Table of Contents
- Introduction
- Understanding the One Stop Shop (OSS)
- Benefits of the One Stop Shop (OSS)
- Registration Process for OSS
- Key Considerations for EU and Non-EU Sellers
- Case Studies: Practical Implications of OSS
- Challenges and Considerations in Implementing OSS
- Conclusion
- Frequently Asked Questions (FAQ)
Introduction
In the ever-evolving world of e-commerce, keeping up with regulatory changes can be a daunting task. For online sellers, one of the most significant recent developments is the introduction of the One Stop Shop (OSS) regulation in the European Union (EU). Effective from July 2021, the OSS aims to simplify VAT return processes across the EU. However, navigating these changes requires understanding the new rules, benefits, limitations, and the steps necessary for compliance.
If you're an online seller, either based within or outside the EU, this guide will help you understand how the OSS impacts your business and how you can navigate the new VAT landscape effectively. By the end of this post, you'll be well-versed in what the OSS entails, its benefits, registration processes, and the key points to consider for compliance.
Understanding the One Stop Shop (OSS)
The Evolution from MOSS to OSS
Before July 2021, the Mini One Stop Shop (MOSS) was the system in place for VAT reporting for telecommunications, broadcasting, and electronic (TBE) services within the EU. MOSS allowed service providers to handle their VAT obligations in a simplified manner by registering in one Member State, even if they had customers across multiple EU countries. The One Stop Shop (OSS) builds upon this concept but extends it significantly to include all business-to-consumer (B2C) services, distance sales of goods within the EU, and certain domestic supplies facilitated by electronic interfaces.
Expanding the Scope: OSS and IOSS
The OSS scheme applies to:
- All distance sales of goods within the EU.
- Certain domestic supplies of goods facilitated by electronic interfaces.
Additionally, the Import One Stop Shop (IOSS) was introduced for distance sales of low-value goods imported from outside of the EU, making the VAT declaration process more streamlined for imported goods.
Benefits of the One Stop Shop (OSS)
The new OSS regulation is designed to simplify the European VAT return filing system. While the initial setup may appear cumbersome, the long-term benefits are considerable:
Simplified VAT Compliance
One of the most significant advantages of the OSS is the reduced complexity in VAT compliance. Businesses now only need to submit one VAT return for the entire EU, rather than separate returns for each Member State where they make sales. This consolidation can save substantial time and administrative resources.
Elimination of Country-Specific VAT Registrations
For companies storing goods in their home country but selling to consumers in multiple EU countries, the need for multiple VAT registrations is eliminated. Instead, a single OSS registration covers all distance sales, reducing the bureaucratic burden on businesses.
Cost Efficiency
By reducing the need to handle multiple VAT registrations and filings, businesses can cut down on associated costs. This includes not only direct costs linked to maintaining VAT registrations in various countries but also the indirect costs of compliance and administrative overheads.
Registration Process for OSS
To take advantage of the OSS, businesses must register through the OSS portal of their respective federal tax authority. Here's a step-by-step outline of the registration process:
Step 1: Pre-Registration Requirements
Businesses must have access to relevant federal tax portals, often requiring a digital certificate or access file. If you are already engaged in other tax obligations, you might already possess necessary login credentials.
Step 2: Online Registration
Once logged in, navigate to the “Registration and Login” section of the OSS portal. Complete the “Registration notice for participation in the OSS EU regulation” form by entering required data.
Step 3: Confirmation and Compliance
After submitting the registration form, the federal tax authority will confirm your registration in writing. This confirmation will include details on declaration periods and payment deadlines.
Step 4: Seek Professional Guidance
If uncertainties arise during the registration process, consulting a tax advisor can be beneficial. Professional advice ensures compliance and helps avoid potential errors in the registration and filing process.
Key Considerations for EU and Non-EU Sellers
For EU-Based Sellers
The OSS brings about major changes for EU-based online sellers:
- The old distance sales thresholds are abolished, introducing a single EU-wide threshold of €10,000 for distance sales.
- Companies storing goods in multiple EU countries still need VAT registrations in each of these countries. Conversely, if you only store in your home country, OSS can ease your VAT compliance burden significantly.
Domestic and Cross-Border Sales
While OSS simplifies distance sales reporting, domestic sales remain excluded and must be reported separately via standard VAT returns. Additionally, imports, purchases, and business-to-business (B2B) sales are not included in OSS and require traditional VAT reporting.
