OSS Guide – Everything You Need to Know
From the 1st July the EU will reshape the current model of VAT obligations for B2C ecommerce sellers. Alongside the introduction of an Import One-Stop-Shop (IOSS), the arguable centrepiece of the new changes is the introduction of a One-Stop-Shop (OSS).
So what exactly will the OSS do? Who will it affect and what will the benefits be? Read our Everything You Need to Know about the One-Stop Shop (OSS) to learn more.
What’s happening on July 1st?
Currently, all EU-based businesses making distance sales of goods above a certain threshold (€35,000 or €100,000 depending on the jurisdiction) to buyers located within the EU must register and pay VAT in the buyers’ Member State. Understandably, this can be a time-consuming and costly process.
However, from the 1st July, a number of new VAT eCommerce rules will come into force. A new €10,000 threshold applicable to all EU-wide sales will be introduced. Sales up to this threshold are taxed to VAT in the country where the selling business is located. If the threshold is exceeded, businesses can register with the One-Stop-Shop (OSS).
The OSS will eliminate the obligation on businesses to VAT register in every country where sellers are making their sales. This allows easier declarations and payments of VAT due in other states.
What is the One-Stop Shop?
The One Stop Shop will simplify and streamline 95% of VAT obligations for sellers of goods and services.
Through the One-Stop Shop, businesses can:
- Register in a single Member State
- Declare and pay all VAT due in a single electronic quarterly return.
- Work with the tax administration of their own Member State, in their own language, even when selling cross border.
How can my business register for the OSS?
Each EU member state has an online One-Stop-Shop portal where your business can register. This registration will be valid for all sales in other EU member countries.
How should I use the OSS?
There are a number of things your company should do if you plan on using the One-Stop-Shop. This is not an exhaustive list:
- Your company needs to apply the VAT rate of the state where the goods are dispatched to or services are supplied.
- Your company will collect VAT from the buyer on intra-EU distance sales of goods or on supplies of services.
- A quarterly VAT return will need to be submitted through the One-Stop-Shop portal of the Member State in which you are OSS registered.
- Your company should make a quarterly payment of the VAT declared in the VAT return to the member state in which you are OSS registered.
- Companies should keep diligent records of all eligible OSS sales for a minimum of 10 years.
EU Member States – VAT Registration
UPDATE: Clarifying the OSS
There have been some misconceptions around the OSS and here are just a few clarifications.
New Rules Affect All E-Commerce Sellers
Though many, quite rightly, believe that the new e-commerce VAT package will impact both EU and non-EU sellers, the reality is it’s mostly limited to business-to-consumer transactions or “B2C” transactions. New regulations affect sellers who:
- Sell goods or services to consumers in the EU
- Are involved in the transport of goods.
In effect, this means that when customers are VAT-registered businesses or manage transport of goods themselves, it won’t apply.
One-Stop Shop is Mandatory
Another point that is not talked about is that the new e-commerce schemes are optional. There are three One-Stop Shop schemes within the overall e-commerce VAT package:
- Union scheme.
- non-Union scheme.
- import one-stop scheme (IOSS) scheme.
Both the Union and the non-Union schemes allow businesses the option to register in one EU country. This allows declaration of VAT due for every EU country where customers are located in one submission.
The import scheme allows businesses to import goods VAT free. Instead of paying import VAT when the goods enter the EU, the seller charges VAT of the customer country at the time of sale.
These schemes are optional. There are good reasons to not use them, too. For example, because you cannot deduct input VAT on your OSS return, businesses with significant expenses in other countries could prefer to use local registrations over the OSS scheme.
Union Scheme is for EU Businesses Only
Most people believe that only EU-businesses can utilize the Union scheme while non-EU businesses use the non-Union scheme. This is mostly true in the case of supplies of services where non-EU businesses must use the non-Union scheme.
