The One-Stop-Shop is the expanded version of the MOSS or Mini-One-Stop-Shop where it was used for certain transactions regarding services. Now, the EU VAT OSS includes all other intra-union transactions including distance selling.
This means that the former national thresholds have been cancelled. Starting 1 July, all merchants who reach the distance selling threshold of €10,000 in the whole of the EU must charge the appropriate local VAT rate to local consumers. Consequently, a seller must have a local VAT number and should pay VAT in the country of destination.
Since this is one scheme for all EU VAT transactions, it’s now possible to pay all your VAT dues in this one single platform from one EU country. How it does this is it transfers the correct VAT amount to the appropriate local tax authorities in the countries of destination.
Therefore, the OSS VAT scheme aims to eliminate VAT fraud and remit the appropriate VAT to each relevant EU member state through this system of transaction transparency and simplicity.
How to Navigate VAT Through the OSS Step-By-Step
- The OSS will ask for your VAT number. There is no need to get a new one as you can supply your existing one.
- Once you are registered on the OSS, you must now apply the appropriate VAT on your products. You can then collect VAT from your EU customers.
- Once your product arrives at EU borders, all you need to do is supply your OSS number.
- To file a quarterly OSS VAT return, submit the report by logging in to the OSS portal in the country where you are registered.
- Make the payment according to your declared OSS VAT return in the said country.
- Keep your VAT records for 10 years as required.
VAT Registration & Compliance for E-commerce Sellers
‘Do I Need To Pay VAT as a Small Business?’
Small enterprises are allowed some exceptions depending on certain conditions.
For example, small businesses based in an EU member state selling no more than €10,000 per year for the past two years can continue to charge the appropriate destination VAT rate if shipping from an EU warehouse. They will also continue to file returns where they are based.
Import One-Stop-Shop 2021
If the OSS was created to cover supply VAT, the IOSS, on the other hand, was created to cover import VAT.
The IOSS portal is an electronic platform where VAT can be declared and remitted for imported goods valued up to €150. These goods must be located outside of the EU at the point of sale.
In other words, the IOSS applies to sellers whose products are not warehoused in any EU member state.
The importation threshold of €22 and exemptions are now cancelled. At the same time, the IOSS VAT is introduced. All e-commerce products now are subject to VAT while import duty exemption for items below €150 will remain.
This means that at the point of clearance (entry of your product into the EU), the IOSS number is required. The seller must have a valid IOSS registration beforehand. This is required by the customs broker to clear the product for entry into the union. If not, VAT for the destination country becomes immediately due.
It is, therefore, favourable to charge VAT at the point of sale. Your clients will also benefit from the transparency of the transaction as well as faster delivery (through faster product clearance time at customs).
Questions regarding the possibility of double taxation have yet to be addressed by tax authorities. As of writing, the system with which to identify if a customer has been charged import VAT at the point of sale or not is still unclear. However, it is supposed that all products will be given an IOSS code through which IOSS will identify paid import VAT. With this, customs will scan the product and greenlight it after identification.
Again, we want to emphasize that the IOSS is only useful for goods priced up to €150. The current rules on VAT apply to products that go beyond this threshold.
However, excise goods such as alcoholic drinks, tobacco products, and petrol do not have this €150 threshold. You will still need a local VAT registration for these.
Before the changes, this led to problems for the seller as it would mean 27 different VAT registrations for all EU countries. Now, however, you will only need one IOSS number and registration for all EU member states.
If your business is based in an EU territory, you will need an IOSS registration in your locality. Registering your business in another EU country with lower VAT rates without any actual physical presence will spell tax troubles for you in the future. We strongly advise against this.
If you’re operating from a non-EU member state, you might be asked to have an EU-based tax representative [hyperlink to local tax accountant page] who will get an IOSS number in his country.
As mandated, you should also be keeping your VAT records for 10 years.
The OSS and IOSS will go live on 1 July 2021 but have been accepting registrations since the beginning of April 2021. It is currently written in English but plans are underway to make it available in all European languages.
Note: Since Germany has announced that they will miss the 1 July 2021 launching of the Germany IOSS VAT portal, this will become an issue for customs and shipping entities.
The tentative date for the German IOSS to go live is on 1 January 2022. Stay tuned to munshian.co.uk or send us a message if you are one of the businesses or clients affected by this delay.
How About Amazon and Other Platforms?
Since the responsibility of collecting VAT falls on the shoulders of Amazon, the online marketplace will be providing its IOSS number for sellers to use. Amazon and other similar ‘electronic interfaces’ (as EU calls them) are deemed as the seller.
As Amazon informed its users last May 2021, they will be charging the appropriate VAT rate according to the customer’s location provided that the product is stored in an EU warehouse and that the seller is a non-EU merchant.
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Other online marketplaces will have their own policies regarding IOSS registration.
What about Shopify? Although Shopify promises to assist its members, it is not classified as an online marketplace like Amazon or eBay is. It is essentially a website development platform. Therefore, Shopify members (and those subscribed to similar platforms) who sell low-value goods must obtain their own IOSS registration and file their own IOSS VAT returns.
Tip: Adding a VAT feature on your checkout page will simplify the way you collect VAT. Just remember to make the system detect the location of your customer through his or her IP address, shipping address, or credit card. This will help you identify what VAT rate to apply on the sale.
For dropshipping, whether or not you need an OSS VAT registration will depend on where you stock your goods and where your business is incorporated.
For example, a non-EU dropshipping business that does not stock goods in the EU is not qualified for OSS VAT registration. What applies to your goods instead is import VAT.
However, keeping goods warehoused in the EU qualifies you for OSS VAT registration. This applies to both EU- and non-EU-registered dropshippers. You can either register for the EU or non-union OSS.
Is the IOSS Compulsory? No, it is not.
There are a few sellers who opt to pay VAT instead but the process will make your goods take a while longer to reach your customer. While the product is held at the border, the said customer will also most likely be contacted by customs to pay the extra cost of import VAT (and other fees like shipping, etc.) if you haven’t done so already. Only after then will the product be released.
While this may sound like a poor customer experience, it really depends upon the agreement of the seller and the customer beforehand. Laying out the procedure clearly will make the customer understand the extra charges and inconvenience. Chances are they’ll be happy to pay for them.
Because the IOSS allows sellers to consolidate all returns into one single report, having an IOSS registration will be easier for merchants who have clients in multiple EU member states.
Munshian is Here for You
The need for further explanations on OSS and IOSS regarding your specific case, plus clear VAT accounting, and a trustworthy tax representative are just some of the reasons to hire Munshian.
Munshian Ltd. provides you full tax support by taking care of your OSS or IOSS VAT registration, representation, compliance, and OSS VAT returns. We also provide helpful insights on how to steer your business on the changing tides of EU VAT regulations so you’ll have a smooth sailing experience all the way.
Munshian Ltd. wants your business to succeed.
We are everywhere Amazon is. We have offices and local tax experts in the UK, France, Czech Republic, Poland, Italy, Spain, Germany, and Austria.
Take advantage of our competitively priced packages or we can customize one just for you.
Do you have questions regarding OSS or IOSS registration or anything related to VAT in the EU? Give us a call or send us an online query.
