On 1st July 2021, the EU introduced its new VAT e-Commerce package, which includes new rules for e-Commerce and VAT, such as the EU VAT One-Stop-Shop scheme.
Coming into immediate effect, the new rules have impacted impact any e-commerce business selling products to consumers in the EU, including individual sellers and marketplaces.
These changes can be utilised by business outside of the EU, including those registered in the UK.
The changes cover:
- Removing distance selling thresholds for the sales of goods
- Setting a unified threshold of 10,000 Euros
- Expanding the Mini One Stop Shop
- Launching the new One Stop Shop
- Online market places will be viewed as the seller for the purposes of selling and collecting VAT
- New record-keeping requirements introduced for online marketplaces
Why were these changes made?
The changes were made in a bid to:
- Simplify the process
- Make it fairer
- Increase revenue for EU Member States
Let’s take a closer look at the new OSS and how it will impact your e-commerce business.
What is the OSS?
One of the biggest changes introduced in July was the expansion of the Mini One Stop Shop to create the new One Stop Shop for goods and services. This update makes OSS available to all B2C services and the distance sales of goods within the EU.
The OSS is a new portal through which non-domestic VAT can be reported and paid, covering the supply or services and goods to consumers across the EU.
In short, it means B2C businesses will now have:
- One country of registration
- One VAT return for all EU distance sales
How does OSS work for e-commerce businesses?
Here’s what the introduction of OSS means for e-commerce business:
- E-commerce businesses selling goods and services within the EU will be able to register VAT in a single member state, rather than having to register in each country that the products are sold in
- The VAT rate of the destination country is charged at the point of sale, then reported and paid quarterly online
- Businesses will only need to exchange information with one tax authority of the member state they have registered in, and only in one language
- They will only need to file a single VAT declaration and make one payment
Following Brexit, it’s important to note that if you’re located outside the EU (ie, in the UK), you can choose an EU member state and register there. It’s usually best to register in the country you ship most goods from.
If you decide to sign up to OSS, you must use it for all supplies made to EU consumers.
So how does it work once you’re registered?
Once you’re registered for the OSS:
- You will need to complete and file a One-Stop-Shop form alongside your pan-EU sales domestic sales VAT return
- You will then send your VAT to your home VAT authority (or the one you’ve chosen to be registered in if you’re outside the EU)
- They will then pass the tax on to the relevant countries.
VAT changes can cause ripple effects throughout your e-commerce business, adjusting price points, storage locations, and growth. If you would like to talk through the changes and find the most beneficial path for your business, please get in touch with our team of e-commerce specialist accountants.
The best time to act is now.