Starting from 1 July 2021, cross-border e-commerce and services to consumers will be taxed in a new way in the European Union. In this article, we examine what the new regime will bring to Estonian companies working with Amazon FBA and independent e-shops selling to consumers in multiple EU countries.
The current MOSS (Mini One Stop Shop) is replaced by the OSS (One Stop Shop) and IOSS (Import One Stop Shop) special arrangements. The general aim of the amendment is to reduce VAT fraud and ensure a level playing field for companies from EU Member States compared to non-EU companies.
Some of you might remember that the MOSS was a special voluntary scheme for the taxation of cross-border digital services to consumers, which allowed EU service provider to declare and pay VAT due in another Member State through the Estonian tax office without having to register for VAT in the consumer’s country of residence.
OSS, which replaces MOSS, is basically extended MOSS. It applies to a wider range of services supplied to consumers in another Member State by an EU company, as well as to intra-Community distance selling of physical goods and, in some cases, to the sale of goods through an online store or e-shop. This does not apply to B2B transactions where your buyer is a VAT registered company.
The new IOSS regime applies to the distance selling of goods to EU consumers from non-EU countries. The MOSS registered long-distance sellers do not have to submit any applications to join the OSS, but non-EU long-distance sellers must make an application to join the new IOSS.
Joining those EU special schemes is still voluntary. Companies can do without it, but using a special procedure makes life more comfortable and saves money on tax reporting in multiple EU-countries. You would only need a VAT registration in Estonia to sell all over the EU.
The OSS and IOSS special arrangements cover the sale of both digital and physical goods and services within the European Union and across its external borders. The OSS special scheme covers services which are provided to a consumer in another Member State and whose place of supply is in the consumer’s country of residence. The IOSS special scheme covers services provided to a consumer in a Member State by a non-EU service provider.
OSS and IOSS will bring another fundamental change to cross-border service provision. The new annual threshold for transactions under the OSS regime is 10,000 euros. If this is exceeded, VAT must be paid in the consumer’s country of residence.
The special IOSS procedure applies if the value of the imported goods does not exceed 150 euros. If your company is only selling goods imported from non-EU countries, you only need to be registered for IOSS special scheme. A separate application must be submitted for this purpose and reporting is on monthly basis.
The OSS special arrangement allows your company to submit a single quarterly VAT return for cross-border sales to consumers in all Member States instead of registering for VAT in all the EU countries where your consumers are based.
IOSS makes the life of a non-EU seller easier. They can declare and pay VAT on the import of all goods to the European Union covered by the special scheme in one Member State, instead of paying VAT at the time of import in each Member State.
IOSS also makes consumer life easier. If the seller has joined the IOSS special scheme, the buyer does not have to submit any customs forms and pay VAT upon arrival of the goods to the European Union. E-stores can charge correct VAT amount on the check out instead of customer submitting a customs form.
OSS makes the life of every Estonian company whose services or products are sold across the European Union easier. It is no longer necessary to register for VAT in each Member State. After joining OSS, VAT is settled quarterly through the Estonian tax office and the tax money reaches consumer’s authorities through Estonian tax office. For this, you always need to calculate and charge correct VAT applicable in buyer’s country.
OSS also makes it easier for manufacturers to cooperate with sellers from non-EU countries. It can be used by an EU e-shop that sells the goods of a non-EU company, which have been produced in cooperation with a manufacturer located in Estonia and this seller does not have a permanent establishment in any Member State.
The special OSS regime can also be used for services related to property or a specific venue, such as construction, cultural and sporting events, etc.
All in all, with OSS and IOSS, as with any new thing – it’s better, but at first you want to get used to it. And it is better if someone first guides, encourages, or even connects the dots for you. So, if you need to apply for OSS or IOSS or have any questions, feel free to contact us.