However, contrary to what most people think, non-EU businesses can register for the Union scheme if they perform intra-EU distance sales of goods. This qualifies as sales of goods from one EU country to another. These sales are not covered by the non-Union scheme which only applies to services.
Each scheme is applied to different supplies so a non-EU business could potentially end up registering for all three schemes.
OSS is Only for Sales Above €10k
Generally, sellers based in the EU selling goods or services to customers in other EU countries will have to charge the VAT of the customer’s country. However, to avoid multiple VAT registrations a seller could utilise the Union scheme.
For EU businesses with sales of digital products or distance sales of goods to customers in the EU that do not exceed €10k there is an exception. These businesses are not required to charge VAT of their customer country, but may apply their local VAT. There are three conditions:
- The seller is established in only one EU member country.
- It supplies goods only from its country of establishment.
- Revenue from sales of goods and digital services to consumers in other EU countries (not total sales) does not exceed €10,000. (The threshold is not counted separately for supplies of goods and digital services but the sum of all these supplies must not exceed €10,000 for the threshold to apply.)
Sellers are also able to disregard the threshold and charge the VAT of the customer country. They will need to register directly in the customer’s country or for the OSS Union scheme. In this case, it will be obligated under this decision for two calendar years.
Non-EU Sellers Do Not Require a Tax Representative
If a non-EU business wants to sell digital services to EU consumers, they can register for the non-Union scheme directly with tax authorities. There is no need for a tax representative.
However, if a non-EU business wants to register for a Union scheme then the EU member state may require the appointment of a tax representative.
Non-EU businesses that want to utilize the import scheme have to appoint an intermediary for this. This intermediary will be a non-EU based business which is liable to remit VAT and fulfil VAT obligations of the import scheme on behalf of the person represented.
If a seller is based in a country where the EU has an agreement on mutual assistance for VAT (Norway, UK) the appointment of an intermediary is waived.
OSS Covers All Sales of Goods to EU Consumers
The Union scheme of the OSS applies only to sales of goods that are shipped from one EU country to another. So in the case that a business sends goods to customers in its country then it must declare them on its domestic VAT return.
If a non-EU business sells goods located within the EU and this sale is facilitated by an online market place the local sale of goods will be declared through the Union scheme by the market place.
OSS Does Not Cover Sales into the UK
Brexit caused a massive upheaval for many businesses and sellers. Most notably in Northern Ireland where there is now a dual VAT regime. Though the United Kingdom is outside the European Union, EU VAT rules still to apply to sales of goods between Northern Ireland and the EU.
For now it will follow EU VAT rules for the sales of goods but will be treated as a non-EU country for sales of services. So, from now on, sales of goods to NI consumers may be declared through the Union scheme.
Import Scheme Applies to Goods Below €150
Generally, the import scheme applies to goods brought through in consignments that do not exceed the value of €150. However, a ‘consignment’ is defined as goods packed together and dispatched by a seller to a customer.
If a customer purchases one item for €80 then the seller may apply the import scheme as it’s below €150. But if a customer orders two copies of the item, the import scheme can’t be applied. This is because the ‘consignment value’ is €160.
EU VAT Number May Be Used for All New Schemes
Under each scheme there is a different ID number required. Under the Union scheme, sellers are identified with the same VAT number they use for all other intra-EU transactions. Non-EU businesses registering for the Union scheme will be allocated a VAT number by the EU member state of registration.
Under the non-Union scheme, non-EU businesses will be given a special number in the format EUxxxyyyyyz. This may be used to declare supplies falling under the non-Union scheme. Likewise, a business using the import scheme will be allocated an IOSS VAT ID number in the format IMxxxyyyyyz.
Tax Invoices are Obligatory in E-Commerce Sales
There is actually no legal obligation to have an invoice for sales issued under any of the new schemes. If a seller chooses to issue an invoice, rules from the EU country where it is registered will apply. If the seller performs intra-EU distance sales of goods but does not use the Union scheme, they will be obliged to issue an invoice under the rules of the customer’s country.
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