What is VAT-OSS? Changes to VAT settlements in the EU for online retailers – Amazon, eBay, online shops

VAT-OSS - definition

VAT-OSS (Value Added Tax – One-Stop-Shop) is an extension of the VAT-MOSS (Value Added Tax – Mini-One-Stop-Shop) procedure.
The procedure consists of a simplified VAT settlement for companies whose business includes selling digital goods and services over the internet.

VAT-MOSS, the predecessor of VAT-OSS

VAT-MOSS is an abbreviation for the English name of the Mini-One-Stop-Shop procedure. You can understand it as a mini shop for comprehensive service or, less literally, a single window procedure. Implementing the VAT MOSS procedure was linked to a change in the tax rules for online services (telecommunications, broadcasting and electronic services) for natural persons not paying VAT. These services were taxed in the country of residence of the recipients of the services. To limit the VAT registration obligation in individual countries, the European Union introduced a simplified procedure – VAT MOSS.

The VAT-MOSS procedure was voluntary, i.e. entities that provided digital services for individuals living in different countries of the EU could – but did not have to – use the simplified procedure. However, if companies did not apply for the procedure, they had to register for VAT in the individual countries to which they sold those services.

VAT-OSS – facilitation of the VAT settlement

VAT OSS is a procedure that allows for the settlement of distance sales to other EU countries within a single collective declaration.

On the 1st of July 2021, with the introduction of the VAT-OSS procedure, distance sales thresholds to EU countries were modified. Instead of separate national thresholds, a single limit of 10,000 EUR was introduced for the whole of the EU. This limit should be calculated as the total value of shipments to other EU countries (and not individual EU countries).

Before you use the VAT OSS procedure, check if you are required to settle VAT. If your sales do not exceed the limit of 10,000 EUR, you can settle VAT at the VAT rate of the country from which you are shipping the goods. As a result, you will have less paperwork to deal with.

Please note that this procedure applies only to transactions between EU countries and does not apply, for example, to the UK or Switzerland.

Can VAT-OSS be applied only in selected countries?

The provisions in place are clear on this issue. When applying to VAT OSS, you must include all your sales.

What does that mean? Suppose you sell your goods to consumers in the Czech Republic, Austria and Italy. When you choose to use the VAT simplification, it will apply to all countries you are shipping the goods. Therefore, you cannot choose, for example, to settle transactions with customers from the Czech Republic in the manner you settled before and only applied VAT OSS to customers from Austria and Italy.

However, if you do not register for the VAT OSS procedure, you will have to register for VAT in each country you send the goods.

Who can use the VAT-OSS procedure?

VAT OSS is a significant simplification for all entrepreneurs who provide services and sell goods online to customers in the European Union. Thanks to the regulations introduced, you will no longer have to register for VAT separately in each of the 27 Member States. The VAT OSS procedure resolves the issue.

Suppose you are thinking of expanding your business to foreign markets. Still, you have been afraid of the complications related to the different regulations concerning the obligation to pay tax in individual EU countries. In that case, you will probably be delighted to hear about the introduction of VAT OSS.

Which industries does the VAT-OSS procedure apply to?

VAT-OSS facilitates trade within the EU and simplifies the submission of VAT declarations. You can use the VAT OSS procedure if:

• you are conducting distance sales of goods within the EU,
• you provide services to private individuals who are taxed in other EU countries.

In practice, this principle mainly concerns the provision of electronic services so far covered by the VAT MOSS procedure.

Is VAT OSS mandatory?

The regulation introduced (like the earlier VAT- MOSS) is not mandatory. Therefore, you can settle VAT in other EU countries if you want to. However, this entails the obligation to register for VAT in each EU country to which goods purchased by private individuals are dispatched.

The VAT-OSS procedure allows the settlement of VAT within a single collective declaration for all EU countries.

Does VAT-OSS include B2B transactions?

The VAT-OSS procedure is only for businesses which sell their goods or provide services to individual customers, that is, persons who do not engage in economic activities.

If the goods you sell are ordered by consumers (for example, Mr X living in Germany), you can use VAT-OSS. However, send merchandise to another company (for example, the order comes from Mr Y from France, who runs a company where he places the order with you). The VAT-OSS regulations do not cover this transaction.

How long must the VAT-OSS records be kept for?

Each taxpayer who chooses to use the simplified VAT settlement system must keep a record of transactions and store the documents for ten years (after the end of a given tax year).
The failure to do so will result in specific sanctions imposed by competent tax authorities.

