What Is One Stop Shop VAT?

Navigating VAT obligations across multiple countries can be a significant challenge for businesses involved in cross-border ecommerce.

This guide provides a complete overview of OSS VAT, explaining what it is, how it works, and why it’s an essential tool for small to medium-sized enterprises (SMEs), ecommerce entrepreneurs, and other businesses engaged in EU trade.

What Is the One Stop Shop (OSS) VAT?

The One Stop Shop (OSS) VAT is a scheme introduced by the EU in July 2021 as part of its reform of VAT rules for cross-border ecommerce. The primary objective of the OSS system is to simplify VAT reporting and payment for businesses trading across EU member states.

Purpose of the OSS VAT Scheme

The OSS VAT scheme was developed to:

Enable businesses to handle all EU VAT obligations through a single registration.
Simplify the process of filing VAT returns across multiple EU countries.
Ensure that VAT is paid in the country where the customer resides, creating fairer tax distribution across the EU.

Types of OSS VAT Schemes

There are three variants of the OSS scheme, designed to meet the needs of different types of businesses:

1. Union OSS:

For businesses established within the EU.
Covers B2C sales of goods and certain services to consumers in other EU member states.

2. Non-Union OSS:

For businesses established outside the EU.
Primarily applies to services (e.g., telecommunications, digital services) provided to EU consumers.

3. Import One Stop Shop (IOSS):

For businesses importing low-value goods (under €150) into the EU.
Simplifies VAT collection by allowing sellers to charge VAT at the point of sale.

How Does OSS VAT Work?

The OSS VAT system allows businesses to centralise their VAT reporting and payments, significantly reducing the complexity of complying with tax rules in multiple EU countries.

1. Registration Process

To use the OSS scheme, businesses must register through the online portal provided by the tax authority in their chosen EU member state. For EU-based businesses, this is typically the country where they are established. Non-EU businesses can select an EU member state for registration.

2. Filing VAT Returns

Businesses registered for OSS file a single quarterly VAT return, which consolidates sales data for all EU countries where they have customers. The VAT return must include:

Details of total sales in each member state.
VAT amounts collected according to the applicable VAT rates in each country.

3. Paying VAT

Once the VAT return is submitted, businesses make a single payment to the tax authority in their country of OSS registration. That authority then distributes the VAT to the relevant member states.

4. Transactions Covered by OSS

The OSS VAT system applies to:

Distance sales of goods: Goods sold B2C and shipped from one EU country to another.
Certain services: Digital services, telecommunications, broadcasting, and other specified services provided to EU consumers.

Benefits of OSS VAT

The OSS VAT scheme offers several key advantages for businesses selling across borders in the EU:

1. Simplified VAT Compliance

Instead of managing VAT obligations in each EU country, businesses can consolidate their reporting and payments through one registration and return.

2. Reduced Administrative Costs

By eliminating the need for multiple VAT registrations, OSS helps businesses save time and money on administrative tasks.

3. Greater Cash Flow Control

The OSS system provides a centralised and predictable VAT payment process, making it easier for businesses to manage cash flow.

4. Supports Cross-Border Expansion

For SMEs and entrepreneurs, OSS eliminates the VAT compliance barriers that previously made it difficult to expand into multiple EU markets.

Do I Need to Pay VAT on Imports through OSS?

If you’re importing goods into the EU, the Import One Stop Shop (IOSS) scheme is particularly relevant.

How IOSS Simplifies VAT on Imports

IOSS applies to low-value goods with a value of €150 or less.
Businesses can collect VAT at the point of sale, ensuring customers are not surprised by additional charges upon delivery.
VAT collected is reported and paid monthly via the IOSS portal in the chosen EU member state.

What About Goods Over €150?

For goods valued above €150, standard VAT and customs duties apply, and these are paid at the border unless arrangements are made for deferred payment.

How to Claim VAT Back from Imports

If your business has paid VAT on imports, you may be eligible to claim it back, provided you meet certain conditions.

For VAT-Registered Businesses

VAT-registered businesses can reclaim import VAT by including it in their VAT returns. The steps include:

Ensuring you have proper documentation, such as customs declarations and invoices.
Reporting the VAT paid on imports in the relevant section of your VAT return.

For Non-VAT-Registered Businesses

Non-registered businesses cannot reclaim VAT on imports, which is why many choose to register for VAT to take advantage of this benefit.

Common Questions about OSS VAT

Here are answers to some frequently asked questions about the OSS VAT scheme:

What Are the VAT Rates under OSS?

The applicable VAT rate depends on the country where your customer resides. Businesses must charge the correct VAT rate for each member state, which varies across the EU.

Is OSS VAT Mandatory?

No, registering for OSS is optional. However, it can greatly simplify VAT compliance if you sell to multiple EU countries.

Can Non-EU Businesses Use OSS?

Yes, non-EU businesses can use the Non-Union OSS for services provided to EU consumers or the IOSS for low-value goods imported into the EU.

Get Help From J.Dauman & Co to Fulfil Your Tax Obligations

Understanding OSS VAT and its implications for your business can be complex. At J.Dauman & Co, we specialise in helping businesses navigate VAT compliance with ease.

Why Work With Us?

Expertise in VAT registration and reporting.
Guidance on the IOSS and Union OSS schemes.
Support for claiming VAT refunds on imports.

If you want to simplify your VAT processes and focus on growing your business, contact our VAT accountants today for tailored advice and solutions.