The long due overhaul on EU VAT is finally coming into force from 01st July 2021. Currently, EU businesses that are selling goods within the EU above a certain threshold (EUR 35 000 or 100 000, depending on the Member State) to buyers located in another EU Member State, need to register and pay VAT in the buyers’ Member State. This requires sellers to register in multiple countries and report VAT separately to each member state where they sold above the threshold. The new system is going to be a one-stop shop portal which is replaced with a new EU wide threshold of EURO 10,000 where businesses can register and declare VAT on one portal to all member states.
Let’s understand the difference between OSS and IOSS
OSS is a general scheme introduced to remove the current distance selling and separate VAT obligations across all EU states. IOSS is specific for online eCommerce retails outside the EU selling goods with a value less than EURO 150 (each consignment) and not subject to any excise duties. The IOSS allows suppliers and electronic interfaces selling imported goods to buyers in the EU to collect, declare and pay the VAT to the tax authorities, instead of making the buyer pay the VAT now the goods are imported into the EU as it was previously the case (for products over 22 EUR).
What are the advantages of the IOSS?
The IOSS facilitates the collection, declaration & payment of VAT for sellers that are making distance sales of imported goods to buyers in the EU. The IOSS also makes the process easier for the buyer, who is only charged at the time of purchase, and therefore does not face any surprise fees when the goods are delivered. If the seller is not registered in the IOSS, the buyer has to pay the VAT and usually a customs clearance fee charged by the transporter.
Online Direct Sellers & Those using Electronic Interfaces
Online Direct Sellers operating their own eCommerce will need to register and report under the new OSS scheme. if an electronic interface (marketplace, platform, etc.) facilitates distance sales of goods by a non-EU established seller to a buyer in the EU, the electronic interface is the seller and is liable for the payment of VAT. To declare and pay this VAT.
Who should register for the new OSS;
- A taxable person established in the EU (who is not a deemed supplier) can use the Union OSS for:
- Supplies of B2C services taking place in a Member State in which he is not established;
- Distance sales of goods within the EU.
- A taxable person not established in the EU for:
- Distance sales of goods within the EU.
- An electronic interface (established in the EU or outside the EU) facilitating supplies of goods (deemed supplier) for:
- Distance sales of goods within the EU ;
- Certain domestic supplies of goods.
How To Register
Each EU member state will have an online OSS portal where businesses can register and start reporting transactions made on or after 1st July 2021. you can register businesses on the new portal of any EU Member State. If businesses are not based in the EU, they will normally need to appoint an EU-established intermediary to fulfil their VAT obligations under OSS/IOSS. The OSS/IOSS registration is valid for all distance sales of imported goods to buyers in the EU. You can start using the OSS/IOSS only for the goods sold as of 1 July 2021. This single registration will, however, be valid for all sales to consumers in the other EU Member States
VAT Rates Applicable
Once you have registered you need to ensure that you collect and report the correct VAT rate applicable to the country to which the goods are dispatched. This depends on the EU country and the product supplied. To find out more about VAT rates please click the link below
What you need to do once registered
- Apply to correct VAT rate of the member state where the goods are dispatched to or where the service is supplied
- Collect VAT from the buyer
- Submit Electronic Quarterly VAT returns via to online portal of the member state you are registered
- Make quarterly payments
- Keep records of all eligible OSS sales for 10 years
- Provide IOSS/OSS VAT identification number on invoices/declaration documents at the EU borders
- Show display correct VAT amounts in the ordering process
Most UK businesses are closely aligned with the EU, supplying services and distance sales to the EU, we have our intermediaries based in the EU who work with us on a regular basis to ensure all our clients fulfil all their obligations. Give us a ring today if you provide services or distance sell to the EU.
To read more about Tax click here
Written by Quraish Adamally