VAT-OSS, a key element of the VAT e-commerce package introduced in July 2021, simplifies compliance with VAT requirements for businesses selling goods and services to consumers in other EU countries. The procedure allows e-commerce businesses to declare and pay VAT in one EU country for all transactions carried out in other Member States. This significantly simplifies the tax settlement process. Introduced in July 2021, VAT-OSS represents a significant step towards reducing the administrative burden faced by online sellers while improving compliance.
By focusing on e-commerce, VAT-OSS opens up new possibilities for e-commerce companies in terms of sales strategies and managing cross-border VAT obligations. Covering all EU countries where the brand sells, the system does not limit international expansion to only certain countries. By shipping from Poland, for example, and using the VAT-OSS procedure, an online store can conduct mail order sales to virtually all EU countries. This way, VAT-OSS addresses the challenges of VAT settlement in e-commerce. Thanks to that, it allows companies to focus on development and expansion in European markets.
What is VAT-OSS and how does it work?
VAT-OSS (Value Added Tax One Stop Shop) is a system that simplifies the VAT compliance process for businesses selling goods and services online within the EU. With this system, businesses can declare and pay VAT in their home country, rather than having to register for VAT in each EU country they sell goods or services to.
VAT-OSS – Availability and Range
- Available to companies that sell goods or services online to consumers in other EU countries.
- It covers intra-Community distance transactions, B2C services for companies that have headquarters or permanent place of business in the EU.
- For companies outside the EU, non-EU VAT-OSS applies to the provision of electronic, telecommunication, broadcasting and certain other services to consumers in the EU.
Procedure and Benefits:
- Companies can register for VAT-OSS in the EU country they are based in.
- Participation in the VAT-OSS procedure is voluntary.
- The system enables you to register for VAT in one EU country. It then handles all VAT obligations related to sales within the EU.
- Companies must submit quarterly declarations detailing all transactions subject to the VAT-OSS procedure.
Changes and Simplifications:
- The new regulations have expanded the list of entities subject to the new rules. Now, it includes online sellers offering goods and services in other EU countries.
- VAT-OSS reduces and unifies the limits to EUR 10,000 or the equivalent in the national currency. In Poland, it is PLN 42,000.
- Sellers who exceed the limit must still pay VAT in the buyer’s country. However, they can register for VAT-OSS in the country where they are registered. There, they file a single declaration with the Tax Office. It then distributes the funds to the countries in which the sale took place.
- A seller settling under VAT-OSS in Poland must file a separate VAT-OSS declaration.
- The new rules eliminate the need to register for VAT in another EU country after exceeding the sales limit.
Conditions of Eligibility for the VAT-OSS System
To qualify for the VAT-OSS system, companies must meet certain conditions and complete the registration procedure. Here are the key points regarding eligibility and registration:
Eligibility Conditions
Sales threshold. Businesses should register for VAT-OSS if their annual sales to consumers in other EU countries exceed a certain threshold (10,000 euros). Before exceeding the threshold, they can also register under the VAT-OSS procedure. In this case, additional documentation is required.
Place of business. To benefit from VAT-OSS, businesses must be registered for VAT in the EU country where they are established.
Accessibility for non-EU businesses. Non-EU businesses can also use VAT-OSS to simplify VAT compliance when selling goods or services to consumers in the EU. A physical presence in an EU country or the use of a tax representative is required.
VAT-OSS Registration and Declaration Procedure
To successfully register and declare under the VAT-OSS system, businesses must go through several steps. Below is a simplified guide to the registration and declaration procedure:
Registration Procedure
1. Access to the One Stop Shop. Businesses registered for VAT in their home country can register for VAT OSS via the One Stop Shop portal of their home country.
2. VIU-R form. Registration for VAT-OSS is voluntary and can be done using the VIU-R form. Registration will become effective from the first day of the quarter following the quarter in which the application was submitted.
