A New EU Tax Regulations: What OSS and IOSS Means for Your Store --
On July 1, new EU tax regulations will be brought into play as it is the time that European Union (EU) Value-Added Tax (VAT) eCommerce program begins to take effect. The changes are a major review of taxes currently in force, and are that are designed to make it easier for businesses and requirements for the administration of merchants. They will impact virtually every consumer-to-business (B2C) company involved in cross-border eCommerce trade (often called "distance sellers") across the EU.
EU merchants crossing a new EU-wide threshold of EUR10,000.00 must register across all EU countries where they make the taxable sales of business-to-consumer. They are however permitted to do this through the recently-created One Stop Shop (OSS) system within their country. The OSS system permits sellers of eCommerce to make a single VAT return for all the EU and to make a single tax payment, which is shared across all the countries where they sell.
We've highlighted several of the biggest changes below. We always recommend speaking with a tax advisor to make sure your company is following the rules as well as the best practices.
Who will be impacted?
The EU VAT eCommerce scheme affects EU retailers that exceed the all-encompassing threshold for EU companies of EUR10,000.00 in addition to merchants from non-EU countries import their goods into the EU.
Merchants are able to choose to make use of the One Stop Shop (OSS) filing system, which allows them to file an individual VAT return for each country in the EU in addition to separately submitting a VAT return for every EU nation that they send their goods to.
The tax rate for VAT differs among countries, with rates ranging from 17% in Luxembourg up to 27 percent in Hungary ( see the entire rate list) So, retailers are required to bill the VAT rate of the country of delivery for orders within the EU. This applies to all orders delivered through a fulfillment centre within the EU to any location within the EU.
What's changing?
What exactly is it, and how is it used:
The present distance selling program lets businesses avoid having to register for VAT purposes for a nation in which they make B2C tax-deductible supplies provided that the amount total of those supplies does not over the threshold to be considered a distance sale during a particular year. The businesses apply their tax rate applicable to these sales as if the sold goods have never been removed from their home country. If the threshold is reached within a specific country, it is mandatory to register and file VAT returns and thereafter determine the tax rate of the country of registration for B2C sales.
The scenario we will examine is that of the case of a German company selling physical products to customers in Romania. So long as the German firm is able to exceed the annual limit of Romanian sales of EUR25,305.00 The profits of the business are tax-deductible in Germany which is a normal German tax percentage of 19 percent.
After the threshold has been reached, starting from EUR25,306.00 After that, Romanian sales are tax-deductible in Romania; they need to join and pay the Romanian tax rate which is 19%..
What will it do when the changes are in effect:
In July, the thresholds for distance selling in certain countries are set to be removed, and a new European-wide limit of EUR10,000.00 will be introduced. When it's reached businesses have to be registered with states in which they're permitted to create tax-deductable B2C-related products. However, they may choose to make this registration through the new One Stop Shop system in the country of their choice.
This will allow eCommerce sellers to submit a single VAT tax return throughout the entire part of EU and make a single tax that is distributed across the nations in which they sell. It is akin to the program will work in conjunction with the previous small one-stop Shop (MOSS) scheme that is available to companies that offer digital services.
So, the German physical goods dealer who sells tax-free B2C products for Romanian, Czech, and Polish private customers, would not need to register for these three countries. If they have the required threshold for registration across Europe and are registered for OSS in Germany submit a return, and then make one tax installment (instead of three). But, their individual German B2C sales have to be included in their tax returns local to them in addition to local VAT obligatory to be paid.
What about sellers outside of Europe? EU?
The exemption of VAT for the importation of items in a value of less than EUR22.00 is to be eliminated. In the end, every merchandise imported into EU will now be subject to VAT. Non-EU sellers face a nil threshold for registration, meaning that they need to register with their first B2C sales.
In order to simplify the VAT compliance of merchants outside the EU In order to simplify VAT compliance for those outside of the EU, an Import one stop Shop (IOSS)will be established. IOSS will allow single return filing for merchants who choose to use VAT at points of sale on consignments less than EUR150.00. If a business chooses not to register for the IOSS, VAT will be due by the purchaser when importing items from within the EU. Anything valued above EUR150.00 are tax-exempt upon their arrival.
IOSS can also have an impact on customs clearance with the potential of clearing imported products quicker. If a shipping company has VAT is assessed upon purchase sellers are able to include IOSS numbers in Commercial Invoice information and then forward it to the shipping service provider for a customs declaration.
Information for merchants that is useful
To learn more about updating your tax preferences, check out our tax documentation.
If you are thinking that you want to make changes to the tax settings, we advise contacting a tax expert to ensure all regulations have been met.
This post was first seen on here