The information which the taxpayer must include in the said records includes:

• member state of consumption,
• type of service provided / description of goods dispatched,
• the date of service/delivery,
• the tax base,
• amounts increasing or decreasing the tax base,
• the VAT rate applied,
• the amount of VAT, including the currency,
• the date and amount of the payments received,
• information on advance payments,
• if an invoice was issued, the information contained therein,
• if a service was provided, information on the place of registered office or permanent residence of the recipient (or place of stay) and, in the case of the sale of goods, the site of origin and receipt of the consignment,
• confirmations regarding the option to return the goods.

The taxpayer is also required to make available the collected records at the request of both the Member State of identification (the country of fixed business activity) and at the Member State of consumption (the country to which the goods are dispatched).

The records kept are to be made available electronically. In exceptional cases – where, for example, due to technical problems, this method is not possible – you can make the records available in another way. Guidelines covering such exceptional cases are made available by the tax authority.

VAT-OSS and Amazon FBM

The introduction of the VAT-OSS system significantly simplifies those who sell their goods on Amazon in the FBM model.
FBM stands for Fulfillment by Merchant. This describes a sales model in which the seller’s responsibility is to organise the shipping process and after-sales customer service. A person selling a specific item is responsible for such matters as:

• storage of goods,
• packing the order for shipment,
• shipment of the package to the recipient,
• handling claims and returns.

This is also the case when selling via eBay or other sales platforms. Furthermore, thanks to VAT-OSS, you will not have to register for VAT in each EU country where you sell your goods.
Instead, it is sufficient to register for VAT in the country from which the goods are dispatched, file the VAT declarations and pay the VAT at a single tax office.

VAT OSS and Amazon FBA

Another model of sale is Amazon FBA, that is, Fulfillment by Amazon. In this case, you are only involved in the organisation of the sales (obtaining customers), and all logistics related to the storage of goods, packaging, shipping and handling of returns are the responsibility of Amazon.

Unfortunately, in the case of the FBA model, you cannot apply all simplifications under the VAT-OSS procedure. In particular, if you sell your goods in the FBA model, the goods are stored in many EU countries, and you must register and account for VAT (IDG/ICA) in these countries.

VAT-OSS and the settlement by the sales platform

Until the 30th of June 2021, small consignments (not exceeding 22.00 EUR) of goods imported into the EU were exempt from VAT. Changes to EU law have introduced new regulations in this respect. From the 1st of July 2021, all consignments have been subject to VAT regardless of their value.

The VAT-OSS procedure has been available since the same date. Sales platforms – such as eBay, Amazon – are required to collect VAT on sales if the goods are shipped from outside the EU or the seller is not established in the EU (for orders up to 150.00 EUR – import VAT at the border will be charged on orders above this amount). The sales platform must also settle the tax collected with specific national offices.

VAT-OSS – how to use it?

In order to use the VAT-OSS procedure, you have to submit an application for the VAT-OSS procedure in the tax office in the country of establishment.
In Poland, the application is submitted using the VAT VIU-R form.

Where should the declaration of applying for VAT OSS be submitted?

If you are an entrepreneur with business activity registered in Poland, you apply for VAT OSS in Poland. Entities interested in tax facilitation could declare their wish to use this solution as early as the 1st of April 2021, that was, a few months before the settlement system entered into force. However, because of a delay in the legislative process, registration could not be made before the 30th of June 2021. As a result, the VAT amendment was only published in the Journal of Laws on the 28th of June 2021 and entered into force on the 1st of July 2021.

If they wish to apply for tax simplification resulting from VAT OSS, Polish entrepreneurs must file an appropriate declaration to the Head of the Second Tax Office, Warszawa-Śródmieście. For your convenience you do not need to go to the capital to join VAT-OSS. Instead, you declare on the VIU-R form remotely via the e-Deklaracje system (however, a qualified electronic signature is required).

When should the VAT OSS registration declaration be submitted?

Companies who have exceeded the sales limit of goods or services set at 10,000 EUR before the 1st of July 2021 should have registered for VAT-OSS by the 10th of August 2021.
The same applies to entrepreneurs who exceeded the limit in the previous year. For example, if such a declaration was submitted on the 11th of August 2021, unfortunately, the use of the VAT-OSS procedure will only have been possible from the 1st of October 2021. In such a case, you will have to register for VAT in the country where you have made the sales, or you will have to stop selling to these countries until the beginning of the next quarter, i.e. the 1st of October 2021.

As a general rule, you can join the VAT-OSS system from the beginning of the quarter, after which the taxpayer informs the Office that it intends to use this procedure. However, suppose the first delivery of goods or services to be placed under a non-EU policy or an EU procedure is made before that date [before the first day of the next quarter]. In that case, the particular procedure shall apply from the date of such delivery or provision of services, provided that the taxpayer informs the member state of identification of the commencement of its activity to be covered by the procedure no later than on the 10th day of the month following that first delivery of goods or services.

