If you are:
- a business selling goods online across the EU;
- an importer of low-value goods; or
- an online platform bringing together sellers and buyers of goods or/and services;
then you need to prepare for major changes that will take place for your business on July 1, 2021.
This article will look at the most important changes.
Firstly, an overview is provided of the main implications of changes to (both EU and non-EU) online sellers shipping goods across Europe from a stock located in the EU.
Secondly, the article will look at the One-Stop-Shop (OSS)—simplified reporting and payment of value-added tax (VAT).
Thirdly, an overview is provided of the impact of the changes for businesses which are importing low-value goods from third countries in the EU.
Fourthly, a short overview is provided of the impact of changes to electronic interfaces/platforms.
Finally, the article will provide an overview of how to register for the simplified OSS reporting.
Major Changes for Online Sellers Shipping Within EU
An overview is provided below of the changes for online sellers who deliver the goods from a stock (e.g. located in a fulfilment center) in one or more EU member states (MSs).
On July 1, 2021, current distance selling thresholds will be abolished and all business-to-consumer (B2C) sales of goods will be taxed in the EU MS of arrival. VAT registration in all EU MSs where customers reside could be avoided if the OSS scheme is used. The OSS may therefore bring considerable savings in VAT compliance costs for businesses selling online across the EU. Any occasional input VAT could be claimed through the (EU online) VAT refund system for non-established taxpayers.
Abolition of Distance Selling Thresholds
- Current rules
Under the current EU distance sales rules, intra-EU B2C sales are subject to VAT in the country of departure of goods until the sales exceed a local threshold in the EU MS where the customer is located. After breaching a local threshold (ranging from 35,000 euros ($42,000) to 100,000 euros) in this EU MS, an online retailer is obliged to VAT register, charge VAT of the EU MS of arrival and remit the collected VAT to the tax authorities of the EU MS.
- Rules after July 1, 2021
As of July 1, 2021, all distance sales of goods will be taxed in the EU MS of arrival. The current thresholds will be abolished (see an exception for small EU businesses below). However, VAT registration in all those countries could be avoided if the VAT reporting takes place via the OSS. If the OSS is used, there will be no need to file VAT returns in all EU MSs where the VAT is due.
All B2C sales could be reported via a quarterly return to the tax authorities of a single (“own”) MS under the OSS (so-called OSS VAT return). The cross-border services to final customers residing in the EU (such as providing admission to events or services related to immovable property) could also be reported in the OSS VAT return. B2B supplies cannot be reported via the OSS.
- New threshold for EU businesses
EU businesses established in only one EU MS may opt for taxation in the EU MS of departure if all their B2C sales of goods and digital (TBE) services in the EU do not exceed 10,000 euros per year. No threshold applies to non-EU businesses.
OSS—Simplified Reporting and Payment of VAT
- Simplified reporting for cross-border supplies and certain local supplies
The OSS (extension of current MOSS) will apply to cross-border B2C sales of goods and all cross-border services to EU non-taxable persons (including those supplied by non-EU suppliers) and to certain domestic supplies of goods “facilitated” by electronic interfaces/online platforms. The Union OSS will be available for intra-EU distance sales of goods and cross-border B2C supplies of services by EU companies and the non-Union OSS for supplies of B2C services by non-EU suppliers.
The Import One-Stop-Shop (IOSS), which is discussed further below, will provide a simplified mechanism for suppliers and deemed suppliers to be able to account for VAT due on import of low-value goods.
- Reporting can be done in one VAT return in a single MS
Sellers will still be obliged to charge VAT of the customer country; however, this VAT could be reported via a quarterly OSS VAT return in a single MS. The OSS allows for a single payment to this MS, which then forwards the VAT payments to the various EU MSs of consumption.
- VAT deduction cannot be done in the OSS return
Businesses cannot claim an input VAT deduction on the OSS VAT return. If the OSS is used for VAT reporting then any occasional input VAT should be claimed via an EU online refund system (previous “8th Directive refund”) by businesses established in the EU, or via a “13th Directive refund” by non-EU businesses.
- Regular VAT registrations may still be required if the OSS is used
A VAT registration and regular VAT returns are still necessary in EU MSs where an online seller keeps stock and performs B2B intra-EU supplies and local sales from this stock.
Sales in the U.K. cannot be reported in the OSS. Sales of goods in Northern Ireland (NI) could be reported via the OSS since special treatment applies to NI after Brexit.
- Using the OSS is optional
A business may choose not to make use of the OSS, and instead to register for VAT in all EU MSs where it has customers. However, if it chooses to register for the OSS then all supplies which fall under the OSS should be declared in the business’s OSS return. This also applies to cross-border B2C services falling under the OSS. You cannot, therefore, opt to use the OSS scheme just for supplies in selected MSs and not for supplies in other MSs.
The obligation to issue an invoice is removed for intra-EU distance sales when the OSS/Union scheme is used, e.g. when goods are shipped within the EU or B2C services are supplied by taxable persons established within the EU which fall under the OSS.
