On July 1, 2021, the EU will introduce its new VAT package for e-commerce, which means that businesses will have to switch to an One Stop Shop (OSS) reporting in the EU.
The OSS system is based on the current Mini One Stop Shop (MOSS) scheme and extends it. MOSS covers B2C transactions for telecommunications, broadcasting and electronic services, and allows companies to declare and pay VAT in one EU member state.
What is OSS and How Will It Function?
At the moment, Member States have varying thresholds for distance selling. After July 1, 2021, these will no longer apply, and all sales of goods within the EU will be subject to a fixed €10,000 threshold. Above this limit, sellers will need to declare and remit VAT in the destination state. This will apply to EU businesses and not to companies established in the UK. We already discussed this topic and you can find it here.
Sellers can declare VAT via a single VAT return. They need to file it in the country of their OSS registration. EU companies can simply declare in the country where they’re operating, which will be considered as the Member State of Identification. For non-EU businesses, they can choose where to register for OSS. The OSS system is meant to simplify tax obligations and allow businesses to streamline their VAT return filings, but it will not be mandatory. If a company prefers to file VAT returns in each state where VAT is due, they can continue doing that.
OSS for Goods Located in the EU
If goods are located within the EU when they’re sent to the end customer, this will still be considered as distance selling. Filing a VAT return via the OSS system will be possible for all goods, no matter their value. VAT needs to be charged at the rates of the country of destination, also known as the Member State of Consumption, but will be remitted at the Member State of Identification, where the company is filing their VAT returns.
IOSS: Goods Located Outside of the EU
For goods that are sent from outside of the European Union, an Import OSS (IOSS) scheme will be available.
Goods of value under or above €150 (excluding shipping and insurance) fall in different categories. For goods of a value of less than €150, the IOSS scheme will apply. If their value is higher than that, a regular customs declaration will be necessary.
If sellers are using an online marketplace for selling goods of a value of less than €150, the platform is considered as the effective seller. This means that it will also be responsible for collecting and declaring VAT.
The VAT directive might be further delayed, and if businesses reach VAT thresholds in any EU country prior to that, they need to register and file VAT returns.
How Can Fonoa Help You?
We recommend e-commerce businesses to prepare for these new rules timely. For volume businesses, this means ensuring your IT systems and e-commerce software are ready to handle the complexity these new rules bring and provide you (or your tax accountant) with adequate data to file your tax returns.
At Fonoa, we have developed a platform that is ready for the future and automates all aspects of your e-commerce VAT obligations.
What’s more, reach out to us and we can help you handle your tax registrations, tax filings and representation where needed.