Table of Contents
- Introduction
- Background of the One Stop Shop System
- Benefits of the One Stop Shop
- Registration and Requirements
- Key Changes for EU-Based Sellers
- Key Changes for Non-EU Based Sellers
- Application Process for OSS
- Practical Examples of OSS Application
- FAQ: Frequently Asked Questions
Introduction
Navigating the complexities of Value Added Tax (VAT) in the European Union (EU) has traditionally been a daunting task for online sellers. Until July 2021, sellers had to comply with myriad national VAT regulations, often involving multiple registrations and reporting requirements across different countries. However, with the introduction of the One Stop Shop (OSS) scheme, a significant overhaul of the EU's VAT system has aimed to simplify the lives of e-commerce vendors. This blog post will explore the changes brought about by OSS, how it affects both EU and non-EU-based sellers, and what businesses need to do to stay compliant.
By the end of this article, you will understand the OSS scheme in-depth, learn about its benefits and limitations, and gain practical insights on how to navigate the new VAT landscape. Whether you're an established e-commerce business or just starting, this knowledge will help you adapt to and leverage the new VAT reporting structure effectively.
Background of the One Stop Shop System
Evolution from Mini One Stop Shop (MOSS)
Before the OSS, the Mini One Stop Shop (MOSS) system was in place. Launched to streamline VAT reporting for telecommunications, broadcasting, and electronic (TBE) services, MOSS allowed service providers to declare and pay VAT in one Member State for all EU transactions. However, MOSS's scope was limited to TBE services, necessitating the need for a more comprehensive mechanism.
With e-commerce booming and the number of cross-border transactions skyrocketing, the European Commission extended MOSS to cover all business-to-consumer (B2C) services and distance sales of goods within the EU. This extension, effective from July 1, 2021, is known as the One Stop Shop (OSS). The OSS aims to simplify VAT compliance by allowing businesses to file a single VAT return for all intra-EU sales, reducing the need for multiple registrations across the member states.
Import One Stop Shop (IOSS) Scheme
In addition to OSS, the Import One Stop Shop (IOSS) scheme was introduced to manage VAT on distance sales of low-value goods imported from outside the EU. IOSS enables sellers to collect, declare, and pay VAT in a single EU Member State, making the import process more efficient and transparent for consumers.
Benefits of the One Stop Shop
Simplified VAT Registration and Reporting
One of the most significant advantages of OSS is the simplification of VAT registration and reporting. Businesses storing goods in their home country and selling in multiple EU countries without storing in these countries only need to submit one home VAT return and one OSS VAT return per period, instead of registering separately for VAT in each country.
Reduction of Compliance Costs
By streamlining the VAT reporting process, the OSS scheme helps businesses reduce the time and money spent on administrative tasks. This system offers a uniform platform to handle VAT obligations, thus minimizing compliance costs.
Enhanced Transparency and Predictability
The OSS initiative enhances transparency and predictability for both businesses and tax authorities. Companies can now better plan their operations and tax payments, reducing the uncertainty and risks associated with cross-border trade within the EU.
Registration and Requirements
Registration Process
To use OSS, businesses must register through the Federal Central Tax Office (BZSt). Registration must be completed by the end of a quarter to be effective for the following quarter. The registration process involves accessing the BZSt online portal and submitting a registration notice for participation in the OSS EU regulation.
For any ambiguities or doubts when entering tax data, it is advisable to consult a tax advisor. Once the BZSt confirms the application for OSS registration in writing, businesses will receive further information on declaration periods and payment deadlines.
Data Submission and Reporting
Initially, OSS forms must be filled out manually via the BZSt portal, as digital interfaces for automatic submissions were not yet available. Businesses must separate sales by product type, storage or delivery countries, the country of origin of the end customer, and applicable VAT rates.
Key Changes for EU-Based Sellers
Abolishment of Distance Sales Thresholds
Under the old system, individual distance sales thresholds were set for each EU Member State. These thresholds have been abolished under OSS, and now there is a single EU-wide threshold of 10,000 euros for distance sales. Businesses exceeding this threshold must register and report these sales through the OSS.