Importantly, registration for VAT-OSS does not exempt you from applying VAT rates applicable to the specific Member States. Therefore, when you sell goods to German customers, you must use the rates in force in Germany even though you are settling in Poland. If you are unsure which VAT rates to apply in a specific country, you can easily check this on the website provided by the EC.

The tax rate base for EEC countries is available at: https://ec.europa.eu/taxation_customs/tedb/splSearchForm.html .

What is the deadline for submitting the tax declaration?

Settlement under the VAT OSS procedure means submitting one quarterly tax declaration for all distance sales made within the European Union.
You submit such a declaration by the last day of the month following the respective accounting quarter.

The declaration should include:

• all member states of consumption (of the receipt of goods),
• the VAT rates applied,
• the tax base for a given VAT rate,
• the amount of VAT.

Please also note that the tax amounts entered in the declaration should be expressed in euros. What if payments for the services rendered or goods sold were settled in another currency? Then you have to convert them into euros. For conversion, apply the exchange rate published by the European Central Bank.
In preparing the settlement, the applicable exchange rate is from the last day of a given settlement period.

The cumulative payment of the VAT due will be made to the account of the tax office to which the declaration is submitted.

Questions about VAT-OSS? Contact us >>>

VAT OSS and payment account

If you are selling in foreign markets and using the VAT OSS procedure, bear in mind that in this case, the micro tax account will not be applicable.

Payments related to VAT OSS should be made to the account: 84 1010 1010 0165 9315 1697 8000, with the Second Tax Office Warsaw-Śródmieście as the recipient. Moreover, payments must be made in euros, the currency used for making VIU-DO declarations, and the transfer title should include the UNR number – a unique reference number – which the taxpayer receives by email after submitting the declaration.

If you want to learn more about VAT OSS payments, you can find more information at this address.

Can VAT OSS returns be corrected?

Currently, for VAT OSS, there is no option to submit a separate correction. In cases where, after submitting the declaration for a given quarter, the seller realizes that there are sales transactions that were not included, these will have to be added to the declaration for the next quarter.

What are the benefits of VAT-OSS?

The regulation introduced on July 1, 2021, significantly simplifies the VAT settlement rules for entrepreneurs who engage in distance selling of goods to consumers (who are not VAT payers) residing in European Union countries. If until now you had to register as a VAT payer in every country to which your goods were sold, using VAT-OSS means you will no longer have to do so. You will be able to pay VAT in Poland.

The introduced regulations include:

• The elimination of the obligation to register for VAT in member states (though voluntary registration remains possible),
• The establishment of a uniform sales threshold (for both distance selling of goods and provision of services, including electronic, broadcasting, and telecommunication services) – set at 10,000 euros,
• The settlement of VAT in Poland (for domestic entrepreneurs selling goods to consumers in the European Union).

The decision whether to use VAT-OSS or continue to register for VAT in every country where you sell goods, such as Germany, Greece, or Denmark, is up to you. Many entrepreneurs will undoubtedly take advantage of this facility. Fewer formalities mean a smaller scope of accounting and, consequently, real savings for your company.

Remember, the obligation to register for VAT in other EU countries may still apply if you store your goods there (e.g., using the Amazon FBA model).

How does the non-Union VAT OSS procedure differ, and who can use it?

It’s worth adding that, besides the Union VAT OSS procedure described above, there’s also a non-Union VAT OSS procedure. The difference between the Union and non-Union procedure is that the latter is aimed at entrepreneurs who have a fixed establishment or business headquarters outside the EU territory. Moreover, the non-Union VAT OSS procedure covers services such as:

• Electronic services,
• Telecommunication services,
• Broadcasting services,
• Services related to culture or sports.

Through the VAT OSS procedure, a non-EU entrepreneur can settle their services just as within the Union service, and the due VAT, which must be settled using this procedure, should be paid to the tax administration in the country of registration. If the country of registration is Poland, a notification of intent to join the non-Union VAT OSS procedure can be sent via the E-Deklaracje system.

IOSS – Import One Stop Shop

IOSS is a new proposal contained within the VAT e-commerce package. It is a procedure for imports, covering the distance selling of goods imported from third countries. The value of the shipment cannot exceed 150 euros.

This import procedure simplifies the tax payment on goods and services. It’s enough to register for VAT in just one EU member state. The tax declaration can be submitted at the comprehensive VAT service point. Similar to OSS, in the VAT IOSS procedure, the VAT rates appropriate for the consumer’s country also apply. You can find more information about VAT IOSS procedure under this adress.

Need tax or IT support for implementing VAT-OSS? Schedule a consultation!

If you want to learn more, check out the material on VAT settlement in sales to EU countries that we co-created with Allegro Academy. You can find it at this address.