Understanding the VAT Mini One Stop Shop: A Comprehensive Guide

EU Cross Border Sales mandate that sellers must apply VAT for each country where they offer their products and services.

A significant change introduced by the EU VAT Package 2021 is the VAT Mini One Stop Shop, which also eliminates the distance selling threshold. As of July 2021, B2C sellers are no longer obligated to register for foreign VAT when selling products in other countries. This allows them to focus their efforts on avoiding the complexities of multiple foreign VAT filings.

Instead, they can choose to submit a One-Stop-Shop filing alongside their regular domestic VAT return, which will detail all their sales. The seller can then remit the tax through their home VAT authority, which will subsequently distribute the tax to the appropriate countries. Non-EU sellers can also take advantage of the OSS regime by selecting any EU member state to facilitate the process.

Distance Selling Threshold Regulations:

Under the current VAT regulations, the VAT Mini One Stop Shop rate is applied based on the consumer’s country of residence, following the destination principle. This means that sellers must be VAT registered in each country where they plan to sell their products.

This requirement can be overwhelming for small-scale sellers, so a distance selling threshold has been established to ease their burden. However, the unfortunate news is that this threshold is only applicable until July 2021. After that date, sellers will need to charge VAT based on the customer’s country of residence from the very first sale and remit it to the relevant authorities.

Single OSS EU VAT Return:

There is positive news regarding the single VAT Mini One Stop Shop return, as the distance selling threshold has been eliminated and an extension has been granted. This change will impact the requirement for sellers to register for VAT in every EU country where they sell products to EU consumers. Many sellers have found the previous rule mandating registration in each EU nation to be a significant burden.

Sellers who are registered for VAT in foreign countries and also sell in their home country can utilize the OSS report starting from July 2021. They can continue to sell their products in their own country using the domestic VAT return.

Additionally, when filing through the One-Stop Shop, sellers must apply the correct VAT rate based on the delivery address of the EU consumers to determine their country of residence. Furthermore, the revenue must be reported in the currency of the seller’s home country. Sellers can consult their domestic authorities for guidance on the applicable rate on the day of the transaction.

Some of the Important components are mentioned below with their relevant details:

• Non-EU Sellers
• Filing One Stop Shop
• The UK and EU Sellers

Non-EU Sellers:

Sellers who are not based in EU countries can still take advantage of the One Stop Shop (OSS) filing system. To do so, they must register as non-union taxpayers in any EU member state by reaching out to the relevant tax authority.

Filing One-Stop Shop:

Typically, this process falls under the jurisdiction of the tax authority. On the day the quarterly VAT return is due, the OSS filing will also be submitted. However, those who are monthly VAT taxpayers (under the VAT Mini One Stop Shop) should consult their local tax authority to stay informed about due dates. The domestic tax authority will handle the remaining procedures.

The UK and EU Sellers:

Since December 2020, the UK has been outside the EU VAT framework. Consequently, UK sellers are classified as non-EU sellers. If a UK seller wishes to sell products to consumers in the EU, they must register in any EU country to submit a non-union OSS return. Additionally, these sellers can cancel their VAT registration if they do not maintain any inventory in EU countries.

Conclusion:

Navigating the regulations for sellers in EU countries can be challenging, yet it also presents a chance to expand your business on a global scale. By adhering to these rules, you can effectively engage with your customer base, ensuring that your products gain visibility and recognition worldwide. We trust that this article has provided you with a clearer insight into the VAT Mini One-stop Shop and its associated responsibilities.