After Brexit brought its fair share of changes for online sellers at the beginning of the year, the most impactful VAT regulations change for ecommerce is yet to come. Long anticipated, the One Stop Shop EU VAT return is part of the EU July 2021 ecommerce VAT package and its launch will bring the introduction of the single EU VAT return, together with the withdrawal of the distance selling thresholds.
Last Updated on 31 May 2021
Currently, the Mini One Stop Shop (MOSS) is an electronic system allowing service providers supplying telecommunications, broadcasting and electronic (TBE) services to consumers in the EU to declare and pay VAT due in all EU Member States in one single Member State.
From 1st July 2021, the MOSS scheme will be extended to all business-to-consumer (B2C) services taking place in EU Member States where the supplier is not established (storing goods). This new One Stop Shop (OSS) will apply also to all distance sales of goods within the EU and to certain domestic supplies of goods facilitated by electronic interfaces under certain conditions. What is more, another new scheme will be created for the declaration and payment of VAT on distance sales of low value goods imported from outside of the EU, called the Import One Stop Shop (IOSS).
What are the key benefits of OSS?
We are told that the OSS is designed to simplify the European VAT return filing system for businesses, and indeed on the long term that most likely would be the case. In the short term though, while the tax offices are setting up the registration process and businesses are getting registered and learning about the new laws, it may feel a little bit more complicated for you.
These are the main benefits of OSS:
- One way it would simplify things for you in the future would be by eliminating the need for VAT registration in EU countries you sell, but do NOT store goods in.
- Different countries distance thresholds will be replaced by one EU-wide of 10,000 euro.
- Another simplification is being able to file one OSS return that covers all of your EU VAT cross-border obligation for B2C sales. So this is regarding cross-border, business to consumer only – you will still need to file your normal VAT return, on your home country, or for countries where you store goods.
- The OSS file VAT return to your home country, in case of EU sellers – or nominated country, in case of Non-EU sellers – will be processed by the country home office and money due to other EU countries (remember, just for cross border B2C sales) will be sent to them by the tax office.
For example, companies storing goods in their home country and selling into 5-6 other EU countries without storage there, will now only have to submit one home VAT return and one OSS VAT return per period. A payment for each return will be required.
How to register for OSS?
The registration process is quite simple, but please be aware that as per now, the OSS is not yet launched. Not all of the European tax offices have put in place their registration systems yet, so we cannot offer full details on the process or documents required, but we’ll get back in the future with more on this topic. You have plenty of time to register in OSS and it can be done up until the end of June 2021.
If you wish to move to OSS reporting from the 1st of July, we can help with the registration process for the following countries. Italy, France, Poland, Czech Republic, Germany, Spain, Austria, Netherlands, Sweden and Ireland.
What is not included in OSS?
There is a series of transactions that are not included in OSS and need separate reporting, such as:
- B2b sales (business to business transactions) are NOT included in OSS;
- Domestic sales (DOMV), meaning sales to clients in the same country as the warehouse is located and from where products are sent. So for example, if you are storing goods in Italy and you are shipping them to an Italian end consumer, then you would need to report that by a standard VAT return to the Italian VAT office and, of course, you would need to be registered for VAT in Italy.
- Purchases, imports and expenses are also NOT reported in OSS.
What are the changes for online sellers based in the EU?
One of the biggest changes brought by OSS is that the old distance sales thresholds will be abolished. Only EU companies with single country storage will still have a single EU-wide 10,000 euro distance sale threshold limit applicable. This means that if you register to OSS from 1st July 2021 you will not have to register for a VAT number in the countries you ship to, but do not store in.
EU companies storing goods in several EU countries still need to register for a VAT number for each country where storage takes place, so as before, storage is still a reason to register and file for VAT in an EU country.
Domestic sales are NOT reported via OSS. These will still be reported separately via a standard VAT return to all countries applicable. As in our example above, if a company is storing goods in Italy and ships them to an Italian end consumer, then it still needs to report that by a standard VAT return to the Italian VAT office.
Imports, Purchases and Business to Business (B2B) sales are NOT included in the new OSS filing and need to be reported via the standard VAT return method.
To bring more clarity on these changes, let’s look at two common scenarios for EU based companies and how OSS registration will impact their reporting:
Example 1 – Alpha Services only stores in DE
Alpha Services is a German based company that sells online to consumers from France, Italy and Spain, but only stores in Germany. Because of this, a home VAT number is in place for Germany. Goods are not stored in France, Italy or Spain, so under OSS no VAT registration is required in these countries.
