One-Stop Shop (OSS) and Import One-Stop Shop (IOSS) Compliance in the European Union

Introduction

EU-OSS, typically known as the EU One Stop Shop (OSS), commemorates businesses. It is the single platform for reporting taxes only if the business sales are B2C (Business to Consumer) cross-border. The platform was then implemented on July 1, 2021, to bring in three different schemes: the Import, Union, and Non-Union.

What is Covered in the EU One-Stop Shop?

The system is well-equipped and aims to simplify and ease the tax compliance burden when the sale of goods or services is made by:

• A taxable person in a non-EU country to a non-taxable person in any EU Member State (Imported distance sale).
• A taxable person established in one EU Member State to a non-taxable person in another Member State (Intra-Community distance sale).

This means registering in One Stop Shop is available only if the sale is B2C, from one EU country to another, or from a non-EU country to an EU country. This type of transaction is also called “Distance Sale of Goods/Services.” Here, you can read further about the Distance Sale of Goods (pg. 6). Below are a few examples for better understanding:

Example 1: Company A, established in Germany, sells the goods to a non-taxable buyer, B, in France. Since this is a cross-border B2C transaction, Company A can choose to register on OSS Germany instead of registering in France.

Example 2: In the above example, if Company A is based in Australia and sells goods to non-taxable buyers in Spain, it can register on the Spain One Stop Shop.

Place of Supply

Before we analyze and assess the One Stop Shop Schemes and taxability deeply, we must first understand how and where the transactions are taxed. These transactions can be Supply of Goods, Supply of Services, Import of Goods, or Intra-Community acquisition.

For your better understanding, TaxDo has summarized the place of supply in the diagram below:

Important Note: When you supply goods to consumers from one Member State to another Member State and your total annual sales (goods/ services) in the EU are more than EUR 10,000, only the goods/ services will be taxed in the recipient member state; otherwise, they should be taxed in the supplier’s member state. Click here to read more on the place of supply.

Furthermore, the EU VAT threshold only applies to the TBE services and intra-community distance sale of goods made in a cross-border B2C transaction (i.e., the sale of goods or services from one European Country to another). This link (pg. 8) will take you to the official guidance issued by the European Commission, where you can read more on the VAT threshold.

Let us de-brief the entire regulation with a few examples:

“Example 3: Denmark-based Company A sells items to Spain-based non-taxable buyers. Company A’s yearly revenues in Spain amount to $40,000.

Since Company A’s total yearly sales in Spain surpass the EU-specified threshold, Spanish VAT must be included to the invoice sent to the consumers.

Assume that Company A makes $9,000 in total sales per year in Spain. When Company A sends bills to Spanish consumers, it will include Danish VAT.

Example 4: Company A, a Spanish entity, distributes its products to Corporation B, a German taxable corporation, which subsequently resells them to Austrian consumers.

There are two primary incidences in this transaction. Sale between Company A and Company B is considered a business-to-business (B2B) transaction, and Company B is responsible for assessing and paying the 0% tax under reverse charge in Germany (explained later in this article). Additionally, Company B is required to charge Austrian VAT on sales made to Austrian consumers.”

EU One-Stop Shop Schemes

As mentioned above, let’s unearth the One Stop Shop schemes in detail:

Important Note: To use the Union Scheme, you must consider the EU VAT threshold of $10,000. This means that only if your annual sales in another Member State exceed this threshold can you use the Scheme. Otherwise, you must pay the VAT in your own Member State, and the transaction will not be treated as Cross-border for tax purposes. To read more on these schemes, click here (pg. 14).

Additional Considerations for Import Scheme: For using the Import One Stop Shop, the shipping documents must be presented during customs clearance. The papers must contain the following information:

• The price paid by the buyer (to validate the items is below EUR 150).
• Delivery Address.
• Supplier’s IOSS VAT Identification number.
• VAT amount paid in EUR.
• Other details as needed by customs authorities.

If the goods imported exceed EUR 150, the documentation must contain:

• The price paid by the buyer (to validate the items is below EUR 150).
• Delivery Address.
• VAT registration number in the Member State of destination.
• VAT amount paid in EUR.
• Other details as needed by customs authorities.

For more details on custom procedures, click here.

Let’s explore some different situations with examples:

“Example 5: Company A in India sells the goods to a non-taxable person in Germany, and the sale price is EUR 120. The transaction is treated as an Imported Distance sale of goods, and German VAT must be charged. Company A can use the Import OSS and must appoint an intermediary.

Example 6: Company A in India sells goods to a non-taxable person in Germany for EUR 160. The transaction is treated as an Imported Distance sale of goods, and German VAT must be charged. However, the option to avail of the OSS is not available as the sale value exceeds EUR 150. Consequently, Company A must register for German VAT by appointing an intermediary.   

Example 7: Company A in Denmark sells goods to non-taxable consumers in Germany, France, and Austria. Company A’s total annual sales in all EU countries are EUR 17,000. Company A can use the Union Scheme to register for Danish OSS. This way, all the tax on sales to Germany, France, and Austria is collected and reported on Danish OSS (obviously, the VAT rates will correspond to the respective destination country), and the system, in turn, remits the respective taxes to the related Member States.

(Note – Any sale by the Company to non-taxable consumers in Denmark will still be reported separately in Denmark VAT instead of OSS).

If Company A does not wish to use the Union scheme, it must register in Germany, France, and Austria and pay the taxes separately.

Example 8: If in example 7 above, Company A’s total annual sales in the EU countries are EUR 9,000. Since the EU threshold of EUR 10,000 is not met, Company A will collect and pay all the taxes in Denmark using the Danish VAT rates. Because the sale will not be treated as cross-border, the OSS is not available.”

