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One-Stop Shop – EU VAT changes for e-sellers

By Peter / In EU VAT Reform / 4 Min read

General overview

Distance sales threshold was replaced by EU-wide 10K threshold for digital services and goods.

That means that intra-community sales are subject to VAT in the EU country of destination. This EU-wide threshold was made for micro-businesses. When they sell less than 10K euro over Europe they may charge VAT rate applicable at their home country. For 99% of the other cases, the rate will be due at the rate of the destination country.

To make it more simple the reporting obligations due to the removal Mini one-stop-shop was extended to a One-stop shop for goods and services. Before such a scheme was possible only for digital services.  A one-stop-shop scheme is optional for e-commerce.

 

What transactions are not covered by OSS?

This new OSS scheme allows reducing the number of countries to be VAT registered. But it is still doesn’t cover all e-commerce situations. Let’s sort out cases when e-commerce must keep VAT numbers.

The first case – if a company use a warehouse in a foreign country

As an example – the company was set up in Latvia and uses an Amazon german warehouse. That means that the company must stay registered for VAT and do periodic reporting.

Similar situation with dropship from another country. The company cannot report incoming invoices in the OSS declaration. The company cannot use OSS for VAT refunds.

 

What if I get the OSS number later than start to sell cross-border?

As a general rule, the OSS scheme shall be applied from the first day of the next tax period after the taxpayer applied for OSS registration. For example, if the application was submitted on 10 October, the special scheme shall be applied automatically from 1st January.

If a Merchant already started to sell goods cross-border he may indicate in the application the date of the first sale. For example, the first sale was in October, then an application for OSS needs to submit before the 10th of November. In such a case, the OSS number will be valid from 1 st of October.

 

Just integrate it into your webshop and see where and how much you need to pay. Lovat calculates OSS return in minutes. Track your thresholds when you go to new markets and get reminders when you need to register.