Misapplication of VAT in distance sales

With Interpretation no. 246 dated April 14, 2021, the Revenue Agency expressed its opinion on the incorrect application of VAT within the sphere of intra-Community distance selling.

Distance sales of goods to private individuals in other Member States are to be considered non-taxable in Italy and relevant in the State of destination of the goods, pursuant to art. 41, paragraph 1, letter b) of Legislative Decree 331/93. If the amount of such sales carried out in another Member State did not exceed the threshold set by that State (between 35,000.00 and 100,000.00 euros) during the previous calendar year and the current one, the sales are subject to VAT in Italy, without prejudice to the possibility for the supplier to opt for application of VAT in the Member State of destination of the goods.

As of July 1, 2021, the provisions introduced by Directive 2017/2455/EU, which will amend the provisions of the VAT regulations just described, will become effective. Among the novelties we find the abolition of the reference thresholds for the application of VAT on distance sales and the introduction of a single threshold, equal to 10,000 euros, above which sales will have to be considered relevant in the State of destination of the goods, unless an option is chosen.

In addition, the possibility will be introduced for suppliers to be able to use the OSS (One Stop Shop) scheme to pay the VAT due on relevant distance sales in other EU countries.

With Interpretation 246/2021, the Revenue Agency has expressed its opinion on the case in which an Italian VAT taxable person, believing that distance sales made to EU private individuals in the second quarter of 2020 were relevant for VAT purposes in the destination countries rather than in Italy, has mistakenly paid the tax in the Member States of destination of the goods through the MOSS, despite the fact that the special regime is applicable until June 30, 2021 only to services rendered in the context of direct e-commerce.

According to the Revenue Agency, the regularization must proceed via the recalculation of the VAT debt for the second quarter of 2020, calculating in the periodic settlement also the transactions erroneously declared with the MOSS and reversing the tax due in addition to the related interest and the penalty pursuant to art. 13, paragraph 1, of Legislative Decree no. 471/97.

When the quarterly declaration is checked, any tax overpaid under the MOSS will be refunded:

  • – by Italy (as the country of registration), if it has not yet been apportioned between the various member states;
  • – directly by the destination countries if the allocation has already taken place.