If you delve into the intricate realm of European VAT (Value Added Tax) legislation, you will inevitably come across the One Stop Shop EU (OSS) system. Grasping this scheme is crucial for international business operations. In this article, we explain the mechanics of the OSS system and how it can assist you.
What you need to know to file your One Stop Shop EU declaration
The MOSS (Mini One Stop Shop) system was a triumph for e-commerce services. Consequently, this scheme was expanded to include distance sales and other private services. This enhanced system is now recognized as the One Stop Shop, also known as the Union Scheme. This regulation became effective across all EU countries as of July 1, 2021.
The previous national threshold amounts have been discontinued and replaced with a single European threshold of 10,000 euros for all distance sales. This means businesses need to consider the VAT they owe. For instance, do you opt to sell your products at a fixed price across the entire EU, or do you prefer price differentiation by country? This is vital, given that reaching the new 10,000 euro threshold can happen quite swiftly.
From July 1, 2021, businesses pay VAT to other EU countries where they deliver products, but only once they surpass the 10,000 euro threshold. A One Stop Shop EU declaration only needs to be filed once per quarter, with the tax authority of the country where the business is based. This tax authority then distributes the correct VAT amount to the other EU countries where the business operates.
Benefits of the One Stop Shop EU
The primary advantages of the OSS scheme include:
- No need for separate VAT numbers: You only require a VAT number in the country where your business is registered. This is particularly convenient, but be cautious if you have inventory stored elsewhere, like through Amazon FBA.
- More time saved: You no longer spend time on separate, local VAT registrations. You only need to process all transactions once every quarter in the OSS declaration, eliminating concerns about varying reporting deadlines.
- Less expense on international transfers: Instead of paying VAT to individual European tax authorities, you pay a set amount to the tax authority of your registration country. They ensure the right amount reaches the appropriate country!
Registration for the OSS scheme isn’t mandatory but certainly simplifies the process. If you have minimal overseas expenses, the OSS system is ideal. You only need to pay VAT in your report and not claim it back. However, if you store inventory overseas and incur costs for it, you might still need a VAT registration.
You must choose between filing through the One Stop Shop or local tax authorities – not both. However, there is an exception, discussed below.
How to Register for the One Stop Shop
The pressing question: How do you sign up for the OSS? You have to sign up for the One Stop Shop through the tax authorities of the EU member state you’re registered in. For the Dutch One Stop Shop, you can register through the tax authority’s “Mijn Belastingdienst Zakelijk” portal.
When registering for the OSS scheme, you must deregister in countries where you possess a VAT number.
Implications of the OSS Scheme on Amazon Sales (incl. FBA)
Amazon identifies two shipping methods:
- Fulfilled By Merchant (FBM): Shipped by the seller. If you dispatch all products to European customers from the Netherlands, the above-explained threshold and OSS regulations apply.
- Fulfilled By Amazon (FBA): Shipped by Amazon. Using the FBA service complicates matters, merging the OSS system with local VAT management. Under FBA, Amazon can store inventory in other EU countries’ fulfillment centers, making you liable for VAT in that country. This scenario bifurcates your VAT administration. You must report VAT through both local declarations and the OSS. This is the exception mentioned earlier!
For countries from which inventory is dispatched, you need a VAT registration. All sales destined for that country must be reported in its local VAT system. But sales to EU customers from a country where you have no local VAT registration and no dispatched inventory, which can be reported through the OSS.
Will I double pay using OSS if I pay for local declarations?
Only cross-border transactions are covered in the One Stop Shop declaration. Local transactions must still be reported in local filings: so there’s no double payment or overlap.
How to Apply for a Foreign VAT Number and File VAT
Need a VAT number or need to file VAT overseas but unsure how? Our team is here to help!
We also assist with your One Stop Shop declaration. With our Staxcloud software, you have continuous access and insight into your VAT, knowing exactly how much you owe by country. If you’d rather not handle VAT administration, we can manage your VAT filings. Schedule a consultation, and we’ll see how we can assist you.