A New EU Tax Regulations: What OSS and IOSS mean to Your Store IOSS and OSS Means for Your Store

Jun 10, 2023

On July 1, new EU tax rules will come into effect to ensure that the European Union (EU) Value-Added Tax (VAT) VAT package for eCommerce is implemented. These changes represent a significant modification to the existing tax legislation that was intended to simplify procedures and administrative requirements for retailers. They will impact virtually every business-to-consumer (B2C) business that is that conducts cross-border eCommerce (often called "distance sellers") that trade with the EU.

EU merchants who have crossed a new threshold for the EU that is EUR10,000.00 will need to register for registration in all EU countries in which they conduct the taxable sales of business-to-consumer. However, they are able to make this registration via the newly-created One Stop Shop (OSS) system in their own country. This allows online sellers to submit a VAT return that is identical across the EU as well as to pay an all-in one tax settlement, which then gets dispersed to all the regions in which they sell.

We've highlighted some of the most significant adjustments in the following section. Always, we suggest consulting with a tax professional in order to make sure your company is following regulations and best practices.

Who are the people who will be affected?

The EU VAT eCommerce scheme affects EU retailers that exceed the EU-wide threshold of EUR10,000.00 and importers from outside the EU.

Merchants are able to utilize the One Stop Shop (OSS) filing system to submit an identical VAT return to all countries that are part of the EU in addition to file a VAT return for each country they ship to. for every EU destination that they deliver to.

The VAT tax rate is different across the world, with rates ranging between 17 percent in Luxembourg up to 27 percent in Hungary ( see the complete listing of rates) So, retailers should charge the VAT rate applicable to the delivery country for orders made from within the EU. This includes orders shipped through one of the fulfillment centers in the EU to an address in the EU.

What's changing?

What is it, and how is it used:

The program currently in place for selling distance allows businesses to avoid registering to be VAT registered within the nation in which they are selling B2C taxable supplies, as it is the case that the quantity of supplies do not surpass the minimum threshold required that applies to distance selling within a specific year. Companies can use the tax rates for local sales on these sales as if the sold goods never left the country that they sold them in. When the threshold has been reached within a particular nation, the business must sign up with VAT authorities, submit VAT returns and charge the local tax rate for the registration country for B2C sales.

Let us look at an instance of an German company that sells products in physical form to customers in Romania. As long as the German firm is able to meet the annual limit of Romanian sales of EUR25,305.00 The sales of the company will be tax deductible in Germany that is the standard German tax of 19 percent.

When the threshold has been reached and the threshold established at EUR25,306.00 When the threshold has been crossed, Romanian sales become tax-deductible within Romania and, therefore, must register there and charge tax at Romanian tax rate, which is 19%..

How it will work when the changes are in effect:

This July distance selling thresholds for particular nations will be eliminated in the EU as a New threshold for EUR10,000.00 will be established. After the threshold is reached the business would be required to join in states where they are able to create tax-deductible B2C products. However, they could opt to do this registration through the newly-created One Stop Shop system in the country in which they operate.

This would allow eCommerce merchants to submit one VAT tax return for the entire EU and to pay one tax payment which is then spread across all the nations in which they sell. The scheme is an extension of the existing small one Stop Shop (MOSS) scheme that is offered to digital service suppliers.

So that it's possible that the German physical goods dealer, who provides B2C taxable supplies for Romanian, Czech, and Polish private customers, does need not register within those three countries. Once they've reached the EU-wide threshold, they'll register to OSS in Germany and submit a single tax return, and make only one tax payment (instead instead of 3). However, regional German B2C transactions will need to be included on their local tax return along with the local VAT which will have to be paid.

What happens to sellers who aren't part of the EU? EU?

The VAT exemption that applies to the importation and use of items with a value less than EUR22.00 will be revoked. In consequence, all goods imported to the EU will be taxed at VAT. Sellers outside the EU have a zero threshold to register, which means that they have to register their very first B2C transaction.

To simplify VAT compliance for non-EU sellers, the Import One Stop Shop (IOSS)will be established. IOSS will allow single returns to businesses that decide to collect VAT at the point of sale when consignments are smaller than EUR150.00. If a company chooses to not register for IOSS VAT, it will be borne by the purchaser when importing goods from the EU. Consignments valued above EUR150.00 are subject to VAT on arrival.

IOSS could affect customs clearance with the possibility that import goods are processed faster. With some shipping providers when VAT is paid at time of sale, then the seller could indicate the IOSS number on the Commercial Invoice information for the shipping company in order to declaring customs.

Information for merchants that is useful

For more information on updating your tax settings, go to our tax documents.

If you are thinking of changing your tax settings, it is strongly recommended that you consult experts in tax law to ensure your tax settings are compliant with law.

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