EU Cross Border Sales requires the Seller to Charge VAT to each country where they are selling their services and products.
One of the major reforms of EU VAT Package 2021 is VAT Mini One Stop Shop along with the withdrawal of the distance selling threshold. According to new rules, from July 2021 the B2C sellers are no longer required to register for foreign VAT in order to sell products in other countries. This protects their energies to be invested in multiple filing for foreign VAT.
What they can easily opt is to file One-Stop-Shop filing along with the regular domestic VAT return which will list all the sales that they are making. The seller can remit the tax because of the home VAT authority and further the tax is forwarded to the relevant countries. The sellers who come under the category of non-EU can also apply for the OSS regime and name any of the EU states to proceed with the process.
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Distance Selling Threshold Rules:
According to current VAT Rules, the VAT Mini One Stop Shop rate is charged to the consumer’s country of residence. This is called the destination principle. This also requires the seller to be VAT registered in every country where they intend to sell their products to the customers.
This is way too much for the small-scale sellers and to reduce their burdens, a distance selling threshold is introduced which is pretty simple and doable. But the bad news is this is available until July 2021. After that, the seller has to charge VAT to the customer’s country of residence from day one and remit it to the authorities.
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Single OSS EU VAT Return:
The good news is that there is an extension in single VAT Mini One Stop Shop return along with withdrawing the distance selling threshold. This will affect the obligation to register VAT in every EU country the sellers are offering their products to EU consumers. The recent rule requiring registration in every EU country is a hindrance that is not appreciated by many sellers.
Sellers that have foreign VAT registration, also they are selling to their country of residence can use the OSS report as well from July 2021. In their own country, sellers can carry on selling their products with the domestic VAT return.
In addition One-Stop Shop filing a domestic VAT return, to charge VAT with the right rate. The seller can use the delivery address of the EU consumers to figure out the country of residence and VAT rate. Moreover, the amount received must be shown in the seller’s own country currency. The sellers can seek guidance from the domestic country about the rate on the very day of transactions.
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 like the ones who are not residing in EU countries can also get benefits of One Stop Shop filing. A certain requirement for them is to get registered as a non-union taxpayer in any EU country by approaching their tax authority.
Filing One-Stop Shop:
Usually, this comes under tax authority. On the date of the quarterly VAT return, OSS filing will be submitted too. However, monthly VAT (VAT Mini One Stop Shop) taxpayers can contact their local tax authority to keep a track of the due date. The rest of the procedure will be the responsibility of the domestic tax authority.
The UK and EU Sellers:
The UK is no longer a part of the EU VAT regime since December 2020. The sellers in the UK come under the category of Non-EU sellers. Now, a UK seller intends to sell products to EU consumers, he is required to register in any EU state in order to file a non-union OSS return. Such sellers can also stop their VAT registration in case they are not holding any stocks in EU states.
We have viewed that to follow the rules of being a seller in any of the EU states could be tricky but it also unfolds the opportunities to grow your business globally and deal with your consumer audience in such an appropriate way that your products come under the limelight and recognized globally. We hope this post helped you to have a better understanding of the VAT Mini One-stop shop and related obligations.
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