Deemed supplier

What it means

A deemed supplier is a concept from the VAT rules for e-commerce. An electronic interface such as an online marketplace or platform that facilitates sales of goods to final consumers is, in specified cases, treated as the supplier, as if it had bought the goods from the seller and sold them to the customer itself.

This applies above all to distance sales of goods imported from outside the EU in low-value consignments, and to sales of goods within the EU where the seller is established outside the Union. The platform then accounts for and pays the VAT, usually through IOSS or OSS.

The aim is to collect VAT where sellers from third countries often did not pay it. Instead of thousands of small sellers, the tax is collected from a handful of large platforms that hold the sales data and can be audited.

How it works in practice

For a Slovak seller selling goods from a warehouse in the EU through a marketplace or its own online shop, the rule usually does not apply and the seller handles VAT itself under the normal rules. But if it ships cheap goods from Asia directly to customers through a platform, the platform may be the deemed supplier and the seller does not account for VAT on the sales to customers.

In the books of a seller for whom the platform acts as deemed supplier, its sale to the platform is assessed separately and generally carries no Slovak VAT. For clients we therefore set up records that make clear which orders the platform taxed and which sales remain the client’s responsibility.

Platforms also report seller data to the Financial Administration under DAC7 and verify sellers under the DSA. Income from platform sales must therefore match the tax return, because the tax office has it from several sources.

What to watch out for

Sellers often assume the platform always pays the VAT for them. The rule applies only in precisely defined cases, however, and for all other sales the seller is responsible for VAT, including registration in customers’ states once the distance selling threshold is exceeded.

If a platform wrongly fails to apply the deemed supplier regime, or applies it where it should not, it becomes unclear who should have accounted for the tax. This needs resolving with the platform and the tax office in good time, because retrospective corrections in foreign states are slow.