3. Use of UPL-1 and PPS-1 forms for registration by proxy. If an e-commerce company wants to register by proxy, it is necessary to provide a qualified electronic signature and submit the UPL-1 form for signing and submitting the declaration and the PPS-1 form for authorisation.
4. Registration deadlines. The registration deadline is the 10th day of the month following the month in which the sales threshold of EUR 10,000 was exceeded, or which was the first month in which the VAT-OSS procedure was reported. Please remember that it is not possible to register for VAT-OSS retroactively, i.e. to settle previous quarters. The VAT-OSS registration process itself takes from 2 to 5 business days from the moment of submitting the application.
Submitting the Declaration
1. Quarterly VAT OSS returns. Once registered, sellers must file quarterly VAT-OSS returns via their home country’s One Stop Shop portal. These returns should include information on sales, VAT rates and the amount of VAT payable. Payments are made in one collective transfer in EUR.
2. VIU-DO declaration details. the VIU-DO declaration, which must be filed quarterly, must include all transactions covered by the VAT-OSS procedure. This is a key document that allows VAT to be settled for sales in all EU countries.
3. Declaration deadlines. VAT-OSS declarations must be filed by the end of the month following the end of the quarter. It is not possible to submit retroactive or corrective declarations.
The role of VAT-OSS in simplifying tax settlements
Under the VAT-OSS procedure, online sellers, both from within and outside the EU, can significantly simplify their tax settlement process. Here are the key aspects of how VAT-OSS simplifies VAT settlements:
- Reduction in the number of VAT registrations. VAT-OSS eliminates the need for multiple VAT registrations in each EU country where sales are made. This significantly reduces the administrative burden. E-commerce companies can therefore avoid, among other things, language barriers in communication with tax offices in other countries.
- Uniform settlement procedures. The system allows for the submission of a single quarterly VAT return for all transactions in the EU. This significantly simplifies the settlement process.
- Compliance with VAT regulations. VAT-OSS facilitates compliance with legal requirements, ensuring better compliance with VAT regulations in the EU.
- Reduction of administrative costs. By eliminating the need for multiple VAT registrations, companies can save on administrative costs.
- Predictability of VAT costs. VAT-OSS increases the transparency and predictability of VAT costs, which facilitates financial planning.
- Strengthening competitiveness. The system creates equal opportunities for companies from the EU and outside the EU. This improves the competitive position of the former on the e-commerce market.
At the same time, it should be emphasized that the VAT-OSS procedure also has its advantages for non-EU companies:
- VAT-OSS gives non-EU companies an easier access to the European market by simplifying the process of settling VAT on transactions made in the EU.
- For companies providing electronic, telecommunications and broadcasting services, VAT-OSS offers a simplified way of settling VAT.
By using the VAT-OSS procedure, online sellers can significantly reduce the administrative burden and costs associated with VAT settlements. This translates into better operational efficiency and greater opportunities for growth in the European market.
The impact of VAT-OSS on e-commerce sales strategies
The introduction of new VAT-OSS regulations has affected the sales strategies of e-commerce companies. Both those selling goods and services to consumers in the EU and to companies. A key element of these changes is the role of platforms such as Amazon and eBay, which now have to check the VAT status of sellers and provide information to tax authorities. This in turn forces entrepreneurs to understand and adapt to the new operating conditions.
Differences in the use of VAT-OSS by Amazon sellers
1. Amazon FBM (Fulfilment by Merchant): sellers who handle logistics and customer service themselves can fully benefit from the advantages of VAT-OSS, which allows them to simplify VAT settlements and increase their competitiveness in the European market.
2. Amazon FBA (Fulfilment by Amazon): sellers using Amazon’s logistics services may encounter limitations in fully using VAT-OSS, because when delivering goods to Amazon warehouses in countries other than the country of their headquarters, they must register for VAT locally in the countries where their products are stored.
