From July 1, cross-border e-commerce and services will be taxed in a new way in the European Union. In this blog post, we look at what the new order will bring to consumers.
First: Why was OSS and IOSS introduced instead of the MOSS special order?
The previously valid MOSS (Mini One Stop Shop) replaces the special arrangements of OSS (One Stop Shop) and IOSS (Import One Stop Shop). The purpose of the amendment is to reduce VAT fraud and ensure equal competitive conditions for companies from EU member states compared to companies from non-EU countries.
We remind you that MOSS was a voluntary special procedure for the taxation of digital services, which allowed the service provider to declare and pay the VAT due in another member state through the tax authority of the country of residence without having to register as a VAT payer in the country of residence of the customer.
OSS, which replaces MOSS, is basically an extended MOSS. This applies to a wider range of services than before, the place of turnover is in another member state, as well as to intra-Community distance sales and in certain cases also to the sale of goods via an internet-based trading place, i.e. an e-shop.
A new special rule added to OSS, IOSS applies to the distance sale of goods imported from a non-EU country. The user of the MOSS special order does not need to submit an application to join the OSS special order, but he must submit an application to join the IOSS.
Joining both special arrangements is still voluntary. You don't have to do this, because you can also do it without, but using a special order makes life more comfortable.
Second: What are the transactions covered by the OSS and IOSS special rules?
The OSS and IOSS special regulations cover the sale of both digital and physical goods and services within the European Union and across its external borders, respectively. Services that are provided to a consumer of another member state and whose turnover is generated in the consumer's country of residence are covered by the OSS special regime. Services that are provided to the consumer of a Member State from outside the European Union are covered by the IOSS special regime.
Together, OSS and IOSS bring another fundamental change. There are new limits for that. The limit for transactions falling under OSS is 10,000 euros. If this is exceeded, VAT must be paid in the buyer's country of residence.
The IOSS special rule applies if the value of the imported goods does not exceed 150 euros. A company that sells only goods imported from third countries to the end user only needs an IOSS special order registration. A separate application must be submitted for this purpose.
Third: How and for whom will life become more comfortable?
The special procedures of OSS and IOSS make it possible to declare the VAT of cross-border sales transactions carried out in all member states on one declaration and to pay all the VAT in the country of residence without the need to register the company as a VAT subject in the countries of residence of the consumers as well.
IOSS makes the life of a merchant from a country that is not part of the European Union easier and more convenient. He can declare and pay VAT on the importation of all goods covered by the special arrangement in the European Union in his own Member State of registration instead of paying VAT at the time of importation in each Member State to which the specific goods go.
IOSS also makes the consumer's life easier and more convenient. If the seller has joined the IOSS special procedure, the buyer does not have to submit a customs declaration and pay VAT when the goods arrive in the European Union. Instead, the seller can collect VAT from the buyer when paying for the goods and declare it himself instead of the buyer in the monthly IOSS declaration submitted to the tax authority.
OSS makes the life of every Estonian merchant, whose services or products have a market across the European Union, easier and more convenient. It is no longer necessary to register as a VAT payer in each country, but by joining OSS, taxes are settled quarterly through the Estonian tax authority, and getting tax money to the consumer's home country is no longer a merchant's concern.
OSS also makes it easier and more convenient for manufacturers to cooperate with merchants outside the borders of the European Union. It can be used by an e-shop that sells goods of a company from a non-EU country, which were produced in cooperation with a manufacturer located in Estonia, if this company does not have a permanent place of business in any member state of the European Union.
The OSS special procedure can also be used for services related to immovable property or a specific venue, such as construction, cultural and sports events, etc., provided in the Member State where the final consumer is located.
All in all, OSS and IOSS are like any new thing - it's better, but it takes some getting used to. And it's better if someone guides, encourages or even shows you from the side at first. Therefore, if you need to format something according to OSS or IOSS or if you have any additional questions, please feel free to contact us. We will help.
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