For Non-EU Sellers
Non-EU sellers will also see significant changes:
- The distance sales thresholds to individual EU countries no longer apply, simplifying compliance.
- Goods sold directly from outside the EU to EU end consumers will remain subject to customs duties and taxes, which are the consumer's responsibility.
- Non-EU businesses storing goods in EU countries will need VAT registrations in each storage location.
Deemed Suppliers
For non-EU sellers using platforms like Amazon, which qualify as deemed suppliers, the platform is responsible for collecting and remitting VAT on sales. This is particularly useful for non-EU sellers who can utilize the platform's established compliance mechanisms.
Case Studies: Practical Implications of OSS
Example 1: Alpha Services (Single Storage Location)
Alpha Services, a German company, sells online to France, Italy, and Spain but only stores goods in Germany. Under the OSS, Alpha Services can simplify its VAT reporting by filing just one VAT return for Germany and one OSS return for the other EU countries.
Example 2: Beta Products (Multiple Storage Locations)
Beta Products, also based in Germany, stores goods in Germany, France, Italy, and Spain. This scenario requires VAT registrations in all storage countries despite using the OSS for distance sales. Beta Products must manage multiple VAT returns but benefits from centralized reporting for cross-border sales.
Example 3: Delta Limited (Non-EU Seller with Deemed Supplier)
Delta Limited, a non-EU company, sells through Amazon and ships products from the UK to consumers in Italy, France, and Spain. Here, Amazon acts as the deemed supplier, and Delta Limited needs a VAT registration in the UK for home sales, while Amazon handles cross-border VAT compliance.
Example 4: Zeta Limited (Non-EU Direct Sales without Deemed Supplier)
Zeta Limited stores goods in France and the UK and sells to Italy and Spain. Zeta Limited needs VAT registrations in France and the UK but benefits from OSS for cross-border sales, thereby simplifying its compliance process significantly.
Challenges and Considerations in Implementing OSS
Despite its benefits, implementing the OSS comes with challenges, particularly regarding the manual input of data and troubleshooting technical issues within federal tax portals. As of the third quarter of 2021, some EU countries, including Germany, still require manual entry of sales data due to the unavailability of automated submission options.
Steps for Manual Submission
- Service vs. Product Sales: Separate service sales from product sales within the OSS return.
- Separate Foreign and Domestic Sales: Clearly differentiate sales to domestic versus foreign customers.
- Sort by Country and VAT Rates: Declare transactions per EU country by applicable VAT rates, whether standard or reduced.
Due to the complexity, sellers might find it beneficial to leverage professional services specializing in e-commerce VAT compliance. Companies like hellotax offer packages that simplify OSS registration and reporting through automation and expert assistance.
Conclusion
The introduction of the OSS represents a significant shift in VAT compliance for e-commerce businesses in the EU, aiming to streamline and centralize VAT reporting. While the initial implementation may present challenges, the long-term benefits of reduced administrative burden, consolidated reporting, and cost savings are substantial.
EU and non-EU sellers alike must understand these changes, register in a timely fashion, and adapt their compliance strategies to leverage the new system effectively. Whether you seek professional advice or manage the process internally, staying informed and proactive is key to ensuring smooth VAT compliance under the OSS regime.
Frequently Asked Questions (FAQ)
Do I need more than one registration after OSS?
Yes, you will need to apply for VAT numbers in your home country and in all EU countries where you store goods.
Will I need to report all my sales to the OSS report?
No, only cross-border B2C (business-to-consumer) sales need to be reported through the OSS. Domestic sales still require separate reporting.
How do I register for OSS?
You can register through the OSS website of the Federal Central Tax Office (BZSt) by following the prescribed steps for your federal tax authority. Timely registration is crucial to avoid delays.
Can non-EU businesses use OSS?
Yes, non-EU businesses can opt to register in a nominated EU Member State but must maintain a standard VAT registration in that country.
Can expenses or imports be included in an OSS report?
No, the OSS report only covers cross-border B2C sales. Expenses, imports, and B2B transactions need to be reported through standard VAT returns.
Navigating the OSS regulations effectively requires a thorough understanding of its implications. By staying informed and seeking professional guidance where necessary, online sellers can ensure compliance and benefit from the streamlined processes introduced by the OSS.