Let’s now look how VAT is assigned for Alpha Services in this business model:
- German VAT will be paid via a normal return in the usual way;
- VAT for sales to France, Italy and Spain will be paid to Germany via the normal VAT return, up to the crossing of the new 10,000 euro EU distance selling threshold;
- After crossing the new distance selling threshold of 10,000 euro, VAT in France, Italy and Spain will be paid to the German tax authorities office via an OSS return;
- Sales for Italy, France and Spain will be calculated at the local VAT rate for each country.
Example 2 – Beta Products stores in 4 EU countries
Beta Products is a German based company that also sells online to France, Italy and Spain. It does not only store goods in Germany, but also in the other 3 countries where it is selling. This means VAT registration is required in all 4 countries.
Let’s now look at the way VAT will be filed and by what means:
- German VAT (for transactions from Germany to Germany) is paid via a normal VAT return, the usual way. Same happens for France, Italy and Spain.
- VAT on B2C sales for which products are sent from one country to another from Germany, France, Italy and Spain, are paid to Germany via OSS return filing;
- Sales for Italy, France and Spain are calculated at the local VAT rate for each country.
What are the changes for non-EU online sellers?
As in case of EU online sellers, distance sales thresholds will no longer apply to individual countries.
NON EU home companies without a business base in Europe (warehouse or marketplace facilitator like Amazon or eBay) directly selling from outside of the EU to end customers within the EU (EU delivery) will still be classed as exporting to the EU. End customers receiving these orders will be charged customs duties and taxes on their purchases.
If you store goods in several EU countries then you will still need to register for a VAT number for each country where storage takes place. Domestic sales are NOT reported via OSS. These will still be reported separately via a standard VAT return to all countries applicable, like for example when an Italian warehouse ships product to an Italian end consumer address, this is treated and reported like a Domestic B2C transaction.
Imports, Purchases and Business to Business sales are NOT included in the new OSS filing and need to be reported via the standard VAT return method.
In case of Non EU online sellers, we can identify two cases: first would be the situation in which they are selling through a deemed supplier and the second is the situation in which they are selling directly, without a deemed supplier.
How to know if you are selling through a deemed supplier?
To qualify as a “deemed supplier” a marketplace or another similar platform you are using should check one statement from column A and two statements from column B.
|Terms and conditions of the sale||Payment processing|
|Authorization of the charge to the customer for the supply||Listing or advertising the goods|
|Ordering or delivering the goods||Redirecting customers to other marketplaces where the goods are offered without any other involvement in the sales|
Let’s now analyze a few common situations for Non-EU sellers and see how their VAT will be reported in the context of the OSS changes.
Example 1 – Delta Limited: Non EU company which is selling on Amazon UK
Delta Limited, non-EU company is selling on Amazon UK and they have customers in Italy, France and Spain. Amazon is a deemed supplier for the company – for example, customers from Italy will place orders on Amazon UK and the goods would ship from the UK to the end consumer in Italy.
Because goods are stored in the UK, Delta Limited needs a VAT number in the UK. Their home sales will be payable in the UK, reported by a standard VAT return. Regarding the sales shipped from Amazon UK to Italy, France or Spain, there are the following steps to be taken:
- Amazon will in effect purchase the product ordered by the end consumer from Delta Ltd at the point of sale. (destination country VAT applied);
- Amazon will report VAT deducted at point of sale to the tax authority;
- Amazon will issue an invoice to the end consumer.
Example 2 – Zeta Limited: UK company which sells on Amazon UK + storing in France, Italy and Spain
Zeta Limited is a UK company selling on Amazon UK. They are also storing goods with Amazon in France, Italy and Spain. Because they are storing goods in all 4 countries now, they will need VAT numbers in all these countries. They have no direct sales between the UK and the EU. They are actually exporting from the UK to France 70,000 euro of products per annum, and from France it is distributed by Amazon into warehouses in Italy, Spain and France.
The import VAT in France can be reclaimed on a standard French VAT return. Let’s see now where the VAT will be applied:
- Amazon will in effect purchase the products ordered by the end consumer from Zeta Ltd at the point of sale, similar to our previous example where there was no storage in the EU;
- Amazon will report VAT deducted at the point of sale to the tax authority;
- An invoice documenting the transfer of goods from Zeta Ltd to Amazon will need to be created for every sales transaction;
- Domestic and cross-border B2b (business to business) sales will be reported as normal at the dispatch country.
