Previously, EU sellers selling goods above a certain threshold were required to register and pay VAT. in the Member State of the final customers.
With effect from 1 July 2021 this rule has changed and replaced by new EU wide threshold.
A new threshold of EUR 10,000 for the whole of the EU, sales of goods will have to be reported to the Member State in which the trader is established. Above this threshold, traders will be able to easily register in a special electronic system called One-Stop Shop (OSS) – where they can easily declare and pay VAT.
ONE STOP SHOP (OSS) VAT RETURN FOR ECOMMERCE
From 1 July 2021, EU countries have made changes to how distance selling or Ecommerce work with the EU. EU has introduced a single EU VAT return where by one return will be required to cover all sales within the EU. Now Distance Selling Threshold which were previously in place in each EU state are not abolished.
Traders or Sellers who sells goods from Business to Customers dispatching goods from one EU country to the other don’t require to register for Foreign VAT any more. This will avoid making multiple submissions. Now sellers have to opt for Central Return whereby they will file VAT return listing sales by each country and pay to their home country tax office. Then Home tax office will remit VAT collection to relevant country.
Purpose of these changes
Ensure fair competition for EU businesses
Facilitate cross-border trade
Fight against VAT fraud
WHAT IS IOSS
The Import One-Stop Shop (IOSS) is the electronic portal businesses which allows to comply with VAT Ecommerce obligations on distance sales of imported goods.
IOSS is a special scheme for distance sales of goods imported from third countries or third territories which allows for the declaration and payment of EU VAT due on import through a monthly IOSS return instead of the payment of the VAT to Customs at the time of importation of the goods.
What is a function for IOSS
The IOSS allows suppliers who sells imported goods to EU Customers to charge and collect VAT on their sales, then declare and pay VAT to relevant tax offices instead of buyer pays vat at the point of importing goods in EU.
OSS is intended for taxable persons who:
- provide telecommunications, radio and television or electronic services to non-taxable persons in Member States,
- provide other B2C services ,
- carry out intra-Community distance sales of goods,
- make certain domestic deliveries of goods,
- carry out distance sales of goods imported from third territories or third countries with an intrinsic value not exceeding 150 euros.
Benefit of IOSS
Benefit for Seller
- IOSS allows sellers to collect and declared VAT on their sales when they sell imported goods into the EU.
- Businesses will benefit from a significant reduction in cross-border VAT compliance costs. This will further facilitate cross-border trade.
Benefit for Buyer
- For buyer, process of purchasing become easier as he only pays vat when he/she purchase the products. Previously they had a surprise fee sometimes when goods were delivered to them.
- If they purchase from non IOSS seller, buyer has to bear the VAT and usually a customs clearance fee charged by the transporter.
OSS Schemes for Sellers
Within the OSS, there are two schemes
The Union scheme
Union Scheme applies to traders based in the EU and Non-Union Scheme allows non-EU establishment to trade in the EU.
Non Union scheme
The non-Union Scheme has an extended scope and can be used by a non-EU taxable person for the supply of services for which the recipients are end customers / consumers (B2C ) and which have a place of performance in a Member State, including Ireland.
Responsibilities if you use the one-stop shop (OSS) system?
Apply the VAT rate to the Member State to which the goods are dispatched or service is rendered.
Collect respective VAT from the end customer
Submit an electronic quarterly VAT return through the OSS portal
Make a quarterly payment of the VAT declared in the VAT return
How to register for OSS
Each EU country has an electronic OSS portal (including Ireland) where sellers are able to register.
If your business requires any help in compliance with the EU, our experts have knowledge and experience. Feel free to reach us at 00353 1 4428230, Whatsapp 00353 851477625 or fill the form.