VATLive > Blog > Europe > EU 2021 One Stop Shop (OSS) VAT return for e-commerce

EU 2021 One Stop Shop (OSS) VAT return for e-commerce

  • Feb 14, 2020 | Richard Asquith

8 May 2020 update: the 2021 EU VAT e-commerce package is delayed, including this reform, until 1 July 2021.

At the heart of the 2021 e-commerce EU VAT reboot is the introduction of the One-Stop-Shop (‘OSS’) single EU VAT return. This is one of three reforms as part of the 2021 EU e-commerce VAT package. The other two reforms are:

  1. Ending low-value import VAT exemption and new IOSS return; and
  2. Making marketplaces deemed supplier VAT.

From July 2021,  B2C sellers dispatching their goods from a single country will no longer be required to register for foreign VAT and complete multiple VAT filings in countries where they are selling. Instead, they may opt to simply complete and file a new OSS filing alongside their regular domestic VAT return that will list all their pan-EU sales. The seller then remits the VAT due to their home VAT authority, which then forwards the taxes to the appropriate countries. Non-EU sellers may also apply to use the OSS regime, and just need to nominate any single EU state to register and file in.

This builds on the successful launch of the single VAT return for B2C digital services in 2015, referred to as the MOSS return.

Ending the distance selling threshold rules

The current EU VAT regime ‘place of supply’ rules require sellers to charge the VAT rate of their customer’s country of residence – known as the destination principle. For EU cross-border sales this means sellers have to VAT register in each country where they are selling goods.

Currently, to reduce the burden on small sellers, the EU operates a special VAT registration simplification for e-commerce, known as distance selling thresholds. This is generally only available for sales from a sellers’ domestic stocks. 

EU distance selling thresholds until June 2021:

  • €100,000 per annum: Germany; the Netherlands; Luxembourg; UK which is still in the EU VAT regime (£70,000). 
  • For all other members of the EU it is €35,000 per annum or local currency equivalent.  

More information on these distance selling thresholds can be found at avalara.com

From 1 July 2021, this registration threshold simplification will be withdrawn. Cross-border sellers will have to charge the VAT rate of the customer’s country of residence from their first sale and remit it to the foreign tax authorities. 

Launching the single OOS EU VAT return

At the same time as withdrawing the distance selling thresholds, the EU is extending the single VAT return, OSS, to e-commerce cross-border distance selling of goods. This will replace the obligation to VAT register in every country where sellers are making sales to EU consumers from stocks in a single EU location – typically their home state. The existing obligation to register in all countries is often called out as the principal barrier to cross-border trade in the EU. A single VAT return, listing all pan-EU sales, has already been in place (known as the Mini One-Stop-Shop, MOSS) since 2015 for B2C cross-border sales of digital, telecoms and broadcast services.

NOTE: Sellers holding stock in other EU countries will not benefit from the OSS single return simplification. They must remain VAT registered in each country where they are holding stock. This includes selling using the Amazon FBA program.

Sellers with existing foreign VAT registrations, and selling from stock in their country of residence, may opt to close these non-resident registrations from 1 July 2021 and use the OSS report instead.

Sellers will continue to declare any sales to customers in their own country of residence through their existing domestic VAT return.  OSS may also be used to report: cross-border B2C traditional services; and certain domestic sale facilitated by marketplaces (see next section).

The OSS filing is in addition to the regular domestic VAT return. Firstly, sellers will charge VAT at the rate of their customer’s country of residence. They can use the delivery address of their customer to identify the country of residence. Then determine the correct VAT rate, as well as applying reduced or nil VAT rates, according to the varying rates and goods classifications of each member state of their customers. 

