The new rules, effective from 1 July 2021, extend the scope of the special administrative point (now OSS - One Stop Shop) which allows service providers and online shops making “distance sales of goods” to non-business entities (consumers) (“B2C”) to declare and pay VAT due in different EU Member States, in only one country where the provider identifies itself in the OSS system. In an elegant way, individual local VAT registrations can be replaced by a single registration. The OSS system is being implemented in three schemes:
- One Stop Shop (OSS) – Union Scheme
- One Stop Shop (OSS) – Non-Union Scheme
- Import One Stop Shop (IOSS) – Import Scheme
OSS – Union Scheme – includes distance sales of goods to other EU Member States and all cross-border services supplied to non-business entities with a place of supply in other EU Member States.
The amendment to the VAT Directive changes the rules on the dispatch of goods within the EU, introducing the new concept of “distance sales of goods” instead of “dispatch of goods” and setting new rules for determining the place of supply, i.e., determining in which Member State the taxation takes place. From 1 July 2021, individual thresholds for determining the place of supply for the dispatch of goods, which Member States could choose to set at €35,000 or €100,000, are cancelled and only one common threshold of €10,000 is introduced for distance sales and the so called TBE services (i.e., telecommunications services, radio and television broadcasting services and electronically supplied services to non-business persons ). If the threshold is exceeded, the place of supply shall be in the Member State of the recipient of the goods or services. In this case, the provider may use the simplified OSS system.
The scope of the special scheme is further extended to all cross-border services provided to non-business entities where the place of supply of the service is in another EU Member State. The option to tax and pay VAT in only one EU Member State will now apply to e.g. accommodation services, construction and renovation works, taxis, restaurant services, admission to educational, cultural and sporting events or transport of goods, etc.
The advantage of the OSS is certainly the payment of VAT in only one EU Member State on a quarterly basis and the elimination of local registration obligations. However, it should be noted that it will not be possible to claim a deduction under the OSS, which may affect the benefit of registering for this scheme. As VAT is settled under the OSS scheme for supplies taxable in other Member States, it must also be remembered that the rules of the destination EU Member States, such as tax rates, rules for issuing invoices, tax corrections, etc., must also be respected under the OSS scheme.
OSS – Non-Union Scheme – covers all types of cross-border services provided by sellers not established in the EU to a non-business entity in the EU.
Possibility of using the simplified OSS scheme for suppliers providing services with a place of supply in the EU to non-business customers.
IOSS - Import Scheme – includes distance sales of goods imported from third countries, the actual value of which does not exceed €150 and the sale is made using an electronic interface operated by an EU taxable person and facilitating the sale.
An electronic interface is e.g., an electronic marketplace, digital platform, portal, etc. operated by a third party. From July this year, the operator of the electronic interface must watch for a particular status in which it acts for each sale and then determine the obligations that may apply to it.
From 1 July 2021, the Directive removes the VAT exemption for imports of goods into the EU with a value not exceeding €22. As a result, all goods imported into the EU are now subject to VAT. Where the sale of these goods to a non-business customer in the EU is facilitated through an electronic interface operated by a taxable person in the EU, the sale is deemed to have been made by a person facilitating the supply of the goods (i.e., the digital platform, the operator of the electronic interface) and not by the actual supplier. The operator of the electronic interface is then obliged to declare and pay VAT. This is where it can take advantage of the simplified IOSS scheme and thus eliminate registrations in multiple Member States.
For the sake of completeness, let us add that the implementation of the Directive is still in the legislative process in the Czech Republic, and therefore the imports of goods with a place of supply in the Czech Republic, the aggregate value of which does not exceed EUR 22, are still exempt from VAT, but only until the day preceding the effective date of the amendment to the VAT Act.
If a supplier with a registered office or establishment in the EU sells goods through the platform, the new rules will, in most cases, subject the platform operator to a new obligation to keep records of all transactions made through the platform operated by it, which must be kept for 10 years.