To promote and simplify cross-border online trade (e-commerce), the EU has introduced the One-Stop-Shop (OSS) VAT return and the abolishment of the Distance Selling thresholds. OSS is not compulsory and applies to business to consumer (B2C) sellers only.
From 1st of July 2021, B2C sellers shipping goods from their home country to customers across the EU member states will no longer be required to register for foreign VAT and complete multiple VAT filings in countries where they are selling. Instead, they may opt to use OSS filing alongside their regular domestic VAT return. The seller remits the VAT liability to their home tax authority, which then forwards the taxes to the appropriate countries and their tax authorities.
Non-EU sellers may also apply to use the OSS VAT return; however, they will need to choose any EU member state to be able to register and make the filings.
OSS is an extension of the MOSS (Mini-One-Stop-Shop) VAT return for B2C that had been introduced for digital services in 2015.
What is changing?
The current EU VAT rules require businesses to charge the VAT rate of their customer’s country of residence. For EU cross-border sales, this means sellers have to VAT register in each country where they are selling goods.
Currently, to benefit smaller businesses, the EU operates a special VAT registration simplification for e-commerce, known as distance selling. Distance selling refers to the sale of goods which are dispatched or transported from a business in one EU member state to a private customer (non-VAT registered entity) in another member state. This is commonly referred to as B2C sales and is only available for sales from a seller’s domestic stocks up to certain thresholds.
EU distance selling thresholds until June 2021 are:
- €100,000 per annum for Germany, the Netherlands and Luxembourg;
- £70,000 per annum for UK, which is still in the EU VAT regime; and
- €35,000 (or local currency equivalent) per annum for all other members of the EU.
From 1st of July 2021, this distance selling threshold will be abolished. Cross-border sellers will have to charge the VAT rate of the customer’s country of residence and remit it to the foreign tax authorities by submitting OSS VAT return to their home tax authority.
Any businesses selling less than €10,000 per annum cross-border on B2C goods and services will be exempt from the obligation to complete the OSS VAT return. Instead, they will be able to charge their domestic VAT rate and report the sales below this threshold in their regular domestic VAT return. This exemption is not available to non-EU businesses.
With the UK having left the EU on 31st December 2020, UK businesses are now non-EU businesses. They will have to register in one of the EU member states to file a Non-Union OSS VAT return. UK sellers will still be able to close any EU VAT registrations if they are not holding stock in those states.
UK businesses selling to EU customers should now consider appointing a VAT fiscal representative in most of the EU countries where they are registered. Once the reforms come into effect in July 2021, they may then register for the Non-Union OSS VAT return.
Businesses should review how they currently sell to EU customers to assess the impact of the new OSS scheme as follows:
- The OSS scheme and abolition of the distance selling thresholds will replace the obligation to VAT register in every country where businesses are selling to EU consumers from stock held in their home state
- Businesses holding stock in other EU member states will not benefit from the OSS VAT return as they must remain VAT registered in the country where they are holding stock
- Businesses with existing foreign VAT registrations, and selling from stock held in their home country, may opt to close these non-resident registrations from 1st July 2021 and use the OSS VAT report instead
- Businesses will continue to declare any sales to customers in their own country through their existing domestic VAT return
Businesses established in Ireland can pre-register for the OSS scheme from 1 April 2021 and may do so through the VAT OSS section of the Revenue Online Service (ROS) account.
OSS VAT return is an additional return to the regular domestic VAT return and will be filed on a quarterly basis. As OSS is an extension of the MOSS, businesses should report on the OSS VAT return their cross-border B2C digital services (currently reportable on MOSS VAT return) and traditional services sold online such as transport, training, education or tickets for events.
Businesses will charge VAT at the rate of their customer’s country of residence. To identify the country of residence of the customer the delivery address can be used. Next, a correct VAT rate applicable to this country needs to be determined.
In order to file an OSS VAT return, the following information will be required:
- country where the supplies were delivered to;
- type of VAT rate (standard, reduced);
- the VAT rate; and
- the total value of supplies excluding VAT in the seller’s domestic country’s currency. In case of the foreign currency transactions, the seller should apply the foreign exchange rate at the date of transaction.
How we can help
Our highly skilled and trained MOSS VAT team can easily assist in OSS VAT registration and return requirements ensuring the correct information is being filed on time. We have secured access to the Irish Revenue online portal and can act as an Agent in filing and contacting the tax authority officials on behalf of our clients.
For further information contact Henry Barrett.