Adapting to these changes requires e-commerce entrepreneurs to understand the new regulations. It also requires them to have a well-thought-out strategy. For example, companies must decide whether using the logistics services of e-commerce platforms is beneficial for them in the context of VAT-OSS, or whether it is better to handle logistics in-house to fully exploit the potential of simplifying VAT settlements. The best solution may as well be to combine both models. This way, you would take advantage of both the benefits of storing goods closer to customers and the benefits of the VAT-OSS procedure.
Another key aspect is the awareness of the responsibility for checking the VAT status and providing the required information to the tax authorities. This may influence the choice of the sales platform. These changes in the VAT-OSS procedure bring both challenges and opportunities for e-commerce entrepreneurs. It requires them to actively adapt and optimize their operations in the new regulatory environment.
Exceptional Cases and VAT-OSS Limitations
There are some exceptions and limitations to the VAT-OSS procedure that e-commerce entrepreneurs should take into account. Here are the most important ones::
- VAT rates and exemptions:
The new regulations introduced under VAT-OSS do not affect VAT rates or VAT exemptions applicable in Poland. This means that entrepreneurs must continue to comply with local national regulations regarding VAT rates and exemptions. This may affect the way they settle their taxes.
- Changes in exemptions for small shipments:
One of the significant changes is the elimination of VAT exemptions for small shipments (value up to EUR 22) imported from non-EU countries. This change means that all shipments imported into the EU, regardless of their value, are subject to VAT. This is particularly important for e-commerce entrepreneurs importing goods from third countries, who now have to include VAT in the cost of their products.
In summary, e-commerce entrepreneurs must be aware of the exceptions and limitations of VAT-OSS. This is crucial in order to adapt their sales and logistics strategies accordingly. Understanding these aspects is essential to ensuring compliance with the regulations and optimizing business costs.
Key benefits of VAT-OSS for entrepreneurs
As we said, using the VAT-OSS procedure brings e-commerce entrepreneurs a number of benefits that significantly affect their daily operations and development strategies. Below are the key benefits of implementing this system:
1. VAT reporting simplified:
Instead of filing separate VAT returns in each EU country to which B2C mail order sales are conducted, entrepreneurs can use a single, quarterly VAT-OSS return. This process significantly simplifies the management of VAT obligations, saving time and resources.
2. Reduction of administrative burden:
The VAT-OSS procedure eliminates the need for multiple VAT registrations in different EU countries. This reduces the administrative burden and related costs. This system allows for the centralization of settlement processes, which translates into greater operational efficiency.
3. Increased efficiency in managing VAT liabilities:
Thanks to VAT-OSS, entrepreneurs can better plan their activities, having clarity about deadlines and procedures. It increases the efficiency of managing VAT liabilities. This procedure also allows for a faster response to changes in VAT regulations. It is especially important in the dynamically changing e-commerce environment.
To sum up, VAT-OSS is a significant convenience for entrepreneurs who want to focus on developing their e-commerce activities while minimizing the related administrative burdens and costs.
Conclusions
The introduction of the VAT-OSS procedure is a significant step forward in simplifying VAT settlement processes for e-commerce entrepreneurs. Especially those selling consumer goods and services within the European Union. By enabling central VAT declaration and payment in one Member State, VAT-OSS reduces the administrative burden. Therefore, it allows entrepreneurs to focus better on developing their business. The benefits of this procedure are particularly visible in the context of reducing administrative costs and the need for multiple VAT registrations in different EU countries.
As an entrepreneur operating in the e-commerce industry, it is worth getting acquainted with the requirements and the VAT-OSS procedure. Registration will not only simplify VAT obligations management, but also contribute to increased operational efficiency while meeting legal requirements. Ultimately, VAT-OSS offers a solid platform that can support entrepreneurs in expanding their presence on European markets. This provides greater development opportunities and increasing competitiveness in the dynamically changing e-commerce market.
Would you like to start or expand the sale of your products on foreign marketplaces? Contact us and trust our many years of experience in scaling cross-border e-commerce sales!
Contact us and expand your foreign sales!
