For starters, VAT (Value Added Tax) is an additional tax applied on the goods and services rendered by businesses registered with VAT. It is irremissible for a business to register for VAT if its taxable turnover surpasses £90,000. Complying with VAT rates and tax regulations can become an arduous task for a business since each EU member country has its VAT obligations, even if it is not based in Europe. That is where the VAT One Stop Shop scheme comes into play. This blog post is intended to provide an extensive guide on how the EU-introduced VAT one-stop scheme streamlines compliance obligations, facilitating the digital selling of goods and services within the EU.
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What is the VAT One Stop Shop Scheme?
The 27-member European Union established a new VAT program in 2021, with the aim of promoting cross-border e-commerce trade within the EU and simplifying VAT collection and payment procedures. It introduced two new schemes: the VAT One Stop Shop (OSS) scheme and the Import One Stop Shop (IOSS) scheme. The schemes went into effect on July 1, 2021.
VAT OSS stands applicable EU-wide, promoting online trading across EU borders. The paramount objective of VAT OSS is to streamline the compliance requirements, i.e. simplifying the collection and payment of VAT throughout the EU. Furthermore, one-stop-shop advantages the goods suppliers and services consumers across the EU by simplifying up to 95% of VAT procedures.
Under the ambit of the OSS scheme, businesses can seamlessly register for VAT in their respective EU member states rather than undergoing the hassle of registering in multiple countries. Later on, using that registration, they can declare and pay VAT on all cross-border sales throughout the EU. It is done via a single electronic portal/gateway. To illustrate, a seller can initially register for VAT in one EU member state to extend all the business-to-consumer (B2C) services and for all the intra-EU distance selling of goods. Thereafter, the seller can pay for the VAT through a single quarterly return.
As an outcome, the VAT one-stop-shop scheme helps businesses and sellers circumnavigate VAT registration in every single EU country.
What’s the Difference Between MOSS and OSS?
Earlier, the EU implemented the Mini One Stop Shop scheme that allowed businesses to pay VAT on digital goods and services sold throughout the EU. The VAT MOSS was effective from January 1, 2015.
However, to simplify the VAT regulations regarding e-commerce trade, the EU made a series of amendments in 2021. The significant amendments included the extension of MOSS to OSS and the introduction of the IOSS (Import One-stop Shop) scheme. As a result, OSS replaced MOSS on 1 July 2021.
What is the Scope of VAT OSS?
The VAT one-stop-shop scheme encompasses various B2C (business-to-consumer) supplies of goods, such as:
- Cross-border supplies, including telecommunications, broadcasting, and electronically supplied (TBE) services to non-taxable companies based within the EU
- Intra-EU distance sales of goods
- Certain domestic goods supplies of goods with the help of electronic interfaces
- Distance or remote sales of goods imported from non-EU countries, except for excise goods.
What are VAT Union and Non-Union One Stop Shop?
The VAT OSS has three schemes: the Union scheme, the non-union scheme, and the Import scheme.
While the union and non-union schemes also existed within the purview of MOSS, their scope has been extended under the one-stop-shop scheme. In addition, the import scheme is newly introduced by the EU.
The VAT Union OSS is accessible to all businesses established within the EU and registered for VAT.
On the other hand, VAT non-Union OSS is available for non-EU-based businesses. For instance, companies based in countries outside the umbrella of the EU (USA, China, and the UK) can choose the VAT non-union OSS option.
Nevertheless, it is relevant to mention that both the VAT union and non-union OSS options enable businesses to use a single electronic gateway for the declaration and payment of VAT on all remote sales of goods and services to EU consumers, irrespective of whether they are based in the EU or outside of it.
How VAT One Stop Shop Scheme Work?
For a business or a seller to secure VAT OSS, the sales of the goods must exceed the distance selling threshold. Earlier, several EU countries retained different distance selling thresholds. Nonetheless, following the implementation of VAT OSS, the new EU-wide distance selling threshold is set at €10,000 or £8,818. Furthermore, a company’s goods and services may remain subject to VAT regulations in the respective EU state where it is based if the sales remain below this threshold.
Next, After signing up for OSS, a business must take into account VAT due on all remote sales through the OSS scheme.
How Do UK Based Businesses Register for VAT OSS?
Following the Brexit saga, UK businesses fall under the category of non-EU-based businesses. Hence, all UK businesses dealing with B2C sales of digital products can opt for a VAT one-stop shop non-Union scheme. In addition, these businesses have ample leeway in terms of choosing any EU country for VAT OSS registration.
Moreover, if businesses using the UK OSS make more than the £8,818 threshold, VAT registration in the UK is mandatory for them if they haven’t previously.
Lastly, it will also uphold even if the total revenue or overall turnover falls below the standard £90,000 UK VAT registration threshold.
The Key Takeaways from the VAT OSS:
Simplified VAT Compliance:
The OSS simplifies Value-Added Tax (VAT) obligations for businesses selling cross-border, with final customers based in the EU. Instead of registering for VAT in several European countries, companies can register for the OSS system in one member country and submit a single VAT return for all their cross-border sales. This significantly reduces the time-consuming procedures and compliance costs.
No Need for VAT Registration in Multiple Countries:
A business can register for VAT in a single EU member country called the Member State of identification. Next, it can digitally pay the VAT due on all distant sales made to customers in other Member States and submit VAT returns through a web portal. Therefore, it reduces the administrative burden and omits the need for businesses to register for VAT in each EU country where their customers are based.
Advantageous for the EU and Non-EU-Based Businesses:
In addition, the VAT OSS facilitates not only EU-based businesses but also those established outside of it through its union and non-union OSS options. The non-EU countries will only have to register with one country where the majority of their customers are based. Alternatively, they can choose a country where VAT registration is the easiest and file one VAT return. Also, any VAT that a company has collected and remitted to its local tax authority will then be distributed to the relevant EU countries on its behalf.
Enhancing Customer Experience:
Lastly, the VAT one-stop-shop scheme enhances and improves the customer experience by ensuring that VAT is accurately charged and paid at the time of sale, no matter the location of the customer.
Secure a Seamless One Stop Shop Scheme with Accotax:
If you are bereft of time to deal with VAT registration and its compliance requirements, leave it to Accotax. Our seasoned accountants and financial experts remain at your beck and call, offering you the most viable solutions for your business. Whether it’s filing your OSS returns, registering for VAT, declaring VAT, or paying it on time, we carry out all the compliance duties with precision to mitigate your VAT-related concerns effectively.
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Conclusion:
In essence, the EU’s chief purpose in establishing the VAT one-stop-shop scheme is to foster cross-border e-commerce trade within the EU. With its hassle-free, convenient, and simplified steps, fulfilling the VAT compliance obligations has become as easy as pie with the VAT OSS.
Disclaimer: All the information provided in this article on VAT One Stop Shop Scheme, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.