The OSS filing will be a quarterly return. It is intended as a simple listing to declare VAT due by the seller to each EU country apart from the domestic state. The OSS return will be standardised across all the EU member states, and will be structured as follows:

Example OSS return from July 2021

Member state

VAT rate type

VAT rate in member state

Total value of supplies exc VAT

VAT due 

 

 

 

 

 

France

Standard

20%

€238,000

€47,600

 

Reduced

5%

€15,000

€750

Germany

Standard

19%

€340,000

€64,600

 

Reduced

7%

€0

€0

Spain 

Standard

21%

€123,000

€25,830

 

Reduced

10%

€4,500

€450

Poland

Standard

23%

€8,000

€1,840

 

Reduced

8%

€0

€0

Other states…

 

 

 

 

 

 

 

 

 

 

 

 

Total VAT due

€141,070

The amounts should be shown in the seller’s domestic country’s currency. In the case of a foreign currency translation, sellers should be following their domestic country’s guidance on rates to use at the date of the transaction.

Non-EU sellers

Sellers who are non-resident in the EU may also use the OSS simplified filing. They must first register as a ‘non-Union’ taxpayer with the tax authority of any EU member state. They can then file quarterly OSS filings like any EU e-commerce seller. There is a requirement to file a regular domestic VAT return in at least one EU member state. VAT incurred on imports may be declared in the OSS, too. 

Filing OSS

The OSS filing should be submitted on the same date as the regular quarterly VAT return. This is usually done though the tax authority’s online portal. Taxpayers on monthly VAT returns should consult their local tax authority’s website to check the due date. The VAT due should be remitted by the same deadline.

The domestic tax authorities will then be responsible for dividing-up and paying the VAT received from the seller to each country as appropriate.

What will this mean for a typical seller?

To show how this will affect a typical EU seller, let us look at the VAT filing obligations for an example seller today, and after the July 2021 reforms.  

Eurotrade GmbH, established in Germany, sells online to consumers across the EU. It holds most of its stock in Germany, from where it ships. However, it holds some stock in France for speedy delivery to its French consumers. 

Eurotrade GmbH annual sales, and VAT obligations are as follows: 

Country

Annual sales

 

Today

 

July 2021

 

 

 

VAT return

VAT %

 

VAT return

VAT %

 

 

 

 

 

 

 

 

Germany

€780,000

 

German domestic VAT return

German 19%

 

German domestic VAT return

German 19%

Spain

€54,000

1

Spanish VAT return 

Spanish 21%

 

OSS

Spanish 21%

Italy

€42,000

1

Italy VAT return

Italian 22%

 

OSS

Italian
 22%

Hungary

€23,000

2

German domestic VAT return

German 19%

 

OSS

Hungarian 27%

Luxembourg

€75,000

2

German domestic VAT return

German 19%

 

OSS

Luxembourg 17%

France

€75,000

3

French VAT return

French 20%

 

French VAT return

French
20%

1 – Today, above the Distance Selling Threshold so must foreign VAT register; post-July 2021 may close this registration 

2 – Today, below the Distance Selling Threshold so report sales under German rules; post July 2021 switches to foreign VAT, reported via OSS 

3 – Today, holding stock in foreign country so must VAT register there; post July 2021 must remain foreign VAT registered in France

Exemption for micro-businesses

The EU will grant micro-businesses an exemption from the OSS rules. This reflects the experience of the roll-out of the 2015 MOSS return which imposed overly complex customer tracking and VAT calculations on the smallest of sellers.

Any businesses selling less than €10,000 per annum cross-border on B2C goods and services will be exempt from the obligation to complete an OSS return. Instead, they will be able to charge their domestic VAT rate and report the sales below this threshold in their regular domestic VAT return.

Brexit – the effect for UK and EU sellers

The UK left the EU on 31 January 2020. Under the Brexit Withdrawal Agreement, it will leave the EU VAT regime on 31 December 2020. This means UK sellers will be non-EU sellers at the same time as the introduction of the July 2021 e-commerce reforms. UK resident sellers will have to register in one of the EU states to file a ‘non-Union’ OSS return. UK sellers will still be able to close any EU VAT registrations if they are not holding stock in those states.

EU sellers selling to UK customers after 31 December 2020 will have to consider appointing a VAT fiscal representative in most of the EU countries where they are registered. Once the reforms pass into effect in July 2021, they may then register for the non-union OSS return.

 


VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He can be contacted at: richard.asquith@avalara.com. He is part of the European leadership team which won International Tax Review's 2019 Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.
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