January 1, 2021, has become a landmark in the lives of business owners since the first changes to the charging and payment of VAT by businessmen (both EU and non-EU) were implemented.
The second stage of the new VAT policy fulfillment started on July 1 of this year. To ease the process of declaring and collecting VAT for e-commerce retailers from and outside the EU, two regulations were created, OSS and IOSS. This article will try to figure out the peculiarities of both of them.
From MOSS to OSS and IOSS
In 2015, for B2C organizations selling digital goods and services, Mini One-Stop Shop (MOSS) for EU VAT was launched. This online portal has greatly clarified and eased the taxation process for both business owners and EU governments. Registration on this VAT service gave the entrepreneur an advantage — they could no longer worry about VAT fees collection and tax returns reporting to different countries where they were selling digital goods and services to non-business customers.
All the tax information and VAT taxes themselves are reported and paid in one place and then transferred to each corresponding country by the system. Only the VAT number of one EU country is needed for that purpose. The sender will need to apply the VAT percentage from the residence country of the non-business recipient but all the tax accounting would be done under one VAT ID of the sending company at the tax authority of the country, where the company operates. Those reports had to be made quarterly.
The basic principle of MOSS was this:
VAT registration + quarterly filing = one online portal
This same concept was used when creating OSS and IOSS but for online businesses selling also physical goods:
- One-Stop-Shop (OSS) — for businesses located in the EU that sell goods to non-business customers in other European Union states.
- Import One-Stop-Shop (IOSS) — for non-EU businesses that sell goods to EU non-business customers. Only organizations that vendor "low value" goods of up to 150 Euros can apply for registration on the platform.
A business owner can choose one of those two variants, depending on whether a business is located in the EU or not.
As stated earlier, the OSS portal is for EU companies/entrepreneurs selling to EU buyers.
- It makes sense to register in this system for those whose cross-border sales exceed €10,000 per year. In this case, for each B2C sale that an organization makes to a non-business end customer, it must apply the VAT rate of the buyer’s country. For example, if a product from a French company is sold to someone in Germany, the transaction is subject to German VAT at 19%.
- If, however, cross-border sales do not exceed the €10,000 per year threshold, the business entity must adhere to its home country's VAT rules, charging the local VAT rate on all B2C sales and filing a return as usual. There is no need for OSS registration in this situation.
Registration with the OSS:
On the tax authority website of the country where the organization is formed, there is an option to register under the new VAT e-commerce rules. The applicant receives a VAT number (if it has none yet) and access to the online portal. Clevver can assists you in receiving the VAT ID for your company in any country of the EU. VAT reporting to the OSS is then done from Clevver each quarter based on the declared revenues.
IOSS is a unified import system for non-EU companies that have e-commerce trade relations with EU member states. This platform makes it possible for businesses to assign and collect VAT on their own, thereby not exposing the buyer to unnecessary stress due to unexpected changes in the agreed price. In case the company selling the goods is not authorized by IOSS, the buyer has to pay VAT and an additional customs clearance fee at the moment of the purchase received.
- It makes sense to register on this portal if goods that are sold by a non-EU company to EU non-business buyers are worth less than €150.
- Businesses selling goods above 150 Euro follow the traditional rules of import VAT. Registration in the IOSS is not reasonable.
The business owner should register for VAT in one of the EU member states. The website of the chosen country tax office has the option of registering under the new VAT e-commerce rules. It is necessary to select the "non-EU members" or "for imports" option during the application. The company/entrepreneur receives a VAT number and access to the online IOSS portal.
EU countries have different VAT rates. A non-EU company should be careful and for each B2C sale apply the local VAT rate of the country where the buyer is located.
VAT reporting to the IOSS is done quarterly.
New rules for the assessing and collecting of the EU VAT were introduced. Some of the modifications were implemented as early as January 1, 2021, and some at the beginning of July.
The changes also affected the e-commerce sector. To facilitate and streamline the VAT calculation and collection process, the online portals OSS and IOSS were developed and put into operation from the 1st of July. Their features require careful research and attention to detail from the EU and non-EU entrepreneurs’ sides. The main condition that must be fulfilled a priori to be able to use these portals is the existence of a VAT-ID of the company.
Clevver specialists are ready to assist you in getting your organization a VAT number in the EU country you need, or even several at once!
We are providing service on VAT ID applications in any country within the European Union. You just need to write an email to our experts: [email protected] and mention the country where you need the VAT ID or a VAT filing. The Clevver team will do the rest! If you have any questions or concerns, please, feel free to write to the email above too.
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