VAT OSS – One Stop Shop
The VAT OSS Simplified Procedure – One Stop Shop, which came into force on July 1st 2021, is an alternative method of VAT settlement for distance sales of goods for European Union entrepreneurs selling remotely to individual customers within the EU. The main principle of this system, is that declarations and output tax are submitted to the Tax Office in the country of the company’s headquarters, and it will be the Tax Authorities of that country that will provide the amount to local Tax Offices in other EU countries. It will be possible to settle all transactions in a single return in Euro currency, and the returns themselves will be filed quarterly.
The distance sales threshold has been lowered to €10,000 or PLN 42,000 as of July 1st 2021. This is the combined total of the distance sales limit to all European Union countries. Once this limit is exceeded, with no local VAT numbers in other EU countries and distance sales, invoices must be issued with the destination country’s VAT rate and these sales must be reported in the OSS VAT return.
The project was passed by the Parliament with no changes to European law, and it consists primarily of differentiating VAT accounting according to the business model.
First model
If you own a warehouse (own, Amazon, rented, other) in an EU country, you cannot use the simplified model for VAT settlements in that country, and obtaining a local VAT number and periodic declarations are still required. When owning a warehouse, full registration and filing of declarations in the country of supply applies to you as previously.
Second model
If your sales are limited to distance sales only from your country of residence within the EU and you do not have warehouses in another country, i.e. the goods are shipped directly to the individual customer, then you can act in two ways:
- If you have full registration in EU countries then you don’t have to opt out, this is a voluntary registration for VAT. Your business will continue to operate as before, and sales will be made with the VAT number of the country of supply. In this solution, invoices must still be issued with the local VAT number and local VAT rates.
- If you want to use the OSS model, and you already have VAT registration in other countries, then you will have to deregister from VAT there and register for OSS in the country of establishment. In this case, invoices will be issued with the VAT number of the country of residence and with local VAT rates in line with those of the consumer countries.
Third model
If you have warehouses in some countries, and you sell to others by mail order from the EU territory, there is a possibility of a hybrid solution, i.e. maintaining active VAT numbers in countries with a warehouse, and in countries of remote sales accounting under the OSS system (reporting to the Fiscal of the country of residence). In this solution, invoices to customers in countries where you have a warehouse should be issued with the local VAT number and rates, and to mail-order customers in countries where you only sell remotely, invoices with the TIN of the country of residence but local rates.
Importantly, the above does not apply to B2B transactions, which still need to be accounted for in domestic declarations as before.