Understanding the OSS Scheme Introduced on 1 July 2021
OSS Scheme starting in July 2021, two significant VAT schemes relating to sales to EU consumers (B2C) will influence the retail industry. These two approaches, however, are intended to accomplish slightly different results. This Import One Stop Shop (IOSS) system applies to sales of products that are situated outside of the EU at the time of sale and are intended for EU customers. This article is focusing on the other scheme: One Stop Shop (OSS).
One-Stop-Shop (OSS) / oss scheme
This oss scheme applies to sales of products under the value of £135/€150 that are sold to EU customers and are situated within the EU at the time of sale. The existing EU distance selling threshold restrictions are replaced by One Stop Shop. To be clear, distance selling thresholds and restrictions no longer apply to stock situated in the United Kingdom (GB), although a GB company can own stock in the EU and be subject to distance selling requirements.
Historical Situation
jigsaws UK is based in the United Kingdom and sells to EU customers (B2C) Jigsaws UK would charge UK VAT on sales to EU consumers under pre-Brexit distance selling rules, but if the value of sales to Italian consumers exceeded the €35,000 threshold, Jigsaws UK was required to register for VAT in Italy and begin charging Italian VAT on those sales, even if the stock was in the UK at the time of sale. Distance selling won’t apply to Jigsaws UK after Brexit; sales would be zero-rated exports, with the buyer responsible for import VAT. Jigsaws UK may also register for Import One Stop Shop (IOSS) and charge VAT based on the client’s location, however, this eliminates the need for the customer to pay for the products before they are delivered.
Core principles of One-Stop-Shop
- Thresholds
The €35,000 per member state distance selling threshold is replaced with a single €10,000 threshold for all EU member state sales. example 1st-
Jigsaws UK keeps goods at an Italian warehouse to service EU customers. Because it sells in Italy, Jigsaws UK will need an Italian VAT number (the place of supply of goods is where the goods are). Sales to EU customers will be subject to Italian VAT until total sales to all EU consumers reach €10,000, at which point Jigsaws UK will be required to register for OSS and charge the VAT rate according to the consumer’s location. A sale to a French customer will be subject to French VAT, whereas a sale to a Romanian customer will be subject to Romanian VAT.
This VAT is levied at the time of sale, the consumer pays, and the seller collects the VAT, which he or she then declares on the OSS VAT report. Keep in mind that OSS refers to stock kept in the EU that is marketed to consumers. If you are a UK company with solely UK goods and are registered for VAT in the EU as a result of the (old) distance selling laws, you can choose to deregister for EU VAT.
Schemes that are both unionized and non-unionized
The non-union program expands on the existing MOSS (Mini One Stop Shop) scheme to include other B2C services such as lodging, entrance to events, and land-related services, to name a few. MOSS was formerly only for digital sales to EU customers, and it has now been renamed Non-Union OSS.
The union plan covers intra-EU goods supply (i.e., products sold in Spain to customers in Portugal), as well as B2C digital services (formerly covered by MOSS) and other B2C services such as lodging and entrance to events.
Example 2-jigsaws UK offers stock in the United Kingdom and Italy, as well as a digital app for playing jigsaw puzzles on your phone. The VAT treatment under the new OSS is GB stock sold to EU consumers. Jigsaws UK registers for IOSS otherwise the sale will be zero-rated export/customer responsible for VAT. Italy stocks are used to serve clients in Italy, Germany, and Spain; they do not sell to anybody else in the EU. Italian VAT registration will be required for sales to Italians. Sales to Germany and Spain totalling more than €10,000 will necessitate a Union OSS registration.
The online app/digital game is a digital service provided to EU customers by a non-EU firm; hence, a Non-Union OSS VAT registration is required. Jigsaws UK, for example, will have a UK VAT registration, an Italian VAT registration, and OSS registrations in both the Union and non-Union. Who knew jigsaw puzzles could be so challenging?
We’ll look at the scenario of selling on an internet marketplace in a future post. That isn’t to suggest the regulations are difficult; rather, the new rules, which will take effect in July 2021, attempt to address a lot of concerns at once. What is simple for one company may be complicated for another.
