EU: One-stop-shop (OSS) regime, VAT on remote sales made by e-commerce sellers and marketplaces

EU introduced reforms to VAT rules that will affect business-to-consumer e-commerce sellers and marketplaces as of 1 July 2021

Reforms to VAT rules that will affect B2C e-commerce sellers and marketplaces

The European Union (EU) introduced reforms to the value added tax (VAT) rules that will affect business-to-consumer (B2C) e-commerce sellers and marketplaces as of 1 July 2021. These changes will affect sellers that make sales via their own web shops and ship goods to EU consumers (B2C sales) from warehouses located in the EU.

Background

Currently, sellers using warehouses in the EU are to register for VAT purposes in the EU Member State where inventories are held. If these sellers ship goods from a warehouse in one EU country to consumers in another EU country (remote or distance sales), the sellers can report these sales using their VAT registration and rate of the country of dispatch, provided that the sales do not exceed the annual “distance sales threshold” in the country of arrival.

Every EU country sets a remote or distance sales threshold and if sellers exceed that threshold, they must register for VAT in that country and charge VAT using the VAT rate of the country of arrival. The current distance sales threshold in all EU countries is approximately €35,000 (or the equivalent of a national currency)—except Germany, Luxembourg, and the Netherlands use a threshold set at €100,000.

Removal of remote or distance sales threshold

As of 1 July 2021, the annual remote or distance sales threshold will be removed. By default, VAT on intra-EU distance sales will be charged at the rate of the country of arrival. This means a seller selling into all EU jurisdictions would potentially need to register for VAT in all 27 EU Member States to account for the VAT on intra-EU distance sales.

One-stop-shop (OSS) regime

In order to simplify the VAT reporting, the EU will introduce a new reporting system—the OSS regime.

  • A seller can choose to register for an OSS scheme in one EU country (the country of identification) and can then submit quarterly OSS VAT returns to declare VAT on intra-EU distance sales to all 27 EU Member States.
  • The seller will make quarterly VAT payments to the country of identification.
  • The tax authorities in the country of identification will distribute the VAT remitted to the other 26 EU Member States in accordance with the OSS VAT returns submitted.

Sellers still need to keep their VAT registrations in all the EU countries where inventories are held, in order to account for VAT on transactions other than intra-EU remote or distances sales (e.g., purchases including imports and domestic sales).

Read an April 2021 report prepared by the KPMG member firm in Switzerland

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