The new e-commerce One Stop Shop (OSS) makes VAT compliance much simpler for online sellers in Europe. Let’s take a closer look what the OSS does – and how you can take advantage of this new system to manage EU VAT.
One VAT registration for all your sales
E-commerce is about more than websites and app-based stores. E-commerce has shifted the way commerce operates at the supply chain level. An advanced infrastructure of warehousing and shipping has been developed to facilitate rapid and efficient cross-border supply and delivery.
The rapid rise of e-commerce also meant that tax officials have had to scramble to catch up. After all, we now live in a world where an online seller based in the UK can sell goods dispatched from a warehouse in Poland to a buyer in Croatia. All in a few clicks. As you can imagine (or as you have already experienced) working out, and complying with, the VAT implications of such a transaction is a complex and time-consuming process.
European policymakers therefore developed the new e-commerce One Stop Shop to try and simplify cross-border e-commerce VAT compliance. By taking advantage of the OSS, e-commerce businesses selling in the EU can account for the VAT on e-commerce sales throughout the EU through a single digital VAT return.
The OSS will be in operation from 1 July 2021. In order to appreciate the extent to which the system simplifies e-commerce VAT compliance, let’s consider the current state of play.
Distance selling and VAT
Given the rapid rise of e-commerce over the last, EU officials have implemented various measures to regulate cross-border sales.
Notably, distance selling thresholds were introduced in EU states. These varied from country to country. E-commerce retailers were obliged to take note of these thresholds. In cases in which their annual sales exceeded any given threshold, they would be required to register for VAT in the applicable country. In practice, this often means multiple VAT registrations in multiple countries, with all the attendant obligations.
The situation is rendered even more complex as each country has different filing requirements and deadlines. All of a sudden, an independent online store had to master the VAT compliance regulations of Belgium.
One-stop VAT registration and filing
As the name implies, the e-commerce One Stop Shop provides a single consolidated service to manage e-commerce VAT compliance. `
Businesses that elect to use the One Stop Shop don’t have to consider distance selling thresholds. Instead, they can register for the OSS in a single EU state and then file a consolidated OSS VAT return, accounting for sales across the EU.
For many e-commerce businesses, the OSS will be a much simpler and more efficient way to account for European VAT. However, the OSS is not mandatory. There may be circumstances in which a company will benefit from multiple VAT registrations. For this reason, it is advisable to speak to a VAT expert to help you make an informed business decision.
Strategic advice and assistance
Vatglobal’s specialist VAT team is available to provide expert VAT guidance and to assist you with all your VAT compliance requirements. Our proprietary VAT compliance technology makes meeting your global VAT obligations simpler, more efficient and more effective than ever.