Table of Contents
- Introduction
- Background: The Need for OSS
- Key Benefits of OSS
- Registration and Implementation of OSS
- Transactions Excluded from OSS
- OSS and Non-EU Sellers
- Submitting OSS Returns
- Practical Tips and Assistance
- Conclusion
- Frequently Asked Questions (FAQ)
Introduction
In July 2021, a significant change unfolded in the landscape of European e-commerce with the implementation of the “One Stop Shop” (OSS) VAT reform. This reform aims to simplify VAT reporting for businesses engaged in cross-border sales within the EU. For online sellers, the introduction of OSS comes with several critical updates and opportunities. This blog will explore what the OSS entails, how it transforms VAT compliance, and the practical steps businesses need to take. By the end, you’ll be equipped with the knowledge to navigate these changes efficiently.
Background: The Need for OSS
Previously, the VAT system within the EU was fragmented, posing challenges to businesses engaged in cross-border sales. The Mini One Stop Shop (MOSS) scheme, which was limited to telecommunications, broadcasting, and electronic services, hinted at the benefits of a streamlined approach. However, it was clear that a more extensive system was required to accommodate the broader e-commerce activities.
From July 1, 2021, the EU extended the MOSS scheme to a broader range of B2C services and all distance sales of goods within the EU, thus giving birth to the OSS. The main objective of OSS is to harmonize VAT reporting across EU member states, ease the administrative burden on businesses, and eliminate the need for multiple VAT registrations.
Key Benefits of OSS
Simplified VAT Returns
One of the primary advantages of OSS is the streamlined VAT return process. Under the new regulation, businesses no longer need to register for VAT in each EU country where they make sales. Instead, sellers can complete a single VAT return for all their cross-border sales within the EU through the OSS.
Centralized VAT Payment
The OSS system allows businesses to make a single payment to cover their VAT obligations across all member states. This centralized approach simplifies the payment process and helps manage cash flow more effectively.
Uniform Threshold
Previously, distance sales were subject to individual thresholds set by each EU country, leading to complex and often confusing compliance requirements. The OSS introduces a single EU-wide threshold of 10,000 euros, making it easier for businesses to understand when they need to account for VAT on cross-border sales.
Registration and Implementation of OSS
How to Register for OSS
To take advantage of OSS, businesses must register through the online portal provided by their national tax authority. In Germany, for example, registration is done via the Federal Central Tax Office’s (BZSt) portal, known as the BOP. Here’s a step-by-step guide:
- Access the Portal: Visit the BOP and log in using your certificate file.
- Complete the Registration: Navigate to “Forms and Services,” select the “Registration notice for participation in the OSS EU regulation,” enter the required information, and submit the form.
- Confirmation: Once your application is approved, you will receive a written confirmation and details on declaration periods and payment deadlines.
Registration Deadlines
It's essential to note the registration deadlines for OSS. Generally, registration must be completed by the end of a quarter to apply OSS from the following quarter. For instance, to use OSS from Q4 or October 1st, you must register by the end of September.
Timeliness and Preparation
Early registration is advised as creating a user account and completing the registration process can take time. Ensure you have all necessary documentation and consult with a tax advisor if there are any uncertainties.
Transactions Excluded from OSS
While OSS simplifies many areas of VAT reporting, not all transactions are covered. The following types of transactions still require separate reporting:
- Domestic Sales: These are reported in the standard VAT return specific to each country.
- Imports and B2B Sales: These must be reported through the conventional VAT return method.
- Purchases: Similar to imports and B2B sales, they need separate handling.
Example Scenarios
Understanding the practical application of OSS can be enhanced by looking at some example scenarios:
Example 1: Single-Country Storage
Alpha Services, a German company storing goods only in Germany, sells to consumers in France, Italy, and Spain. Under OSS, Alpha Services needs only its German VAT registration and can utilize OSS for all cross-border sales, eliminating the need for additional VAT registrations.
Example 2: Multi-Country Storage
Beta Products, also German-based, stores goods in Germany, France, Italy, and Spain. In this case, VAT registration is required in all four countries where storage occurs, and the sales will be processed accordingly.
OSS and Non-EU Sellers
Non-EU businesses selling to EU consumers via electronic interfaces or directly also benefit from the OSS, though the application varies slightly:
Using a Deemed Supplier
Non-EU companies using marketplaces like Amazon, where the platform is deemed the supplier, must register for VAT in the country where goods are stored. OSS can then be used for cross-border sales, excluding B2B transactions.
Direct Sales without a Deemed Supplier
For direct sales from non-EU sellers, goods shipped from outside the EU to EU consumers are subject to customs duties and taxes. The OSS can still be used for cross-border B2C sales within the EU, while VAT numbers are required in countries where storage occurs.
Submitting OSS Returns
Initial Procedures
In the initial phase post-implementation, OSS returns were not fully integrated into digital submission portals. Manual entry was required, but anticipated updates should streamline this process.
Required Data
When submitting your OSS return, ensure that transactions are categorized by country and VAT rates. This also involves separating services from goods and distinguishing between domestic and cross-border sales.
Practical Tips and Assistance
Navigating the OSS can be complex initially. Enlisting the help of a specialized tax advisor, especially those familiar with e-commerce and FBA sales tax, can be invaluable. Advisors can assist with registration, data preparation, and submission of OSS reports.
Conclusion
The One Stop Shop (OSS) VAT reform represents a pivotal change in EU e-commerce, simplifying VAT compliance but requiring thorough understanding and timely action. Whether you're an EU-based online seller or a non-EU business, adapting to OSS can significantly ease your administrative burden and streamline your operations across borders.
Frequently Asked Questions (FAQ)
Do I need more than one registration after OSS?
- Yes, you still need VAT numbers for your home country and any EU country where you store goods.
Will I need to report all my sales in the OSS report?
- No, only cross-border B2C sales are included in the OSS.
Is OSS mandatory?
- No, you can choose to continue with standard individual country reporting.
Can non-EU businesses use OSS?
- Yes, they can register for OSS in any EU country where they have a standard VAT registration.
Can I include my expenses/imports in the OSS report?
- No, OSS is for reporting cross-border B2C sales only.
How are OSS returns submitted initially?
- Returns were initially submitted through manual entry but will transition to more automated systems.
Understanding these facets of the OSS will ensure that your business remains compliant while benefiting from streamlined VAT processes.
