On July 1st, the VAT rules for business to customer (B2C) eCommerce sales changed. Sage has launched a new solution to assist customers using Sage Accounting located in France, Ireland, Spain, and the UK. Sage has, perhaps surprisingly, also omitted mention of the US customers in the release who may also be affected. Enterprise Times asked Sage about this, but as yet, has received no response.
The solution addresses the changes made within the EU VAT E-commerce Package and will assist customers with calculating the new changes. The add-on includes live tax rates and simple reporting features to ensure that the calculated tax on eCommerce sales is accurate.
The new regulations apply to the following transactions:
- Distance sales of goods within the EU carried out by suppliers or deemed suppliers
- Domestic sales of goods by deemed suppliers
- Supplies of services by EU and non-EU sellers to consumers in the EU
- Distance sales of goods imported from third territories or third countries carried out by suppliers and deemed suppliers, except for goods subject to excise duties.
If these apply to your organisation, you need to take note of the changes.
The changes to the VAT rules seem simple at first glance, but as with any changes, they soon become increasingly complex and beyond the scope of this news piece. In simple terms, businesses that are distance selling to consumers within the EU need to assess VAT based on the destination country. The new Sage solution will automatically make that calculation based on the destination address.
Why change VAT rates?
These new rules are targeted at reducing the amount of Tax fraud and companies circumventing regulations. It will mean that companies that previously “shipped” from Luxembourg to consumers will need to charge the full VAT rate of the country they are shipping to.
Neal Watkins, EVP, Small Segment, Sage commented, “As we move into our 6th post Brexit month of 2021, the path forward for businesses trading cross border with EU based suppliers and end customers is becoming clearer. Our single focus is to help our customers navigate these changes with solutions and advice that enable them to do better business.
“E-Commerce gives businesses the ability to reach more customers than traditional retail, and with so many people making their purchases online, it is the fastest-growing retail market – we want our customers to see the opportunities, not the limitations.”
The legislation is designed to make things easier and simpler for online businesses selling to consumers living within the EU. Businesses must assess, based on the region with which they are trading, their entire supply chain and ensure that their VAT liability and reporting obligations are in line with the EU One Stop Shop (OSS). For those selling through marketplaces, there is good news. It infers that if the relationship is with the marketplace, this now becomes a B2B engagement for the supplier and the onus is put on the marketplace.
What does the update do?
The new feature within Sage Accounting helps organisations automatically calculates the correct tax to apply for each EU country. Importantly it will also serve up the correct options available depending upon the services and goods offered for those countries. VAT rates vary within in member country with nuances for different goods and services. It will ensure that as users enter invoice information, the choice of VAT rates is filtered from more than 50 down to only a few.
With fewer options, the data is accurate, ensuring better compliance and reducing the time taken by accountants to correct errors. The update includes several features:
- There is a managed experience for each regional Tax Scheme or model, right down to specific trading scenarios. It will help customers understand how each transaction is processed and why. Specifically for the UK, this includes support for the Low-Value Consignment scheme and OSS Services.
- Live tax rates. These are updated in real-time and combine with Sage Accounting’s scenario management solution developed for Brexit. It will help to avoid manual data input errors.
- Destination VAT – charging the VAT rate of the end customer they are selling to, helping customers fast-track goods into the EU or cross-border (within the EU), avoiding delays in customs, and providing clarity to their customers on what they will be charged at the point of purchase.
- New reports and ledger accounts help customers report on Destination VAT and complete their submissions, simplifying the compliance journey and providing easy reconciliation.
More help is at hand
Alongside the press release, Sage also published a few videos and guides to the new regulations, which are useful for a quick overview of the changes.
- Help: https://help.accounting.sage.com/en-gb/start/tax/EU-VAT.html
- Blog: https://www.sage.com/en-gb/blog/eu-ecommerce-vat-changes/
- Product Agnostic Video: https://www.youtube.com/watch?v=ZJHhir3OM4o (12 mins)
- How to: Sage Accounting: https://www.youtube.com/watch?v=_h4q07aKotk (5 mins)
- Detailed How to Accounting: https://www.youtube.com/watch?v=DFrEOEFykqQ (18 mins)
- Sage solutions and advice for e-commerce businesses: https://www.sage.com/en-gb/cp/ecommerce/
- Information about the new solution on the Sage EU VAT hub here.
There are also wider implications for US businesses, which Avalara touched on within this blog. For organisations based in Northern Ireland, there are slightly different rules in effect as a result of the Brexit deal.
(un)answered questions forSage
Sage have responded with further information inserted below
The announcement does raise questions about other areas of Sage that were not covered, though. Enterprise Times asked several questions around this.
Sage Accounting is not available in Germany, and it seems unlikely that they will make it available there. It announced in its annual report that its strategy is to divest operations in Central Europe. It doesn’t mention Portugal, though that is part of Southern Europe, including Spain.
- Sage Accounting as a solution is available in Germany, however for this release we made some decisions around scope to ensure we could deliver the maximum value for as many customers as possible.
- The legislation does apply to US customers, and we have plans to include our North America customers in future releases. As per Germany, we made strategic decisions around scope to support customers who could benefit the most.
There is also no mention of Sage Intacct, Sage X3 or its cloud-connected solutions. Will this package be available as part of the wider Sage Business Cloud ecosystem? It seems not.
- This new capability is part of Sage’s ecosystem and therefore is available to all Sage products both globally and domestically. Each product will have its own plans as to how to use each these capabilities based on individual strategy and feature set.
Enterprise Times also asked Sage its view of the VAT changes. Does this complicate matters or simplify matters for SMEs? Is there a better solution, and if so, what is it?
- This new legislation around VAT does simplify things for customers who trade B2C, especially around low-value items. This is a real opportunity for customers to scale their existing business into the EU. With the Sage solution, they can offer customers clarity over pricing by including the relevant VAT amounts, help customers to receive their goods in an expedited way, and for Sage customers it simplifies recording, reporting and paying VAT.
- In addition, with our solution it makes it easier to manage your cashflow by easily reconciling those VAT liabilities upfront. A single return for all trade into the EU is certainly more straightforward for businesses.
As of writing, no answers were received to these questions; the article will be updated when they are.
Enterprise Times: What does this mean
Anything that makes life easier for SMEs trying to engage with international customers is a good thing. This is not a simple subject, and anything that makes life easier for SMEs is welcome. It will be interesting to see how Sage manages to update the VAT changes across Europe. There is no mention of it leveraging a partner specialising in this, such as Avalara or SOVOS.