One Stop Shop – Changes for Online Sellers

Table of Contents

1. Introduction
2. The Background of One Stop Shop (OSS)
3. Key Benefits of the OSS System
4. Registration for OSS
5. Transactions Not Included in OSS
6. Implications for EU-Based Sellers
7. Impact on Non-EU Sellers
8. Submission of OSS Returns
9. FAQ: Frequently Asked Questions

Introduction

As of July 2021, the European Union introduced significant changes to its VAT system for e-commerce through the new One Stop Shop (OSS) regulation. This change poses both challenges and opportunities for online sellers. Previously, businesses had to navigate a complex landscape of different VAT thresholds and compliance rules for each EU member state they sold to. Now, the OSS aims to streamline this process, but understanding its intricacies is vital for leveraging its benefits.

This blog post will help you understand the nuances of the new OSS regulations, including the changes it brings for both EU and non-EU sellers, the benefits, and the specific steps needed for registration and compliance.

The Background of One Stop Shop (OSS)

The One Stop Shop regulation stems from an expansion of the previous Mini One Stop Shop (MOSS) system, which was limited to businesses supplying telecommunication, broadcasting, and electronic (TBE) services. As of July 1, 2021, the MOSS has been expanded to cover all business-to-consumer (B2C) services within the EU and certain domestic supplies facilitated by electronic interfaces, introducing OSS. Additionally, the Import One Stop Shop (IOSS) was created for low-value goods imported from outside the EU.

Key Benefits of the OSS System

Simplified Reporting

One of the robust benefits that OSS delivers is the simplification of the VAT return filing system across the EU. Instead of dealing with different VAT registrations in each EU country, eligible businesses can now submit one consolidated tax return through their home country's tax authority.

Reduced Registration Requirements

For companies engaged in distance sales across multiple EU countries but storing goods only in their home country, the OSS reduces the need for multiple VAT registrations. Now, such businesses only require one VAT registration in their home country and need to file one OSS return per period.

Consolidated Payments

Under the new OSS system, businesses make a single payment for their VAT obligations, simplifying cash flow management and reducing administrative burdens.

Early Registration Incentives

If businesses pre-register for the OSS before the end of a quarter, they become eligible to use the system in the following quarter. This pre-planning can help avoid last-minute registration rushes and potential penalties for non-compliance.

Registration for OSS

The Process

To start with OSS from a specific quarter, businesses must complete their registration by the end of the preceding quarter. This means early planning and preparation are essential. Registration is carried out through the Federal Central Tax Office (BZSt) in Germany, with similar processes in other EU countries.

Here's the general step-by-step process:

1. Access the Portal: Visit the OSS section on the Federal Central Tax Office (BZSt) website and access the online portal, known as BOP.
2. Login or Create an Account: Log in using existing credentials or create a new account if you don't have one.
3. Fill Out Forms: Navigate to "Forms and Services" and select "Registration notice for participation in the OSS EU regulation."
4. Submit Data: Enter all necessary data and submit the form.
5. Confirmation: The tax office will confirm the application in writing, after which you'll receive further instructions on declaration periods and payment deadlines.

Preparing for Registration

Early registration is crucial due to potential delays in creating user accounts and accessing necessary certificates. Be sure to consult with your tax advisor to ensure all data is entered correctly.

Transactions Not Included in OSS

Despite the broad coverage, some transactions are excluded from OSS and need separate reporting. These include:

• Domestic Sales: Must still be reported via the standard VAT return in each respective country.
• Imports, Purchases, and Business-to-Business (B2B) Sales: These are also excluded and require standard VAT return filings.

Implications for EU-Based Sellers

Abolished Distance Sales Thresholds

One of the most significant changes for EU-based online sellers is the removal of old distance sales thresholds. Instead, an EU-wide threshold of €10,000 applies, simplifying compliance but also necessitating a shift in reporting practices.

Storage-Linked VAT Numbers

For businesses storing goods in multiple EU countries, VAT registration in each country is still required. OSS only reduces the burden where goods are not stored.

Reporting Domestic Sales

Domestic sales transactions must continue to be reported separately from the OSS. For instance, if goods are shipped within Germany, the company must report this transaction through a German VAT return.

Example Scenarios

Alpha Services

Alpha Services is a German company storing goods only in Germany and selling to France, Italy, and Spain. Using OSS simplifies their tax obligations significantly since they no longer need VAT registrations in France, Italy, and Spain.

Beta Products

Beta Products, also based in Germany, stores goods in Germany, France, Italy, and Spain. Despite OSS, they must maintain VAT registrations in all four countries due to storage requirements.

Impact on Non-EU Sellers

New Distance Sales Thresholds

Non-EU sellers must also adapt to the changes, particularly the abolition of individual country distance sales thresholds. They must navigate VAT obligations under the new unified €10,000 threshold.

Reporting for Non-EU Sellers

For non-EU companies, scenarios vary based on whether they use deemed suppliers (e.g., Amazon) or sell directly without intermediaries.

Example Scenarios

Delta Limited

Delta Limited, a non-EU company, sells through Amazon UK to customers across the EU. Although Amazon acts as a deemed supplier and handles part of the compliance, Delta Limited still requires a UK VAT registration for their operations.

Zeta Limited

Zeta Limited, a UK-based non-EU seller, stores goods in multiple EU countries. This diversification calls for VAT registrations in all stored locations, echoing the implications for EU-based sellers with multiple storage points.

Gamma Ltd

Gamma Ltd sells directly from the UK to EU consumers without using a deemed supplier or storing goods in the EU. Their VAT compliance revolves around UK reporting, and customs duties managed by end consumers.

Submission of OSS Returns

Initial Manual Submission

As of Q3 2021, OSS returns need to be submitted manually through local tax portals due to the unavailability of automated submissions. This involves filling forms manually and organizing data according to transaction type, storage locations, and applicable VAT rates.

Steps to Organize Data

• Service vs. Product Sales: Segregate sales data into services and product sales due to different applicable VAT rates.
• Foreign vs. Domestic Sales: Distinguish sales to foreign EU customers from domestic sales.
• Country-Specific VAT Rates: Sort transactions by destination country and apply the respective VAT rates.

Simplifying the Process

Specialized tax advisors and automation tools can significantly simplify OSS pre-registration and ongoing compliance. Partnering with firms specializing in e-commerce VAT compliance can ensure accurate and timely submissions.

FAQ: Frequently Asked Questions

Do I Need More Than One Registration? Yes, VAT numbers are required for domestic operations and each country where goods are stored.

Does OSS Cover All Sales? No, it only covers cross-border B2C sales. Domestic sales require separate reporting.

Can Non-EU Businesses Use OSS? Yes, they can choose a country for OSS registration but must also maintain standard VAT registrations.

Is OSS Mandatory? No, businesses can continue with standard reporting but this involves more administrative burdens.

Can Businesses Report B2B Sales through OSS? No, OSS is exclusively for B2C sales. B2B sales must be reported separately.

Conclusion

The One Stop Shop (OSS) introduces a streamlined VAT reporting mechanism for cross-border B2C sales within the EU, replacing individual distance sales thresholds with an EU-wide threshold. While the system simplifies VAT compliance in the long term, understanding and navigating initial registration and compliance require careful planning.

By leveraging OSS, businesses can reduce their administrative burdens and focus more on growth. Ensuring accurate and timely compliance is key to fully benefiting from the new system. For businesses feeling overwhelmed by these changes, specialized tax advisory services can provide much-needed support and guidance.

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