We recently looked at the benefits of using the new e-commerce One Stop Shop. Businesses that sell to customers in Europe will, in many cases, greatly simplify their VAT compliance by using the OSS. However, the OSS is not obligatory. In some instances, the OSS will not be relevant to your business. And, in other instances, an e-commerce business may find it advantageous to manage VAT compliance through an alternative approach. Let’s take a look at the options.
You don’t have to use the OSS, but it (often) helps
First things first. The OSS can simplify VAT compliance by eliminating the need for multiple VAT registration. But do you even have multiple VAT registrations?
Operating an e-commerce business doesn’t automatically mean you have VAT obligations in any foreign country. Even if you sell to customers abroad, you will only incur an obligation to account for foreign VAT (and thus be required to register for VAT) if you cross the specified distance selling threshold set by that country.
Therefore, if your annual turnover is relatively low, you may not have overseas VAT obligations and thus the OSS may be applicable. That said, don’t take
Selling through an online marketplace
If you are a non-EU established business that sells goods to customers in the EU via an online marketplace, such as Amazon or eBay, then the marketplace itself is required to account for the VAT on sales.
IOSS or OSS?
The OSS forms part of the EU’s new e-commerce VAT package. The VAT packaged was designed to modernise and simplify VAT regulations. In addition to the OSS, officials also introduced a mechanism known as the Import One Stop Shop.
The IOSS applies to goods valued at no more than €150 that are located outside of the EU at the time of sale. For retailers selling such goods to customers in the EU, the IOSS will be the applicable VAT compliance mechanism.
The pros and cons of VAT registrations
Given that the OSS is optional, you may simply choose not to use it. For example, you may already have registered for VAT in several countries and be satisfied with your current processes.
Moreover, in some cases there are benefits to multiple VAT registrations. Each registration involves a number of obligations, such as the requirement to regularly file VAT returns. However, they may also provide benefits, such as reclaim opportunities. Obviously, these potential benefits will only apply in certain cases, depending on a business’s operations.
Ensure you are compliant, one way or another
To conclude, we should emphasise that while the OSS itself is optional, you are nonetheless obliged to meet your VAT obligations using one or another applicable mechanism.
Vatglobal’s team of VAT specialists will provide expert guidance on the optimal way to manage your VAT. Plus, our e-commerce VAT experts can manage all your registration and compliance needs, ensuring you are always 100% VAT compliant, everywhere you have an obligation. Get in touch with Vatglobal for world-class strategic VAT advice and assistance.