The New EU Tax Regulations: What OSS and IOSS is for your store IOSS and OSS is a good idea for your Store
The 1st of July, 2021. New EU tax laws will go into force in the event the it is the European Union (EU) Value-Added Tax (VAT) eCommerce program becomes effective. The new rules are a huge overhaul of the tax system and are designed to streamline the processes for retail stores and their management. The changes affect nearly every business-to-consumer (B2C) company that operates cross-border eCommerce (often referred to as "distance sellers") within the EU.
EU retailers that exceed the new threshold for the EU which is EUR10,000.00 must register for registration in all EU countries where they conduct the taxable sales of business to consumer. They can opt to register using the new One Stop Shop (OSS) program for their home country. This allows eCommerce merchants to make an identical VAT tax payment for all of the EU and also to receive an identical tax-related payment across the different countries they perform the sales.
Here are a few key modifications in the following paragraphs. Always consult a tax professional in order to be sure your business is in compliance with the most current regulations and the best practice.
Who are the people who will be affected?
The EU VAT eCommerce program impacts EU retailers that exceed an all-European limit of EUR10,000.00, and non-EU merchants exporting goods to the EU.
Merchants are able to use to use the One Stop Shop (OSS) processing system. It allows them to file one VAT return to all of the EU as well as separately submit an individual VAT return for every EU country that they ship to.
The rates of VAT vary in different countries. Rates vary between 17% in Luxembourg and up to 27% in Hungary ( see the full list of rates) Therefore, sellers will want to charge the applicable VAT rate to the shipping country used by the customer for orders from within the EU. This includes orders delivered from fulfillment centers located in the EU and delivered to a destination in the EU.
What's changing?
The way it works:
The present scheme for distance selling permits businesses to not register to be VAT registered in a country where they offer B2C products which are tax-deductible provided that the total amount of these supplies does not surpass the amount that is allowed for distance selling in a given year. Businesses can apply their tax rates local to the sales like if products sold never left the country in which they were sold. When the threshold has been crossed in the country that the products originated in, businesses must register and file VAT returns, and apply the tax rate local to of the jurisdiction of the registration for B2C sales.
Take the example of an example of a German company that sells physical items to consumers in Romania. If the German company is able to meet the threshold for annual Romanian earnings in the amount of EUR25,305.00 the sales will be tax-deductible to Germany and are covered by the normal German VAT rate of 19 percent.
After the threshold has been crossed at EUR25,306.00 When the threshold has been crossed, Romanian sales become tax-deductible within Romania and must register there and charge the Romanian normal VAT rate of 191 %.
How will it work after the change is in the process:
The 1st day of July is the day that the thresholds for selling products via distance in specific countries will disappear within the EU with a brand New threshold for distance selling of EUR10,000.00 is set to be established. When it's reached, businesses will be required to sign up in the states in order to create tax-deductible B2C products. However, they can decide to do this through the recently-launched One Stop Shop system in the nation they reside in.
It allows eCommerce businesses to submit one VAT return across the entire EU and also make one tax payment, which is then distributed to all countries where they make supplies. This program will be an extension of the current Mini One Stop Shop (MOSS) scheme that is available for digital service providers.
Therefore, a German physical goods seller who creates B2C taxable supplies for Romanian, Czech, and Polish private customers, will be allowed to operate without registration in these three countries. After they have crossed the EU-wide threshold and are recognized as OSS for OSS in Germany and then file one tax return and then pay one tax (instead instead of 3). But, their domestic German B2C sales will still need to be reported on their tax return to their local region as well as local VAT mandatory to pay.
What happens to sellers who aren't from EU? EU?
The VAT exemption for the use and/or importation of items with a value of not more than EUR22.00 will be removed. The result is that all items that are imported into the EU will be subject to VAT. Non-EU sellers have an insufficient registration requirement this means they must to join when they make their first B2C transaction.
To facilitate VAT compliance for retailers outside of the EU, the Import One Stop Shop (IOSS)will be set up. IOSS will allow single filing of tax returns to businesses that opt to apply VAT at the time of sale for consignments smaller than EUR150.00. If a business chooses to not sign up for IOSS VAT, it must be charged by the buyer upon importing products from the EU. Goods valued in excess of EUR150.00 are subject to VAT upon arrival.
IOSS may also influence customs clearance and has potential in processing imports more quickly. In the case of certain shipping companies, when VAT is calculated on the spot of purchase, sellers may supply the IOSS code in the commercial invoice data to the shipping provider for the purpose of declaring the customs.
The information for retailers is useful
To learn more about updating the tax settings go to our tax documentation.
In the event of making any modifications to your tax preferences, it is highly recommended to contact a tax expert to verify that all regulations are being in compliance.
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