOSS VAT identification number (IMPORT ONE-STOPSHOP).

the OSS SCHEME

New rules: use of the IOSS Scheme

Under the special IOSS scheme, the vendor needs to charge VAT to the customers.

This VAT will not become due on the moment of importation of the goods into the EU, but will instead become due on the moment of supply.

The goods shall be regarded as having been supplied at the time when the payment has been accepted.

This implies that the consignments will be VAT exempt upon importation of the goods into the EU (under the condition that the vendor provides its IOSS VAT Identification Number to the customs authorities).

The vendor (or its intermediary) should submit monthly VAT returns by the end of the month following the month in which the VAT became due.

Use of the IOSS Scheme

The Working Process of VAT

The Working Process of VAT

Case Study: distance sales from Iceland (no EU) to the EU

Distance sales from Iceland

1. VAT Registration

VAT Registration

1. VAT Registration and Fiscal Representative

  • Any Trader can register for VAT Number if he intends to carry out distance sales from a third country or territory to the EU
    • Any Trader not established in the EU must be represented by an Intermediary (Fiscal Representative)
    • The trader not established in the EU should register in the Member State of the Intermediary from whom he has a consultancy advise (there must be an administrative cooperation in place)
    • The Trader established in the EU or Intermediary must register in the Member State of his business or where he has a fixed establishment
    • The Intermediary must be authorized and identified to act as such
  • Member State (MS) must provide for electronic registration (via web portal)
  • Trader must register before making first supply
  • Registration information to be provided by the trader includes: full name and surname, address, company name, trading name, email address, Website, passport or ID.

2. Supply of Goods

Supply of Goods

3. VAT Return

VAT Return
  • To be submitted monthly (by the end of the following month)
  • To be submitted electronically
  • Must contain the following information, per MS of Consumption (MSC):
    • Total value of supplies made during the month, exclusive of VAT (per VAT rate)
    • VAT rate
    • Total amount of VAT due (per rate of VAT)
  • MSI (Intermediary) allocates a Nr to the VAT return
  • MSI splits the return information by MSC and forwards it to the various MSCs
  • All MS have a direct access to data for all registered businesses
  • Return to be made in Euro; MS not using the Euro may require submission in their national currency but amounts to be converted to Euro when communicated to MSC.

4. VAT Payment

VAT Payment
  • To be made monthly (by the end of the following month)
  • Payment must refer to the VAT return No
  • The MSI transfers the VAT to each MSC at the latest 20 days after the end of the month during which the payment was received.
VAT Payment 2

5. VAT Listing

VAT Listing
  • All MS must compile a monthly listing containing:
    • The IOSS VAT Id Nos mentioned in import declarations during the month (of any MSI)
    • Per VAT Id No, the total value of imports exempted during the month
  • MS shall enter the information in an electronic system without delay (no deadline set) and shall grant automated access to other MS
  • MS shall keep the information in the listing available for at least 5 years from the end of the first year during which access is to be granted
  • Why: To allow the MSI to check the consistency between:
    • Total value of sales declared in the monthly IOSS VAT return
    • Total value of imports during that month.

What Now?

Europe Ahead

The new incoming Eu legislation offers a more level playing field for Cross-border businesses.

On the other side, the new rules will have a huge impact on the role of professional and accountancy advisors.

It will be challenging for them to keep the tax and legal responsibilities for representing their cross-borders customers from a VAT point of view.

We can only advise you to be prepared for these changes.

And we can only advise you to already start preparing your business for these changes.

start preparing your business for these changes

SG&BMGR have dedicated team of professionals that are very keen to advise the impact of the new EU VAT LEGISLATION on your business.

SG e BMGR

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