Request for harmonised framework to determine digital interfaces’ liabilities on non-EU sellers establishment
France has called for harmonisation of rules on marketplace VAT obligations where non-EU goods sellers circumvent the Fixed Establishment requirements. It has raised the issue in the VAT Committee, which reviews technical questions from member states on the application of the VAT Directive and related rules.
In particular, some non-EU sellers have been establishing EU companies to circumvent the rule on the liability of electronic interfaces set out in Article 14a(2) of the VAT Directive. This then means under the 2021 e-commerce package reforms, any facilitating marketplaces for the sellers are no longer treated as the deemed supplier and do not hold liability. However, the marketplaces may nevertheless be held liable if they did not seek appropriate proof of this avoidance tactic.
The French are proposing a new framework for digital interfaces to determine genuine vs spurious EU establishments, and so have
French seek VAT Committee views
The French delegation has proposed a common due diligence framework for electronic interfaces to enhance legal certainty for e-commerce stakeholders, ensure fair competition, and reduce risks of circumvention of EU provisions. The framework introduces a two-step process for verifying whether an underlying supplier is established within the EU, involving a presumption of establishment (Stage 1) and corroborating evidence (Stage 2). This framework aims to balance regulatory requirements with the administrative feasibility for stakeholders.
Stage 1: Presumption of EU Establishment
An underlying supplier is presumed to be established in the EU if it:
- Declares an EU business address to the electronic interface.
- Is registered in a trade register of an EU Member State.
- Has an intra-Community VAT number consistent with the company name, verified through the VIES database, without conflicting evidence.
- Has not been flagged by the relevant tax authority as being outside the EU.
Stage 2: Additional Evidence
The presumption must be supported by at least two items of non-contradictory evidence, such as:
- A company legal representative’s EU home address.
- Geolocation of devices or IP addresses within the EU.
- Financial evidence like an EU bank account or payment details.
- A European telephone number.
- Other commercial or tax-related documents confirming EU establishment.
If these conditions are not met, the electronic interface must treat the supplier as non-EU-based and become liable for VAT. Suppliers can challenge this assessment by providing evidence like identity documents, utility bills, property records, employment contracts, or other relevant records proving EU establishment.
Flexibility and Legal Framework
The framework ensures compliance with Article 5c of Implementing Regulation No. 282/2011, as interpreted by the Court of Justice of the European Union (CJEU), without imposing excessive administrative burdens. Electronic interfaces retain the option to adopt alternative, risk-based approaches, which must be robust enough to withstand Member State controls.
Potential Benefits
This approach offers a harmonized, secure legal framework while accommodating varied e-commerce practices. It aims to provide stakeholders with clearer guidelines and reduce legal ambiguities. The proposal remains under consideration, as it seeks to balance the need for due diligence with practical implementation challenges.
