Table of Contents
- Introduction
- What is One Stop Shop (OSS)?
- Benefits of OSS for Online Sellers
- How to Register for OSS
- Transactions Not Covered by OSS
- Changes for EU-Based Online Sellers
- Changes for Non-EU Online Sellers
- Submitting OSS Applications
- Frequently Asked Questions (FAQ)
Introduction
The EU VAT reforms introduced on July 1, 2021, have reshaped the landscape of online B2C (business-to-consumer) transactions. The "One Stop Shop" (OSS) system, a key element of this reform, promises to simplify VAT filing but also brings along significant changes that online sellers need to navigate. Are you an online seller unsure about how these changes might impact your business? This blog post will serve as your guide, detailing how OSS works, the registration process, its benefits, and potential challenges.
By the end of this article, readers will have a thorough understanding of OSS, including how to register, which transactions are covered, and the specific implications for both EU and non-EU online sellers.
What is One Stop Shop (OSS)?
Before delving into the new system, let's understand its precursor, the Mini One Stop Shop (MOSS). MOSS was designed to simplify VAT payments for telecommunications, broadcasting, and electronic services within the EU. From July 2021, OSS extended this system to cover all B2C services and goods across the EU.
Key Features of OSS
- Uniform VAT Return: OSS enables sellers to file a consolidated VAT return for all EU countries without needing separate VAT registrations for each country they sell to.
- Extended Scope: OSS now includes B2C sales of goods, certain domestic supplies, and telecommunication services.
- Import One Stop Shop (IOSS): A new scheme for distance sales of low-value goods imported from non-EU countries.
Benefits of OSS for Online Sellers
While the initial setup may seem daunting, OSS aims to simplify VAT compliance significantly. Here’s how:
- Centralized Filing: Sellers can submit one VAT return per period, reducing paperwork.
- Cost Savings: Eliminates the need for multiple VAT registrations, saving administrative and compliance costs.
- Simplified Payments: A single payment is required for all returns, streamlining financial transactions.
Practical Advantages
Consider a company based in Germany selling to multiple EU countries. Previously, it had to register and file VAT separately in each country. With OSS, only a home VAT return and one OSS VAT return per period are needed, drastically reducing administrative burden.
How to Register for OSS
Registration Deadlines and Process
To use OSS, registration is required by the end of the preceding quarter. For instance, to start using OSS from Q4 2021, registration must be complete by the end of September.
Steps to Register
- Access the BZSt Portal: Visit the Federal Central Tax Office website and log into the BOP portal with your certificate file.
- Fill Out the Registration Notice: Under “Forms and Services”, find and complete the "Registration notice for participation in the OSS EU regulation" form.
- Obtain Confirmation: The BZSt will confirm your registration in writing, providing details on declaration periods and payment deadlines.
Seek Professional Help
If the process seems complex, consulting a tax advisor can be beneficial. Specialists like hellotax offer services to assist with OSS registration across multiple EU countries.
Transactions Not Covered by OSS
It is crucial to note the limitations of OSS, as there are transactions that require separate reporting:
- Domestic Sales: Must be reported through a standard VAT return in their respective countries.
- B2B Transactions: Not included in the OSS return and require traditional reporting methods.
- Imports and Purchases: Separate filings are necessary as these are not covered by OSS.
Changes for EU-Based Online Sellers
Abolishment of Distance Sales Thresholds
One of the significant updates is the removal of country-specific distance sales thresholds, replaced by a single EU-wide threshold of €10,000. This means businesses now need only one VAT registration via OSS for selling to EU countries, provided no goods are stored outside the home nation.
Example 1: Single Country Storage
Alpha Services, storing goods only in Germany but selling across the EU, can leverage OSS. They need only a German VAT number to operate across multiple countries without individual VAT registrations.
Example 2: Multiple Country Storage
Beta Products, storing goods in Germany, France, Italy, and Spain, must maintain VAT registrations in all these countries. They must file standard VAT returns for domestic sales in addition to OSS filings for cross-border sales.
Changes for Non-EU Online Sellers
Impact on Direct Sales and Deemed Suppliers
Non-EU sellers face similar changes with the removal of distance sales thresholds. Those storing goods in multiple EU countries must register for VAT in each storage location, and domestic sales are excluded from OSS.
Example 1: Selling Directly from Outside the EU
Gamma Ltd, a UK-based seller, ships directly to EU countries from the UK. Such transactions are classed as exports, and end consumers bear customs duties. OSS does not cover these transactions.
Example 2: Storing Within the EU
Epsilon Ltd, storing goods in France and the UK, needs VAT numbers for both countries. They can reclaim import VAT on their French VAT return, but OSS filing only includes cross-border sales.
Submitting OSS Applications
Current Reporting Challenges
Despite OSS's intention to streamline VAT reporting, technical limitations currently necessitate manual submissions through the BZSt portal. Sellers must meticulously sort sales by product type, destination country, and VAT rate, and manually enter this data.
Best Practices for Manual Submission
- Separate Services and Products: Different VAT rates and treatments require distinct reporting categories.
- Segment Sales by Country and Warehouse: Differentiating sales by warehouse location aids correct VAT allocation.
- Sort Sales by VAT Rates: Ensure sales under regular and reduced VAT rates are reported separately.
Tools and Assistance
Utilizing tax advisory services can ease this transition. Companies like hellotax offer automated transaction sorting and data validation services to ensure compliance.
Frequently Asked Questions (FAQ)
Do I need more than one registration after OSS?
Yes, for your home country and any EU countries where you store goods.
Will I need to report all my sales to OSS?
No, only cross-border B2C sales.
How can I register for OSS?
Registration can be done via the Federal Central Tax Office or with the help of tax advisors.
Can non-EU businesses use OSS?
Yes, non-EU businesses can register in a chosen EU country where they have a standard VAT registration.
Is OSS reporting mandatory?
No, but it simplifies administrative processes and is recommended to minimize costs.
In conclusion, while OSS presents an initial learning curve, its implementation represents a significant step towards streamlined and simplified VAT compliance across the EU. Whether you are an EU-based seller or an international business, understanding and leveraging OSS effectively can substantially reduce your administrative burden and enhance your operational efficiency. For ongoing support, consider partnering with tax advisors specializing in e-commerce to navigate these changes seamlessly.
