The Organisation for Economic Cooperation and Development (OECD) today announced the release of new implementation guidance to promote the effective collection of consumption taxes on cross-border sales.
According to today’s OECD release, this guidance is intended to support the consistent implementation of internationally agreed standards for the value added tax (VAT) treatment of cross-border trade and will be “of particular relevance given the rapid and ongoing digitalisation of the economy.” The effects of e-commerce and its impact on the collection of VAT on business to consumer (B2C) supplies was identified as a key tax challenge in the context of the OECD/G20 base erosion and profit shifting (BEPS) project.
The new implementation guidance focuses on the implementation of the recommended approaches included in the final report under BEPS Action 1 (Addressing the tax challenges of the digital economy), and the OECD today stated that these recommended approaches have already been successfully implemented by a large number of countries. The implementation guidance builds on approaches deployed by jurisdictions that require foreign suppliers to register and collect VAT on cross-border B2C sales.
The OECD reported that early data on the impact of the recommended solutions is “very promising” and that the EU (the first adopter of these collection mechanisms) identified the total VAT revenue declared via its compliance regime (the Mini One Stop Shop or MOSS) as in excess of €3 billion in its first year of operation. The MOSS has also played an important role in reducing the compliance burden of businesses that use the regime. Approximately 70% of the total cross-border B2C supplies of services and intangibles that are in scope of this regime are captured by this compliance regime.
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