B2B Transactions and Reverse Charge

When a taxable person sells the goods to another VAT-registered person in another member state, the transaction is considered a B2B Intra-Community supply, and the seller is not required to charge the VAT on an invoice raised to the buyer. Instead, the buyer will account for VAT on the intra-community acquisition (under the reverse charge mechanism). In the VAT return, the buyer will calculate the input VAT on purchase from another state and show the output VAT for the same amount, allowing him to adjust the tax liability, resulting in a zero VAT payment. Refer to the reverse charge rule here.

The same principle will be applied where a taxable person maintains the warehouse in other member states and transfers his goods. The seller will need a VAT number in the country of transfer and should account for VAT there as an Intra-Community acquisition under the reverse charge. He will get the VAT exemption by Chapter 10 of the VAT directive, i.e., he will show deemed purchase (input VAT) and deemed sale (output VAT) while filing the return in the member state of arrival, leading to zero tax being paid.

“Example 9: Company A in Australia sells goods in Europe. For this purpose, it has set up a warehouse in France. From France, it dispatches the goods to consumers in Germany, the Netherlands, and other EU Member States. The Company’s total annual sales in Europe are EUR 31,000.

The first-time transfer of goods in Europe will be treated as an Import, and Company A must register and pay VAT in France on Import. Company A, while filing the VAT return in France, will account for VAT on import and recover the Import VAT paid against the output VAT liability considering the B2B transaction and reverse charge principles listed above. Later, for any sales made to consumers in Germany, the Netherlands, or other EU Member States, the Company can use the Union scheme in France and report the taxes on sales to other Member States.”

Selling Goods through a Marketplace

The Marketplace will be deemed a supplier if it facilitates:

• Import of goods up to EUR 150 or
• Any sale by a seller outside the EU to a consumer in the EU.

Accordingly, the Marketplace will charge VAT, and you will be considered a taxable person selling the goods to Marketplace as a B2B. Refer here for more information.

“Example 10: Company A in the US sells goods through the European Marketplace. It buys the goods in France and sells them to German consumers.

Marketplace will charge German VAT for sales made to consumers, while Company A will be treated as a B2B seller to Marketplace, and no VAT is payable by Company A, though Company A must report the 0% B2B sale in France in the French VAT return. Marketplace may register for German VAT or can use the union scheme to register on One Stop Shop for collecting and reporting the German VAT.

The examples covered throughout this article are just a glimpse of how taxation works in several types of transactions. However, it sometimes becomes difficult to ascertain the point of taxation and reporting considerations, especially while using an Import scheme, which involves the appointment of an intermediary or a fiscal representative; this is where TaxDo helps you. We have a great and skilled team of professionals with colossal experience, partners & resources that resolve all your problems. You will just come to TaxDo, where we and our customized solution will ensure everything for you, including tax collection, invoicing, reporting, registration, appointing a fiscal representative or Intermediary, etc.

How do you get the OSS registration?

To register the business on One Stop Shop, you must first identify your EU Member State of Identification (MSI), which can be different across the Schemes, as follows:

1. Non-Union Scheme: A taxable person who does not have an establishment in the EU can choose any Member State to be the Member State of identification.

• Union Scheme: MSI will be the place/ state where the taxable person has a business or fixed establishment.

• Import Scheme: MSI is where the taxable person establishes his business.

Once you know your MSI, you can register on One Stop Shop by providing certain information that the Member State can collect electronically or through other means. You will be provided with a web portal for submitting documents. After the MSI completes all the validation checks, you will be awarded a VAT identification number if you apply for the Import or Non-Union scheme.

The VAT number already issued for the Union scheme is used on the OSS portal. Sometimes, it gets tricky, and you get stuck between how and what information is needed for registration. Now, there is TaxDo for you. Our specialized tax solution and we are pirated to the OSS portal, so you do not have to go anywhere. You can use our software to complete all the registration formalities. For more information on OSS registration, visit here.

Filing Frequencies and Reporting Requirements

As you are registered on One Stop Shop, whether as a taxable business or as an intermediary, you must file an electronic OSS VAT return to the MSI as follows:

• Union and Non-Union Scheme: The tax reporting period is Quarterly. Thus, you must file the return by the end of the month following the relevant quarter.

• Import Scheme: The tax reporting period is Monthly. Accordingly, you must file the OSS VAT return by the end of the month following the relevant taxable reporting month.

Submitting the return, even if there is zero tax liability, is mandatory. If not submitted on time, the MSI will issue a reminder on the 10^th day following the date the return should have been submitted. According to the MSI’s rules and procedures, any default will lead to fines and penalties. But you should not worry about it as soon as you work with TaxDo. We will ensure your compliance. Read here for more information on reporting requirements.

EU VAT Return – One Stop Shop vs Local VAT filing

1. OSS VAT Registration and Return: Only VAT related to B2C distance sales (B2C cross-border sales) transactions can be filed via OSS (the same for IOSS) for both EU and non-EU sellers.
2. Local VAT Registration & Return: All VAT related to below transactions are required to be submitted and filed with a tax authority locally by the suppliers:
3. B2C Home country sales: Any transactions between the supplier and consumer in the same EU member state.
4. B2B—Intra community supplies: A supplier sells goods and services to other businesses for reselling /manufacturing /distribution in any EU member state (regardless of whether the seller and buyer are in the same country or not). Technically, the supplier must register and submit the VAT return to the destination country.
5. B2B / Intra community Movement: A supplier transfers its own goods to a warehouse (or marketplace facilities) for restocking purposes and then resells those products to consumers from that location. Technically, the supplier requires registering and submitting the VAT return in the country where their warehouses (or marketplace facilities) are located and the products are delivered.