You are an online entrepreneur and sell through your own webshop or an e-commerce platform, such as Bol.com or Amazon. Business is going well, so you'd like to expand into other European markets. Whatever other European market you choose, there are always consequences when it comes to VAT. In recent years, the e-commerce business has grown enormously - as an added surprise, so have other tax regulations. Indeed, as of July 2021, the One Stop Shop (OSS) regulation has been created. It can be difficult to find your way in the European VAT landscape, but in this article we help you a little further.
What is the OSS?
In mid-2021, the One Stop Shop (OSS) regulation was introduced. This new scheme is intended to make VAT declarations easier. Suppose you sell in several European countries, then you are liable for VAT in each of these countries and must also submit VAT returns there.
You could file the declaration one by one with the tax authorities of these countries, but with the OSS it is now possible to do it all at once. You give the details of all your supplies in the countries where you do business, and then these details are taken over by the tax authorities of the country where your business is registered. After this, the tax authorities ensure that your sales are forwarded to the correct country. Instead of having to take into account the different return periods of all the countries, you submit the OSS return four times a year (even if you had no deliveries in one period). In other words, much more efficient!
The OSS has several different regulations. These have to do with which countries belong to the European Union, and which do not. Countries that belong to the EU can make use of the Union arrangement; countries that do not belong (such as the United Kingdom) have to make use of the non-Union arrangement. Then there is a third regulation: the Import One Stop Shop (IOSS). This regulation applies when you bring goods from outside the EU, into the EU and sell them. For example when you sell a product from China in Germany.
Who is the OSS intended for?
If your sales exceed the European threshold of EUR 10,000, the OSS scheme makes VAT declarations easy. However, an OSS registration is not obligatory! So if you prefer to declare taxes locally, you can still do so. This does mean, however, that you have to register and declare VAT in each country, whereas under the OSS you only need one VAT number and only one VAT declaration. In other words, an illogical choice. What is important to know is that you cannot opt for both. You must either opt for the OSS regulation or for local returns.
If you have stock of your products in another country, it is still necessary to have a VAT number for them. Keep this in mind when selling on Amazon. If you use Amazon FBA, Amazon can distribute your stock across European countries. It is your responsibility to remain VAT compliant: For example, Amazon does not arrange VAT numbers for you. Please note that when this is the case, a combination of local declarations and declarations via the OSS is possible!
Example: Martin sells through Amazon in the Netherlands, France, Italy, Spain and Germany. His company is based in the Netherlands. His turnover is EUR 14,000, which exceeds the EUR 10,000 threshold. He has two ways to file his VAT return:
- Local declaration: If Martin chooses this option, he must apply for a VAT number for the Netherlands, France, Italy, Spain and Germany. In addition, he must submit a separate VAT return to the relevant tax authorities in each of these countries.
- Declaration through the OSS: When Martin wants to declare his VAT through the OSS regulation, he only needs a Dutch VAT registration. Once every quarter, he passes on the details of his transactions to the Tax and Customs Administration, which sorts them out for him and sends them to the right countries.
Local declarations can take up a lot of time and effort. Applying for a VAT number for each country takes time, and communication is in the language of the country itself: language skills are therefore required. That is why the One Stop Shop may be an attractive choice for Martin: he only needs to apply for one VAT number and he does not have to take into account different languages and declaration periods.
So what changed?
Before the OSS was introduced, each country could set its own threshold. If you exceeded this threshold, you had to register for VAT in that country. Now, a general European threshold of EUR 10,000 has been introduced. Do you exceed this threshold? Then you qualify for the OSS!
The country to which you sell your goods determines the amount of VAT, not the country in which your business is based. This is known as the destination principle of the OSS regulation. You are obliged to report sales above this threshold in the OSS declaration. Are you below the threshold value? If so, the domestic VAT rules continue to apply.
The most obvious change is the declaration itself. Entrepreneurs now have the option to opt for the OSS regulation, which makes VAT declaration a lot easier. Again: a One Stop Shop registration is not obligatory, but it does make things easier!
When you make use of the OSS scheme, the destination principle always applies. This means that you can charge the VAT rate of the destination country on your supply. This means that it no longer matters in which country your business is based! This means that large companies, for example, cannot take advantage of being based in a country with a low VAT rate. The rates are now the same for everyone, creating a more competitive playing field.
What are the advantages of One Stop Shop?
Firstly, the One Stop Shop reduces the administrative burden. You no longer have to register for VAT in all the individual countries, but only in the country where your business is based! That already saves a lot of administration. The invoicing also only has to take into account the country where you are based. This again makes a considerable difference in the administrative burden, since European regulations can be quite divergent in this respect.
Secondly, there are often fewer costs involved in the One Stop Shop arrangement. Instead of filing several returns, you only have to file one every quarter. International bank transfers often come with extra costs, so the One Stop Shop can be an advantageous choice.
Perhaps the most important benefit of the OSS, as mentioned above, is that it creates a fairer competitive environment. Before the OSS was introduced, you were out of luck if your business was based in a country with a high VAT rate. This was a disadvantage compared to your competitors in countries with a lower VAT rate, as they had to pay less tax.
Summary
Despite the fact that the new regulation is intended to make VAT declarations easier,
you can still get lost in the maze of new information. Therefore, the most important points are listed below:
- What:The OSS is a tax registration that regulates your VAT obligations for all EU countries.
- Who: Do you exceed the EUR 10,000 threshold? Then you can make use of the OSS.
- Why: The OSS provides more competition, but less cost and administration.
- Where: You can register your OSS at the tax office of the country where your company is located.
- Pay attention: Do you sell through Amazon? Then, in addition to an OSS registration, you still need a local VAT registration in countries where you have stock.
Help with OSS-registration and declaration
Because of the new regulation and all the changes it entails, you may spend a lot of time figuring out which rules apply to you. At Staxxer, we can take your VAT administration off your hands so that you can focus on growing your business.