Table of Contents
- Introduction
- What is One Stop Shop (OSS)?
- Understanding the OSS Registration Process
- Changes for EU-Based Online Sellers
- Changes for Non-EU Online Sellers
- Submitting OSS Returns
- Conclusion
- Frequently Asked Questions (FAQs)
Introduction
As global e-commerce continues to expand, so does the complexity of VAT regulations for sellers operating across multiple countries. For online sellers in the European Union (EU), the need to navigate diverse VAT obligations has often been a substantial administrative burden. However, July 2021 marked a pivotal moment with the introduction of the One Stop Shop (OSS) scheme, revolutionizing how VAT is reported and managed within the EU.
By the end of this blog post, you'll have a thorough understanding of the OSS scheme, the changes it brings, and how online sellers, both within and outside the EU, can adapt to these new regulations. Whether you're an established e-commerce business or just starting, this guide will help you comprehend the OSS's impact and requirements.
What is One Stop Shop (OSS)?
Background and Objectives
Before OSS, sellers had to register for VAT in each EU country where they met the sales threshold, leading to multiple VAT filings and payments. The OSS simplifies this entire process by allowing sellers to fulfill their VAT obligations through a single registration and return for all their EU sales, except for domestic sales and a few specific transactions.
Evolution from MOSS to OSS
The Mini One Stop Shop (MOSS) system, which OSS expands upon, had been in place for certain business-to-consumer (B2C) services since 2015. MOSS was limited to telecommunications, broadcasting, and electronic (TBE) services. With the new OSS, nearly all B2C sales of goods and services within the EU are now covered.
Key Benefits of OSS
- Simplified VAT Reporting: Sellers can declare and pay the VAT due in one member state, avoiding multiple registrations.
- Reduces Administrative Costs: Cuts down on the need for multiple VAT registrations, filings, and payments.
- Uniformity Across the EU: Establishes a consistent VAT return process across all member states.
Understanding the OSS Registration Process
Steps to Register for OSS
- Determine Eligibility: Assess whether your business activities are subject to OSS. Companies selling distance goods, storing in one EU country and shipping to others, are prime candidates.
- Choose Your Member State of Identification: For EU-based businesses, this is typically the country where your headquarters are located. Non-EU sellers must choose a single EU member state for registration.
- Complete Registration: Access the Federal Central Tax Office (BZSt) online portal, attach the necessary documents, and submit your application.
Important Deadlines
- Early Registration: For prospective users by July 1st, 2021, registration was required by June 30th.
- Quarterly Registration: Completing registration within the quarter ensures usage in the subsequent quarter.
What to Keep in Mind
- Consult with Tax Advisors: Seek guidance if you face uncertainties during registration.
- Confirmation and Documentation: Properly maintain all confirmation correspondence and understand the timelines for declaration and payments.
Changes for EU-Based Online Sellers
Abolition of Distance Sales Thresholds
Previously, sellers had to navigate varying distance sales thresholds for different countries. Now, a single EU-wide threshold of €10,000 applies for companies with single-country storage. Sellers with cross-border sales exceeding this threshold must register for the OSS.
Mixed Storage Implications
Even with OSS, companies storing goods in multiple EU countries must maintain VAT registrations in each storage country. For example, if a seller stores in Germany but ships to France, Italy, and Spain, no separate VAT registration is needed for those countries under the OSS umbrella. However, domestic sales within Germany will still require a standard VAT return.
Illustration: Alpha Services and Beta Products
- Alpha Services: Sells to various EU countries but stores in Germany. With OSS, no additional VAT registrations are necessary outside Germany.
- Beta Products: Stores in Germany, France, Italy, and Spain, requiring VAT registrations in each country of storage.
Changes for Non-EU Online Sellers
No Distance Sales Thresholds for Non-EU Sellers
Non-EU businesses will no longer worry about varying distance sales thresholds. They must register for OSS in one chosen EU country.
VAT Obligations for Non-EU Sellers
- With a Deemed Supplier: Platforms like Amazon handle VAT collection and reporting. For example, a UK-based seller using Amazon to distribute in the EU needs VAT registration in the UK and possibly other storage countries.
- Direct Sales: Sellers directly shipping from outside the EU must handle VAT as if they are exporting to the EU. The end consumer is responsible for customs duties and taxes.
Key Examples of Non-EU Sellers
- Delta Limited: Sells through Amazon UK, requiring UK VAT registration but benefits from Amazon's deemed supplier status.
- Gamma Ltd: Directly ships from the UK to EU consumers, with direct export classification and consumer tax responsibilities.
Submitting OSS Returns
Current Submission Process
Initially, the OSS returns couldn't be digitally uploaded, requiring sellers to manually input data into their local tax office portals. This involves organizing sales by type, country, storage location, and applicable VAT rates.
Anticipated Improvements
While manual submission was the starting point, improvements and automation are expected to streamline this process, reducing the administrative burden further.
Data Requirements
Essential data includes:
- Service vs. Product Sales: Separate listings are required for accurate VAT application.
- Geographic Sales Breakdown: Distinction between domestic and cross-border EU sales.
- Categorization by VAT Rates: Properly sorting transactions based on the regular or reduced VAT rates applicable in different countries.
Conclusion
The OSS scheme marks a significant advancement in simplifying VAT compliance for e-commerce businesses in the EU. By consolidating the reporting and payment processes, OSS reduces the administrative load and makes it easier for businesses to expand their EU operations. However, understanding the specifics of registration, reporting, and exclusions is crucial for smooth adaptation to this new system.
Frequently Asked Questions (FAQs)
Do I need multiple VAT registrations with OSS implementation? You still need VAT registrations in each EU country where you store goods.
Are all sales reported in the OSS return? No, only cross-border B2C sales are included in OSS returns.
Is domestic sales reporting still required? Yes, domestic sales are reported through the standard VAT return process for each respective country.
Can non-EU businesses use OSS? Yes, non-EU businesses can choose an EU member state for OSS registration.
What about B2B transactions? B2B transactions are excluded from OSS and are reported traditionally.
By keeping these FAQs and OSS guidelines in mind, businesses can navigate the new VAT landscape effectively, ensuring compliance and optimizing their EU operations.
