e-Commerce platforms could be liable for VAT fraud

The EU is continuing with suggestions to enforce obligations to online marketplaces for VAT fraud committed by non-EU merchants on their e-Commerce platforms. This move will endeavour to tackle over €5bn in non/under declared VAT by fraudsters, many originating from China. This measure was introduced by the UK in 2016 to tackle its own estimated £1.5bn fraud losses.

This EU plan also involves making third-party warehouses and fulfilment centres liable if they have not acted in good faith in defining if their non-EU merchant companies are completely EU VAT compliant. This proposal, as a tax measure, would require full agreement from all 28 EU Member States. Nevertheless, only a small number of Member States – including Poland, Croatia, Finland and Slovenia – have raised any major concerns about yielding fiscal autonomy to EU level.

UK’s anti-VAT fraud measures being followed by the EU

These impending VAT liabilities, which have already been enforced by the UK on the relevant marketplaces, if they do not act to block manifesting VAT fraudulent non-EU traders. There is now a HMRC compulsory fulfilment house register, with a due diligence regime also planned for 2019. The UK has estimated that VAT fraud could be as high as £1.5bn per annum.

Low-value import VAT relief to be withdrawn

Unconnected, the EU has already suggested that the present low-value consignment relief threshold be removed. This currently allows merchants to import goods from China, or anywhere else outside of the EU without paying VAT or customs. Numerous fraudulent traders have been intentionally under declaring the value of their goods to take full advantage of tax-free benefits. Presently, the threshold in the UK is £15 per parcel, and the average across the rest of the EU is €22.

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