Example 3 – Non-EU seller which is selling directly, without a deemed supplier
Now let’s see an example of a Non-EU seller which is selling directly, without a deemed supplier. Gamma Ltd is a UK bases, non-EU company selling in Italy, France and Spain through their website only. Gamma Ltd is storing goods in UK so they need a VAT registration there. They are not storing goods in Italy, France or Spain, so when they’re receiving an order from these countries they are shipping the goods from the UK to the EU.
Home sales VAT is payable in the UK, through a standard VAT return, as normal. All products sold into Italy, France and Spain from outside of the EU is classed as an export and the end consumer is importing the product and they are liable for any customs duties.
Example 4 – Epison Ltd: Non EU Seller which sells directly trough his online shop (without a deemed supplier) + stores goods in France (besides it’s home country UK)
Epsilon Ltd is another example of a Non- EU seller selling directly through its website, without a deemed supplier, only that this time this company is also storing goods in France, besides its home country – the UK. VAT numbers are required for both countries where goods are stored, France and the UK. They also sell in Italy and Spain, but since there is no storage there, no VAT registration is required for these countries.
Epsilon has decided to export from the UK to France 70,000 euro of products per annum, in order to service the orders from the French, Italian and Spanish markets. They can reclaim the import VAT on their French VAT return.
Let’s see now where the VAT will be applied:
- France is the nominated/registered country for OSS filed VAT for Italy, Spain and France cross border B2C sales.
- French VAT return for domestic sales (DOMV) is filed and paid separately;
- All sales reported via OSS have destination country VAT rate applied.
Example 5 – Zeta Ltd: Non EU Seller stores goods in 4 EU countries
Zeta Ltd is our last example for the Non-EU sellers selling directly, with no deemed supplier. They are selling in France, Italy and Spain. In this scenario, the seller is storing goods in all 4 countries, therefore VAT registration every one of these.
Similar to the previous example, Epsilon has decided to export from the UK to France 70,000 euro of products per annum, in order to service the orders from the French, Italian and Spanish markets. They can reclaim the import VAT on their French VAT return.
So how the VAT allocation will be done in this case?
- Domestic sales (DOMV) are filed and paid as normal via a tax return to each country tax office (for example, IT to IT or ES to ES);
- Cross border B2C sales (for example FR to It or FR to ES) are paid via OSS return at the French tax office;
- All sales reported via OSS have destination country VAT rate applied to them.
Frequently asked questions
You will need to apply for vat numbers in your home country in the EU or your nominated country in the EU if you are a NON EU home client. You will need to apply for vat numbers in all EU countries where you store goods.
No, only cross border B2C ( Business to consumer) sales.
Yes, you need to report domestic sales in the standard country VAT return. And if you store in other countries you need to report those countries domestic sales as well in their local VAT reports.
The registration to OSS is simple, but in some countries it has not been launched yet. You still have the time to register until the end of June 2021. If you wish to move to OSS reporting from July 2021, hellotax can register you for OSS in the following countries Italy, France, Poland, Czech Republic, Germany, Spain, Austria, Netherlands, Sweden & Ireland.
Yes, the report needs to match with the OSS structure. It needs to cover all your B2C cross-border sales from all the dispatching countries.
The OSS report can be filed by anyone that you have registered authorisation for (in some countries you might be limited to authorising only licenced accountants or tax advisors).
hellotax can do this for you in the following countries:
Italy, France, Poland, Czech Republic, Germany, Spain, Austria, Netherlands, Sweden, Ireland.
Yes, after 1st July 2021 all sales to these countries can be reported in the OSS report. IF you register to OSS then you will be able to deregister your VAT ID in these countries.
No, you can stay with standard reporting but this will mean that you might have to register in all EU states in which you sell your products to.
There is no longer individual distance sales thresholds from the 1st of July 2021 there is a single DST of 10,000 euro for Europe.
To minimize your administrative costs it is advised to use the OSS reporting option.
Yes, non-EU can choose the country in which it will get registered for OSS, the only condition is that the NON-EU company needs to have a standard VAT registration in that country.
No, OSS reporting is only for cross border B2C sales.
No, in the OSS report we include only B2C sales
B2B transactions would be reported via the standard way.
Yes, you need to report B2B cross-border transactions (Intracommunity transactions) in the EC list. OSS is just for B2C.
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