EU Vat return accountants guide
In 2021, there were major changes in the European Union(EU) Value added tax (VAT) rules for ecommerce businesses. The major change was the introduction of the single One stop shop (OSS) EU VAT return and the thresholds for distance selling were removed.
The other reforms were ending the VAT exemption for low value imports, and the new IOS return and making marketplaces the deemed supplier for VAT purposes.Find out more
After July 1, 2021, businesses selling to consumers , and dispatching their goods from only one country, will not have to register for VAT in the foreign country and file VAT in the different countries.
Instead the business can complete the OSS form and file it along with their regular VAT return which will list their sales across the EU. The seller has to remit the VAT amount for items sold to the home country’s VAT authorities, which will then forward the taxes to the relevant countries based on sales.
Non-EU sellers can also apply for OSS regime, and specify the single EU state for registering, filing returns . The EU VAT reform package was to be implemented from January 1, 2021, but was postponed.
The new reforms are based on the success of the single VAT return, MOSS return for businesses offering services like digital, broadcast and telecom services to customers in 2015.
In addition to businesses selling products to customers, event organisers and service providers can also use OSS.
Distance selling rules ending
The existing EU VAT rules specify that the seller should charge VAT at the rate of the country, where the customer is residing, called the ‘destination principle’.
So for EU sales in different countries, sellers have to register in each country, where they sell goods. So to reduce the compliance burden for small sellers, a VAT registration simplification called the thresholds for distance selling, where sellers did not have to register if the amount was less than the specified amount. In Netherlands. Luxembourg and Germany it is Euro 100,000 and for other EU members Euro 35000 annually.
This simplification will be withdrawn from July 1, 2021, and charge the VAT at the applicable rate in the country where the customer is residing, so that it can remitted to the tax authorities
Single OSS EU VAT return
EU is extending the single VAT return to eCommerce business selling goods in different countries. These sellers are usually selling from stocks in their home state. Earlier the businesses were forced to register in every EU country, and this was extremely inconvenient for the sellers, reducing their sales.
However, the sellers having stock in multiple countries will not benefit, since they must register in every country where their stock is located. This is also applicable for sellers who are part of the FBA program of Amazon. Sellers who already have VAT registrations in other EU countries and are selling stock only from the country where they reside, can close the non-resident VAT registrations from 1 July 2021 to use the OSS report.
The sellers can declare the sales to customers within the same country in their VAT domestic returns
In addition to goods, OSS will report cross border services, specific domestic sales through marketplaces. The OSS return is filed by using the delivery address to identify the country where the customer is residing.
Then based on how the goods are classified, and the applicable rate in the customers country, VAT is charged, which may be lower or nil. The OSS should be filed quarterly. It is a simple form which specifies the VAT which the seller has to pay the country where his customer resides. For uniformity, the OSS return is standardized in all the member states of the EU.
Effect of Brexit on UK, EU sellers
The United Kingdom (UK) left the EU on 31 december, 2020 and Brexit is no longer applicable. UK sellers are treated as as non-EU sellers. If they wish to file a OSS return for ‘non-Union’ country sellers, they can register in any of the EU states.
The UK sellers are able to close their existing EU VAT registration in any country where they do not have a stock. UK sellers had to consider appoint a fiscal representative in the EU countries where they were registered. This will no longer be necessary from July 1, 2021, since they can use the OSS returns for non-EU countries.
Gm Professional Accountants have offices located in London. Contact us now for registration.