Major Changes for Importers of Low-Value Goods into the EU
IOSS—Simplified Reporting and Payment of VAT
As of July 1, 2021, all imports will be subject to VAT unless the IOSS is used. The IOSS is a new special scheme for reporting sales of low-value goods imported from outside the EU. Under the IOSS, the importer can charge VAT at the point of sale to the customer and declare and pay this VAT via a monthly IOSS return.
The IOSS allows for a quick release of imported goods (“green channel” fast customs clearance for consignments not exceeding 150 euros) and also for a release of goods destined for customers located in other EU MSs than that of the entry of the goods in the EU.
Non-EU businesses can only register directly if they are established in a country that the EU has a VAT mutual assistance agreement in place with (at the moment, only Norway) and the goods are shipped from that country to the EU. In all other cases, a non-EU business must register for the IOSS indirectly through appointment of an intermediary.
Any occasional input VAT cannot be deducted via IOSS return and should be claimed through the (EU online) VAT refund system for non-established taxpayers.
Registering for IOSS
EU businesses can register for the IOSS in their own MS. Non-EU businesses requiring an appointment of an intermediary should register in the MS where their intermediary has established its business.
Major Changes for Sellers via Online Platforms on July 1, 2021
Drastic changes will also occur for businesses selling via electronic interfaces such as online marketplaces (e.g. dropshippers). If a business is selling not (only) via its own webshop but (also) via other electronic interfaces/online platforms (hereafter “platform”) then the following changes may be relevant. The changes apply for both goods and services sold via platforms; we consider below the changes applicable for goods.
If a platform facilitates your sales and you are:
- a non-EU business shipping within the EU and/or importing low-value goods from third countries directly to final customers in the EU; or
- an EU business importing low-value goods from third countries directly to final customers in the EU;
then you should be aware of the following changes.
Platforms May be Considered Deemed Suppliers
As of July 1, 2021, if a platform facilitates sales by an actual seller (meaning that the platform brings the actual seller in contact with a customer, resulting in the supply of a good via the platform) then in certain cases the platform becomes liable for charging and reporting VAT, if a so-called platform fiction applies (i.e. the platform becomes a deemed supplier).
In cases where a platform facilitates sales of the actual seller (so-called underlying supplier, hereafter also a “seller”) then the platform becomes a deemed supplier where the following conditions are met:
- non-Union goods not exceeding 150 euros are imported and shipped directly to a customer in the EU, irrespective of where the seller is established;
- Union goods, irrespective of their value, are supplied to customers in the EU from a location in the EU, if the seller is not established in the EU.
VAT Consequences if a Platform is Considered a Deemed Supplier
The single supply from the (actual) seller to its customer is split into two supplies:
- a supply from the seller to the platform (deemed B2B supply), which is treated as a supply without transport subject to a zero-rate VAT (outside of scope in the case of imports) ; and
- a supply from the platform to the customer (deemed B2C supply), which is the supply to which the transport is allocated.
What Does this Mean for You?
If a platform is considered a deemed supplier, it is liable to charge VAT from its customers and to report and pay this VAT to the tax authorities. The (actual) seller of the goods is not allowed to charge VAT from its customers if the platform becomes a deemed supplier. The (actual) seller is liable to provide the complete information to the platform.
If you sell via platforms:
- you need to differentiate between the sales via your own webshop and sales via platforms that are considered deemed suppliers;
- changes may be required in your transactions’ mapping and IT systems because of the changes in the VAT treatment of your sales;
- changes may be required in your invoicing or contracts because the VAT liability on your sales via platforms that are considered deemed suppliers shifts from you to platforms.
OSS Registrations are Open in the Netherlands
MOSS registrations will be automatically transferred to OSS in the Netherlands. For EU businesses, OSS registrations are possible from April 1 in the Netherlands. For non-EU businesses OSS registrations are possible from May 7 in the Netherlands.
• Where can a business register for OSS?
The EU MS in which a business can register for the OSS depends on a number of factors. These factors include the type of supplies in which the business is engaged in (goods or services, or both), any establishments it may have in the EU, and whether it is eligible for the Union scheme or the non-Union scheme.
For example, EU businesses must register for the OSS in their own EU MS. Non-EU businesses without a fixed establishment in the EU supplying goods across the EU from stock located in one or more of the EU MSs (so-called EU distance sales of goods), must register for the Union Scheme in one of the EU MSs where the stock of their goods is located (in one of the EU MSs of the departure of the goods).
• Businesses already registered for MOSS
If a business is already registered for MOSS for supplies of TBE services, this MOSS registration is transferred to OSS. Those companies should not file a separate OSS registration in the Netherlands but should update any details of their supplies under OSS.
Changes in internal business processes and IT systems may be needed to manage the changes.
- Engage with VAT advisers to understand the VAT rules applicable to the flows of your goods.
- Check whether the OSS could be applied.
- Decide whether you want to use the OSS or you prefer to file VAT returns in all EU MSs of arrival.
- If you choose to make use of the OSS then you need to register for it.
- Check which administrative steps (such as de-registrations and notifications in various EU MSs) are required if you choose OSS.
- If you choose not to use the OSS then check whether any new registrations are required in any of the EU MSs where you have sales to final customers.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Aiki Kuldkepp is Senior Manager, Tax, with Grant Thornton Netherlands.
The author may be contacted at: email@example.com