Storage-Based VAT Registration
EU companies storing goods in several EU countries still need to register for VAT in each country where storage occurs. However, for businesses that only store goods in one country, OSS simplifies the process, allowing reporting in the home country only.
Domestic Sales and B2B Transactions
Important to note is that domestic sales and Business to Business (B2B) transactions are not reported through OSS. These will still require separate reporting via standard VAT returns in each respective country.
Key Changes for Non-EU Based Sellers
No Individual Distance Sales Thresholds
Similar to the EU-based sellers, non-EU companies will no longer have individual thresholds for distance sales. These companies can choose an EU member state to register for OSS.
Storage and Domestic Sales
Non-EU sellers storing goods in multiple EU countries need to register for VAT in each location. Domestic sales in these countries must be reported separately via local VAT returns.
Reporting via Deemed Suppliers
If a marketplace such as Amazon or eBay acts as a deemed supplier, VAT compliance may be handled by these platforms, simplifying the seller's VAT obligations. However, if the non-EU seller operates independently, they must manage their VAT reporting directly.
Application Process for OSS
Steps for Submission
- Service vs. Product Sales: Both taxable services and product sales must be declared via OSS returns but need to be listed separately.
- Foreign Sales Separation: Sales to non-German EU countries must be separated and reported distinctly.
- Country and VAT Rates Sorting: Transactions must be categorized by EU country and applicable VAT rates.
Manual Reporting
Due to initial operational challenges, OSS forms for the first quarter of implementation (Q3 2021) must be submitted manually, involving detailed breakdowns of sales and profits.
Practical Examples of OSS Application
EU-Based Company Storing in One Country
For a German-based company storing goods only in Germany, OSS eliminates the need for additional VAT registrations in other EU countries where sales occur.
Non-EU Company with Deemed Supplier
A UK-based non-EU company selling through Amazon UK to other EU countries will need VAT registration in the UK, while Amazon, acting as a deemed supplier, handles the VAT for sales within the EU.
Direct Sales without Deemed Supplier
A non-EU company selling directly without using a deemed supplier must separately manage and report their cross-border and domestic sales.
FAQ: Frequently Asked Questions
Do I need more than one registration after OSS?
Yes, you still need to apply for VAT numbers in your home country or the nominated country in the EU, as well as in all EU countries where goods are stored.
Is OSS reporting mandatory?
No, businesses can continue with standard reporting, but it may lead to multiple VAT registrations across the EU.
Can non-EU businesses use OSS?
Yes, non-EU businesses can use OSS by registering in an EU Member State where they have VAT registration.
Conclusion
The One Stop Shop (OSS) system signifies a groundbreaking change in the EU VAT landscape, aimed at simplifying compliance for e-commerce businesses. Despite initial challenges and the need for manual submissions, OSS promises long-term benefits by reducing the administrative burden and compliance costs. By understanding and leveraging OSS, both EU and non-EU sellers can navigate the complexities of VAT reporting more efficiently, enabling them to focus on growing their businesses in the dynamic EU market.## FAQs
Do I need more than one registration after OSS?
Yes, OSS does not eliminate the need for VAT registrations in your home country or any other EU country where you store goods.
Will I need to report all my sales in an OSS report?
No, only cross-border B2C sales need to be reported via OSS. Domestic sales and B2B transactions still require standard VAT returns.
How can I register for OSS?
Registration can be done via the BZSt online portal. It's advisable to consult a tax advisor to ensure accurate and timely registration.
Can non-EU companies use OSS reporting?
Yes, non-EU businesses can select an EU Member State for OSS registration, provided they have a VAT registration in that country.
Is the OSS report mandatory?
No, traditional reporting is still an option, but OSS offers a more streamlined process for cross-border B2C sales.
How are OSS reports submitted?
Initially, OSS forms must be filled out manually via the BZSt portal, as digital submissions were not available for the first implementation quarter.
