Table of Contents
- Introduction
- The Evolution to One Stop Shop (OSS)
- Key Benefits of OSS
- Registering for OSS
- Inclusions and Exclusions of OSS
- Examples of OSS Impact
- Changes for Non-EU Sellers
- OSS Application Submission and Challenges
- Detailed Steps for OSS Return Submission
- Conclusion
Introduction
Imagine a marketplace where you, as an online seller, no longer have to juggle multiple VAT registrations across different countries. The new One Stop Shop (OSS) regulation introduced as part of the EU VAT reform in July 2021 promises just that. Designed to simplify VAT compliance for e-commerce businesses, it has the potential to significantly reduce administrative overhead. However, the initial implementation may feel a bit overwhelming due to the new laws and processes involved. This article will explore the implications of the OSS for online sellers, detailing the changes, registration processes, and what transactions are included.
The Evolution to One Stop Shop (OSS)
Until July 2021, the Mini One Stop Shop (MOSS) was available for service providers offering telecommunications, broadcasting, and electronic (TBE) services within the EU. The MOSS allowed these providers to declare and pay VAT in one EU Member State for all their EU activities. The new OSS expands this system to include all business-to-consumer (B2C) services and distance sales of goods within the EU, streamlining VAT compliance significantly.
One major transformation under the OSS is the abolition of individual delivery thresholds for distance sales. Instead, a single EU-wide threshold of €10,000 now applies. This means that businesses will no longer need separate VAT registrations in every EU country they sell to, provided they do not store goods there.
Key Benefits of OSS
The One Stop Shop system brings several remarkable benefits, crucial for simplifying VAT compliance:
- Unified VAT Return: Companies will only need to submit one VAT return in their home country and one OSS VAT return per period, reducing the need for multiple registrations.
- Administrative Ease: Instead of managing VAT for multiple countries, businesses can streamline their processes and focus on growth.
- Sector Expansion: The expansion from MOSS to OSS includes nearly all B2C services and goods, providing a broader application.
Registering for OSS
To start using the OSS from its launch on July 1, 2021, businesses needed to register by June 30, 2021. Registration for subsequent quarters must be completed by the end of the preceding quarter. Registration is done through the Federal Central Tax Office (BZSt) online portal. Here's a simplified guide on how to register:
- Access the Portal: Login to the BZSt online portal using your certificate file.
- Fill the Form: Locate the "Registration notice for participation in the OSS EU regulation" under "Forms and Services".
- Submit and Confirm: Complete and submit the form. The BZSt will confirm your application via a written notice, followed by details on declaration periods and payment deadlines.
Consult a tax advisor if needed to ensure accuracy in your registration data.
Inclusions and Exclusions of OSS
While the OSS covers a wide range of transactions, some transactions are excluded and need separate reporting:
Included in OSS:
- All B2C distance sales of goods within the EU.
- Certain domestic supplies of goods facilitated by electronic interfaces.
Excluded from OSS:
- Business-to-Business (B2B) sales
- Imports and purchases
- Domestic sales within the home country or where goods are stored in other EU countries
Examples of OSS Impact
Scenario 1: Alpha Services
Company: Alpha Services
Storage: Only in Germany
Sales: France, Italy, Spain
VAT Treatment:
- Alpha Services needs VAT registration only in Germany.
- All sales to France, Italy, and Spain will be reported through the OSS.
Scenario 2: Beta Products
Company: Beta Products
Storage: Germany, France, Italy, Spain
Sales: Same as storage locations
VAT Treatment:
- Requires VAT registration in all four countries.
- Domestic sales in each country will be reported through standard VAT returns.
- Cross-border sales will be handled via the OSS.
Changes for Non-EU Sellers
Non-EU sellers, just like their EU counterparts, will no longer deal with individual country distance sales thresholds. However, if they store goods in EU countries, they must register for VAT in those countries. Domestic sales are still reported separately.
Scenario: Delta Limited
Company: Delta Limited
Marketplace: Amazon UK
Sales: France, Italy, Spain
Storage: UK
VAT Treatment:
- Needs VAT registration in the UK.
- UK domestic sales reported via standard VAT returns.
- Sales to France, Italy, and Spain managed through the OSS.
OSS Application Submission and Challenges
Currently, OSS returns cannot be submitted digitally and must be entered manually through the BZSt portal. Here are the steps involved:
- Differentiate Services and Product Sales: List services and products separately due to different VAT treatments.
- Sort by Customer Location: Separate sales to domestic and foreign customers.
- Categorize by EU Country and VAT Rate: Ensure transactions are categorized by each EU country and applicable VAT rates.
Although this process is manual, tools and advisory services, such as those offered by specialized tax advisors, can simplify your compliance requirements.
Detailed Steps for OSS Return Submission
Step 1: Services vs. Product Sales
Separately list chargeable services and products sold due to potential different VAT rates and legal treatments.
Step 2: Foreign vs. Domestic Sales
Maintain clarity on foreign and domestic sales, making sure foreign sales are organized by warehouse location.
Step 3: EU Country and VAT Rate Categorization
Sort distance sales transactions by EU country and VAT rate, indicating whether regular or reduced rates apply.
Conclusion
The European Union's new One Stop Shop VAT system marks a significant shift in e-commerce compliance, simplifying VAT reporting and reducing administrative burdens for online sellers. Although transitioning to this new system includes initial hurdles, the long-term benefits are substantial.
Frequently Asked Questions (FAQs)
Do I need more than one registration after OSS? Yes, you will still need VAT numbers in all EU countries where you store goods.
Will I need to report all my sales to OSS report? No, only cross-border B2C sales need to be reported in the OSS.
How to register to OSS? Registration can be done through the BZSt online portal by the end of the quarter preceding the one you want to start the OSS.
Can non-EU businesses use OSS? Yes, but they must choose a country for OSS registration and have a standard VAT registration there.
Do I need to report B2B transactions in the OSS? No, B2B transactions are reported via the standard method.
Understanding and adhering to the OSS changes can initially seem complex, but with the right guidance and tools, online sellers can navigate this new terrain successfully, ensuring compliance while focusing on business growth.
