Table of Contents
- Introduction
- What is One Stop Shop (OSS)?
- The Benefits of OSS for Online Sellers
- Registration Process for OSS
- Transactions Excluded from OSS
- Impact on EU-based Online Sellers
- Impact on Non-EU Online Sellers
- OSS Filing and Reporting
- Conclusion
- Frequently Asked Questions (FAQs)
Introduction
As the landscape of e-commerce continues to evolve, staying compliant with tax regulations becomes increasingly complex. For online sellers operating within the European Union (EU), understanding and adapting to the new tax reforms is crucial. One of the significant changes came into effect on July 1, 2021, with the introduction of the One Stop Shop (OSS) regulation. This blog will delve into what OSS is, how it works, its benefits and limitations, and the impact it has on both EU and non-EU online sellers.
What is One Stop Shop (OSS)?
The OSS is part of the broader e-commerce VAT reform within the EU, extending the previous Mini One Stop Shop (MOSS) system which was limited to telecommunications, broadcasting, and electronic (TBE) services. From July 2021, the OSS encompasses all business-to-consumer (B2C) services carried out in EU Member States where the supplier is not based. Importantly, it also covers distance sales of goods within the EU and certain domestic supplies facilitated by electronic interfaces.
The Benefits of OSS for Online Sellers
Implementing the OSS helps simplify the VAT return filing process for businesses. While it may seem complicated initially due to the transition, the long-term benefits are significant:
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Simplified VAT Reporting:
- Businesses that sell goods to multiple EU countries without storing stock there only need to submit one home VAT return and one OSS VAT return per period. This uniformity reduces the administrative burden and makes compliance easier.
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Unified Threshold:
- The abolition of individual country distance selling thresholds replaces them with a single EU-wide threshold of €10,000. This simplifies the calculations for businesses operating across multiple EU states.
Registration Process for OSS
Online sellers wishing to use the OSS must register via the OSS website by the end of a quarter to use it in the subsequent quarter. The registration process involves accessing the portal of the Federal Central Tax Office (BZSt), logging in with a certificate file, and submitting the required forms. Successful registration is confirmed in writing, and further information about declaration periods and deadlines is provided.
Transactions Excluded from OSS
Certain transactions are not covered by OSS and require separate reporting:
- B2B transactions, imports, and purchases must still be reported through the standard VAT return system.
- Domestic sales, where goods are stored and sold within the same country, must also be reported separately.
Impact on EU-based Online Sellers
One of the biggest changes introduced by OSS for EU-based sellers is the removal of individual country thresholds for distance sales. Companies with a single country storage only have to consider the EU-wide threshold of €10,000. However, sellers storing goods in multiple EU countries still need to register for VAT in each country where storage occurs.
Example 1 – Alpha Services: Alpha Services, a German-based company, sells to consumers in France, Italy, and Spain but stores inventory only in Germany. They only need a home VAT number for Germany and no additional VAT registrations are required in other countries.
Example 2 – Beta Products: Beta Products also sells to France, Italy, and Spain but stores inventory in all four countries. This requires VAT registration and reporting in each of these countries.
Impact on Non-EU Online Sellers
For non-EU sellers, the removal of the distance sales threshold means that all distance sales to EU consumers will now be treated under the same framework. Non-EU businesses without an EU base will continue to charge customs duties and taxes on their exports to the EU. These sellers will still need VAT registrations in countries where they store goods.
Example 1 – Delta Limited: Delta Limited, a non-EU company, sells via Amazon UK. They need a VAT number for the UK and will handle cross-border sales to Italy, France, and Spain through the OSS.
Example 2 – Zeta Limited: Zeta Limited, also a non-EU company, stores goods in France, Italy, and Spain. VAT registrations are necessary for all these EU countries.
OSS Filing and Reporting
Businesses have to manually report their sales and profits in the BZSt portal due to operational hurdles in implementing automated systems. The process involves:
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Service vs. Product Sales:
- Separating revenue from services and products due to differences in VAT treatment.
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Domestic and Foreign Sales:
- Segregating sales to domestic consumers from foreign consumers.
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Sales by Country and VAT Rates:
- Declaring transactions per EU country alongside the applicable VAT rates.
Conclusion
The OSS has significantly altered the VAT landscape for both EU and non-EU online sellers. While simplifying the long-term reporting process, the initial setup can be complex. It eliminates the need for multiple VAT registrations across EU Member States for distance sales, easing administrative burdens. However, it is essential to remain informed and comply with the regulatory requirements to ensure smooth operations.
Frequently Asked Questions (FAQs)
Do I need more than one registration after OSS? Yes, VAT numbers are required for your home country and any EU country where you store goods.
Will all my sales be reported in the OSS report? No, only cross-border B2C sales are included.
What else needs reporting besides the OSS return? Domestic sales must still be reported in their respective country’s VAT return, and cross-border B2B transactions need to be reported via standard methods.
Is OSS registration mandatory? No, businesses can opt for traditional reporting but it involves registering in every EU state where sales occur.
Can non-EU businesses use OSS reporting? Yes, non-EU businesses can choose any EU country for OSS registration, provided they have a standard VAT registration there.
Navigating these changes can be challenging, but with the right knowledge and preparation, online sellers can seamlessly integrate into this new system, simplifying their VAT reporting and compliance duties.
