Table of Contents
- Introduction
- What is the One Stop Shop (OSS)?
- Key Benefits of OSS
- How to Register for OSS
- Transactions Not Included in OSS
- Changes for Online Sellers Based in the EU
- Changes for Non-EU Online Sellers
- Submitting OSS Applications
- Conclusion
- Frequently Asked Questions (FAQ)
Introduction
Imagine being an online seller in the vast EU market, dealing with different VAT returns for each country you sell to. The administrative burden is nothing short of overwhelming. But, what if there was a simpler way to handle these VAT obligations? Enter the One Stop Shop (OSS), a new regulation that promises to streamline and simplify this process. Effective from July 2021, OSS is set to revolutionize the way e-commerce businesses handle VAT within the EU. This post will provide you with a comprehensive guide on OSS, including its benefits, registration process, and specific scenarios for both EU and non-EU sellers. By the end, you'll see how OSS can be a game-changer for your business.
What is the One Stop Shop (OSS)?
The OSS regulation is part of the EU's VAT reform aimed at simplifying VAT obligations for businesses engaged in cross-border e-commerce. Before OSS, the Mini One Stop Shop (MOSS) allowed service providers of telecommunications, broadcasting, and electronic services to declare and pay VAT in a single EU member state. From July 1, 2021, MOSS has extended to all business-to-consumer (B2C) services and distance sales of goods within the EU. Additionally, a new scheme, the Import One Stop Shop (IOSS), covers VAT on distance sales of low-value goods imported from outside the EU.
Key Benefits of OSS
The OSS framework is designed to simplify the VAT return filing system for businesses. Here are the main benefits:
- Single declaration: Instead of having to file VAT returns in every EU country you sell to, OSS allows you to submit one single VAT return in your home country for all EU cross-border sales.
- Administrative ease: By centralizing the VAT reporting process, businesses can save on administrative costs and reduce compliance risks.
- Simplified payments: Businesses only need to make one payment for each return, reducing the complexity of managing multiple tax payments across different countries.
While the long-term benefits are significant, businesses may face initial complexities during the setup and registration processes.
How to Register for OSS
To start using OSS, businesses must register for the scheme. The registration process includes:
- Registering by the end of a quarter: For OSS to apply from the next quarter, businesses must register by the end of the current quarter.
- Accessing the Federal Central Tax Office (BZSt): Registration is done via the BZSt online portal. Most businesses already have access data to this portal due to other tax obligations.
- Filling out the registration notice: After logging in, businesses must complete and submit the "Registration notice for participation in the OSS EU regulation" form.
- Receiving confirmation: Following submission, the BZSt will confirm registration in writing and provide information on declaration periods and payment deadlines.
It's advisable to contact a tax advisor if there are any uncertainties during the registration process.
Transactions Not Included in OSS
Not all transactions are eligible for OSS. Here are some exceptions:
- Domestic sales: Sales within a single country must still be reported separately via a standard VAT return to the specific country's tax authorities.
- Imports and business-to-business (B2B) sales: These transactions are not included in OSS and require separate reporting through the standard VAT return method.
Changes for Online Sellers Based in the EU
One of the significant changes with OSS is the elimination of distance sales thresholds. Previously, businesses had to register for VAT in each country where they exceeded a certain sales threshold. With OSS, this is streamlined:
- Single EU-wide threshold: An EU-wide threshold of 10,000 euros applies, simplifying compliance for businesses selling to multiple countries without storing goods there.
- Reporting exceptions: Companies storing goods in multiple EU countries still need VAT registration in each country where storage occurs, as storage triggers local VAT obligations.
- Domestic sales reporting: These must still be reported separately through the standard VAT return process in each applicable country.
Example Scenarios for EU-based Companies
Alpha Services: A German company selling to France, Italy, and Spain, but only storing goods in Germany. Under OSS, they do not need VAT registration in France, Italy, or Spain, simplifying their VAT obligations to a single home VAT return and an OSS VAT return.
Beta Products: A German company storing goods in Germany, Italy, France, and Spain. They need VAT registrations in all these countries, but OSS simplifies reporting for cross-border sales.
Changes for Non-EU Online Sellers
Similar to EU sellers, non-EU businesses also benefit from the elimination of country-specific distance sales thresholds under OSS. Here’s how it impacts them:
- No EU sales thresholds: Distance sales thresholds no longer apply to individual countries, simplifying VAT obligations for non-EU sellers.
- Customs duties and taxes: End customers in the EU will be charged customs duties and taxes on purchases from non-EU sellers.
Example Scenarios for Non-EU Sellers
Delta Limited: A non-EU company selling through Amazon UK and shipping to Italy, France, and Spain. Delta requires a VAT number in the UK and benefits from simplified OSS reporting for cross-border sales, managed by Amazon as a deemed supplier.
Zeta Limited: A UK company storing goods in France, Italy, Spain, and the UK. They need VAT numbers in all these countries but can reclaim import VAT on their French VAT return.
Gamma Ltd: A non-EU company selling directly to EU customers without a deemed supplier. They need a VAT registration in their home country but not in the countries they ship to, simplifying reporting under OSS.
Epsilon Ltd: A UK company storing goods in France and selling to Italy and Spain. They need VAT numbers for France and the UK, reclaiming import VAT on the French VAT return.
Zeta Ltd: Similar to Epsilon, but storing goods in all four countries, requiring VAT registrations in each.
Submitting OSS Applications
In the first OSS quarter (Q3 2021), returns had to be submitted manually via the BZSt portal due to operational issues. Here's how to submit:
- Step 1: Differentiate services and product sales: List chargeable services and products sold separately, reflecting different VAT rates and treatments.
- Step 2: Separate foreign from domestic sales: Distinguish between sales to German and other EU end customers.
- Step 3: Sort by country and VAT rates: Ensure transactions are listed by EU country and VAT rate, simplifying sorting and reporting.
Conclusion
The OSS regulation marks a significant shift in how VAT is managed for cross-border e-commerce within the EU. By simplifying the registration and reporting process, OSS can dramatically reduce administrative burdens for businesses. While there are initial hurdles to clear, the long-term benefits in terms of compliance and cost savings are substantial. Whether you're an EU or non-EU seller, understanding and leveraging OSS could be key to optimizing your VAT processes and driving business growth.
Frequently Asked Questions (FAQ)
Do I need more than one registration after OSS? Yes, you will still need VAT numbers in your home country and any EU country where you store goods.
Will I need to report all my sales to OSS? No, only cross-border B2C sales need to be reported to OSS.
Is there anything else I need to report except OSS returns? Yes, you need to report domestic sales in the standard country VAT return.
How to register for OSS? Registration is via your local tax office's online portal. Ensure you complete registration by the end of a quarter to start using OSS in the next quarter.
Do I need a special report for OSS? Yes, it should cover all your B2C cross-border sales from all dispatching countries.
Can non-EU businesses use OSS reporting? Yes, provided they have a standard VAT registration in an EU country.
Can I deregister my VAT ID in countries where I do not store goods? Yes, once registered for OSS, you can deregister VAT IDs in countries where you do not store goods.
Is OSS mandatory? No, but it simplifies reporting and reduces the need for multiple VAT registrations.
What is better: regular reporting or OSS? OSS reporting is generally advised to minimize administrative costs.
How can I submit the OSS return? Initially, OSS returns must be submitted manually through the relevant tax authority's online portal.
By understanding and effectively utilizing OSS, online sellers can streamline their VAT processes, allowing for a more efficient focus on growing their business.
