Table of Contents
- Introduction
- What is OSS (One Stop Shop)?
- Key Benefits of OSS for Online Sellers
- How to Register for OSS
- Limitations of OSS
- Changes for EU-Based Online Sellers
- Changes for Non-EU Online Sellers
- OSS Reporting Process
- Conclusion
- FAQs
Introduction
The launch of the new "One Stop Shop" (OSS) regulation marks a significant shift in the EU VAT landscape for e-commerce businesses. With its inception in July 2021, the OSS aims to simplify VAT return filing across the European Union, eschewing individual delivery thresholds. In this blog post, we will delve into the key changes OSS brings for online sellers, the registration process, and its implications for both EU and non-EU businesses.
The transition from the Mini One Stop Shop (MOSS) to the expanded OSS aims to unify as many VAT reporting complexities as possible. However, while this strives towards long-term simplicity, the immediate future might present a few hiccups. Let's explore these changes in depth and provide tips to navigate this evolving landscape.
What is OSS (One Stop Shop)?
The OSS extends the original MOSS framework, which initially covered only telecommunications, broadcasting, and electronic (TBE) services. As of July 2021, OSS encompasses all B2C services taking place in any EU state where the supplier does not have an establishment. This reform abolishes the previous distance sales thresholds for most scenarios, replacing them with a singular, unified threshold.
The "Import One Stop Shop" (IOSS) scheme also emerged to manage VAT on low-value goods imported from outside the EU, further streamlining compliance.
Key Benefits of OSS for Online Sellers
OSS is engineered to simplify VAT return processes, allowing businesses to file a single VAT return for all their EU transactions, rather than multiple returns in each EU country where sales occur. This not only minimizes administrative burdens but also facilitates easier VAT management.
Advantages:
- Unified Reporting: Companies can submit one consolidated OSS return covering all cross-border EU sales.
- Reduced Registrations: Companies storing goods only in their home country can avoid multiple VAT registrations, markedly diminishing compliance costs.
- Future Readiness: Streamlined returns and compliance pave the way for potential future expansions and ease in international transactions.
How to Register for OSS
To leverage the OSS, timely registration is crucial. Businesses needed to sign up for the OSS by June 30th, 2021, for use starting from Q3 of the same year. Future registrations work on a quarterly cycle: complete registration by the end of any quarter to use OSS in the subsequent quarter.
Registration steps include:
- Login: Access the online portal of the Federal Central Tax Office (BZSt) with your certificate file. Most sellers already have login credentials due to other tax obligations.
- Forms: Navigate to "Forms and Services" to find the “Registration notice for participation in the OSS EU regulation”.
- Confirmation: Submit your data, and await written confirmation from BZSt.
Regardless of familiarity with the process, consultation with a tax advisor is recommended to avoid errors.
Limitations of OSS
Not all transactions fall under the OSS umbrella. Domestic sales must still be reported through standard VAT returns. The following transactions are excluded:
- Domestic B2C sales
- Business-to-Business (B2B) transactions
- Imports and purchases
Changes for EU-Based Online Sellers
Abolition of Distance Sales Thresholds
The previous individual country distance sales thresholds no longer apply, replaced by a single EU-wide threshold of €10,000. This simplifies VAT requirements significantly for cross-border sales.
Storage Considerations
Companies storing goods in multiple EU countries must still register for VAT in each country where they hold stock. Only businesses storing goods in one country and selling throughout the EU can benefit from the simplified OSS process.
Domestic Sales
Domestic transactions remain outside the scope of OSS and need separate standard VAT reporting.
Impact Analysis on Examples
Example 1: Alpha Services
A German-based company storing goods only in Germany and selling to many EU countries, Alpha Services would need a VAT number in Germany. All foreign sales can then be reported through the OSS, avoiding multiple country registrations.
Example 2: Beta Products
A German company storing goods in multiple countries must retain VAT registrations in each of these countries, continuing current practices for domestic sales.
Changes for Non-EU Online Sellers
New Thresholds
The abolition of country-specific distance sales thresholds applies universally, including non-EU businesses. This aligns their VAT calculation with EU sellers under the new singular threshold.
Non-EU Sellers' Considerations:
- Direct Sales vs. Deemed Suppliers: Non-EU sellers must assess whether they operate through deemed suppliers (e.g., Amazon) or independently. This distinction affects their VAT registration and reporting obligations.
- Storage in the EU: Non-EU businesses storing goods in multiple EU countries must register for VAT in each of these countries.
- Direct Reporting: Sales without deemed suppliers entail direct reporting, adhering to new OSS or standard VAT protocol as applicable.
Case Studies for Non-EU Sellers
Example 1: Delta Limited
A non-EU company using Amazon UK, Delta Limited, must register for VAT in the UK for both home and cross-border sales.
Example 2: Gamma Ltd
Operating without a deemed supplier from the UK, Gamma Ltd must comply with direct shipping regulations, where the end consumer incurs customs duties for EU imports.
Example 3: Epsilon Ltd
Storing goods in France and the UK, Epsilon Ltd requires VAT numbers for both countries, using standard returns for local sales, and reclaiming import VAT on French returns.
OSS Reporting Process
The initial implementation phase of OSS required manual filling of forms, which presented initial challenges. As local authorities fine-tune their processes, automated portals are expected to streamline this further.
Data Requirements:
- Separation of Services and Products: Differentiating between services and products due to varied VAT implications.
- Sales Segregation: Sorting sales by customer location, applicable VAT rates, and originating warehouse.
Submission Steps:
- Product Sales vs. Services: Separate and report appropriately.
- Foreign vs. Domestic Sales: Isolate and report cross-border (OSS) and domestic transactions separately.
- Sorting by Country: Report sales per country, detailing applicable VAT rates.
Conclusion
The OSS regulation represents a monumental shift in the EU e-commerce VAT framework. While designed for simplicity, immediate adaptation requires a thoughtful approach and potential consultation with tax professionals. By understanding and diligently applying the new requirements, businesses can smoothly navigate these changes, benefiting from streamlined VAT compliance and reduced administrative burdens.
FAQs
Do I need more than one registration after OSS? Yes, you will still need VAT numbers in your home EU country and any other EU countries where you store goods.
Will I need to report all my sales to OSS? No, only cross-border B2C sales.
Is there anything else I need to report besides the OSS return? Yes, domestic sales and B2B transactions must still be reported via standard VAT returns.
How to register for OSS? Registration can be done through the BZSt online portal. Ensure you register before the end of the current quarter to be eligible for the following quarter's OSS.
Can non-EU businesses use OSS? Yes, but the non-EU company must have a VAT registration in their chosen EU country.
Can I include my expenses/imports in OSS reports? No, OSS is solely for cross-border B2C sales.
By mastering these new OSS rules, online sellers can better manage their VAT obligations, ensuring compliance while focusing on business growth.
