A small online seller established in Ireland made combined cross-border B2C distance sales of goods, plus B2C telecommunications, broadcasting and electronic services, to consumers in other EU member states totalling EUR 6,000 in the current calendar year and EUR 4,000 in the previous calendar year. Under Article 59c of the EU VAT Directive (the EU-wide distance-selling threshold, effective since 1 July 2021), what does this mean for where these supplies are taxed?
- The EUR 10,000 threshold is assessed separately for goods and for services, so the seller has a further EUR 10,000 of headroom in each category before either threshold is breached
- Falling under the threshold means these supplies are entirely VAT-exempt and no VAT is chargeable on them by any member state
- The threshold is assessed only by reference to the current calendar year's sales, so the prior year's EUR 4,000 is irrelevant to whether the seller stays under it now
- Because the combined total across both years is below EUR 10,000, the seller may treat these supplies as taxed in Ireland under domestic Irish VAT rules, though it can still choose to apply destination-based taxation, including registering for the One Stop Shop, voluntarily instead
Why D? And why not the others?
Correct answer: D. Because the combined total across both years is below EUR 10,000, the seller may treat these supplies as taxed in Ireland under domestic Irish VAT rules, though it can still choose to apply destination-based taxation, including registering for the One Stop Shop, voluntarily instead
Article 59c sets a single combined EUR 10,000 EU-wide threshold, assessed on the current year's turnover together with the previous year's, covering distance sales of goods and cross-border telecommunications, broadcasting and electronic services together; as long as the combined figure for both years stays below that amount, the seller may continue treating these supplies as domestic Irish supplies taxed at Irish rates, while still being free to opt into destination-based taxation and OSS registration voluntarily even though under the threshold. The option splitting the threshold into separate EUR 10,000 allowances for goods and for services misstates the rule, which combines both categories into one shared ceiling rather than doubling the available headroom. The option treating supplies under the threshold as VAT-exempt is wrong because staying under the threshold does not remove the supplies from VAT; it simply lets the seller apply its home member state's domestic VAT rules to them instead of destination-based rules. The option ignoring the prior year's turnover is wrong because Article 59c requires looking at both the current and preceding calendar year's combined sales, not the current year in isolation, to determine whether the threshold has been exceeded.
Source: EU VAT Directive (2006/112/EC), Article 59c (EU-wide distance-selling threshold), as introduced by Council Directive (EU) 2017/2455, effective 1 July 2021