A set of APIs helping marketplaces to comply with new international tax regulations
As multiple far-reaching reforms of the international tax systems are planned, marketplaces will have to comply with these regulations by bringing VAT/GST/Sales tax calculations and invoicing automation for each sale.
New tax regulations are changing the game
New tax regulations are deeply modifying the regimes applicables to B2B and B2C distance sales and marketplaces are becoming responsible for the VAT/GST/sales tax collection.
- The EU commission is setting up a new VAT package that will require marketplaces to account for VAT for overseas goods sold by non-EU sellers to EU customers.
- From 1 January 2021, new rules in the UK will impact how online marketplaces will deal with VAT for goods from overseas that are sold to customers in Great Britain.
- In the US, more than 40 states have put in place a Marketplace Facilitator legislation that shifts the sales tax collection and remittance obligations from a third party seller to the marketplace facilitator.
EU 2021 rules - Online Marketplaces become the deemed supplier and VAT collector
Online Marketplaces play an important role in controlling the rapid growth of electronic commerce and the EU states have decided to imply them in the fight against VAT fraud. Therefore, from July 2021, online marketplaces will be required to account for VAT when:
- the marketplace is facilitating B2C sale imports not exceeding €150.
- the marketplace is facilitating sales of goods that are already stocked in the EU but the sellers are based in a third party country.
Marketplaces will also be required to keep the records of certain information and tax evidence related to the sales made online while ensuring compliance with GDPR.
Sellers will bear part of the tax liability if the goods sold are already stocked in the EU. In that case, they will be obliged to register and file VAT in the country where the products are held.
How to be compliant?
Liability assessment factors
As your online marketplace is becoming jointly and severally liable for VAT treatment, you will need to assess whether you or your seller collect the VAT/GST/sales tax based on 5 factors.
- Type of product sold
- The goods amount (item by item)
- The customer’s location
- The seller’s location
- Goods warehouse location
The new EU VAT regulations will also impact the way marketplaces treat invoices and credit notes. Here are some important points that will have to be covered:
- Invoicing mandate for invoices generated in the name and on behalf of sellers
- Self-billing for sellers when the marketplace is the deemed supplier
- Invoices and credit notes from the marketplace to customers
- Multi-languages, currencies, and special mentions in order to comply with local requirements
How does Octobat Plaza work?
Octobat Plaza is a set of APIs and applications built on-top of Octobat to help platforms and marketplaces build an invoicing and tax management to face their liabilities and give their sellers the possibility to comply with both international and local laws.
Thanks to our API-based system, you can integrate with our services in many different ways, giving you a lot of control and customization possibilities, including:
Onboard sellers in your marketplace
Onboard your users by collecting required information and verify VAT IDs
Determine the deemed supplier
Determine the deemed supplier based on the sellers and sale profile
Apply the right tax rate item-by-item
Get item-by-item accurate tax rates at checkout
Issue compliance invoices
Issue compliance invoices on your seller’s behalf or allow your sellers to do self-invoicing
Octobat Plaza is designed in a modular and customizable way - choose your implementation to help your and sellers comply with new international and local tax rules.