The New EU Tax Regulations: What OSS and IOSS means for your store -
In 2021, which is July 1 the new EU tax legislation will come into force should they are implemented. European Union (EU) Value-Added Tax (VAT) program for eCommerce is implemented. The changes are a major modification to the existing tax legislation that is intended to simplify processes and administration for merchants. The changes will affect virtually all consumer-to-business (B2C) firm that conducts cross-border eCommerce (often referred to as "distance sellers") within the EU.
EU merchants who've crossed a new threshold for the EU that is EUR10,000.00 are required to register in the entire EU countries where they make tax-deductible sales to consumers from businesses. They may choose to do so via the new One Stop Shop (OSS) program in their home country. The OSS program allows eCommerce sellers to submit an all-inclusive VAT return for all the EU and to pay one tax and distribute it to all regions where they sell their products.
Here are a few key changes listed below. We recommend that you speak with an accountant to ensure your business adheres to the latest regulations along with the top practices.
Who will be impacted?
The EU VAT eCommerce program affects EU retailers that exceed an EU-wide threshold of EUR10,000.00 as well as non-EU businesses exporting goods to the EU.
Merchants are able to make their use of One Stop Shop (OSS) filing system that allows them to file an identical VAT return for each country within the EU and to file an annual VAT return for each EU nation that they send their merchandise to.
The rate of VAT varies across countries and can vary between 17% for Luxembourg in Luxembourg and 27% in Hungary ( see the complete list of rates) Therefore, merchants will want to charge the applicable VAT rate to the delivery country when placing orders in the EU. The VAT rate is applicable to purchases made through a fulfillment center in the EU to any location within the EU.
What's changing?
HTML1 How it works
The current scheme for distance selling permits businesses to not registration with VAT authorities within countries where they are making B2C tax-deductible supplies as in the event that the amount of the supplies do not exceed the threshold of distance selling during a certain year. Businesses can apply their tax rates local to these sales, as if sold items never left their countries. If the threshold is reached in a particular country, the company has to register and submit VAT returns and then impose the tax rate that is local from the country of registration in the case of B2C sales.
Let's consider the case of the case of a German company offering physical goods to private customers in Romania. When the German firm is able to reach the annual threshold for Romanian revenue of EUR25,305.00 and above, they are taxable to Germany and are subject to a typical German tax rate of 19 percent.
After the threshold has been achieved with EUR25,306.00 The Romanian sales will be taxed in Romania and are required to register in Romania and be charged the Romanian standard VAT rate of 19 1 %.
What happens following the change:
The 1st day of July is the day when distance selling thresholds for particular countries will be abolished within the EU with a brand higher threshold, of EUR10,000.00 will soon be established. When the threshold is met, firms will need to join the states where they are able to make tax-deductible B2C supplies, but they may opt to sign up using the newly-created One Stop Shop system in their country of residence.
This will allow sellers of eCommerce to submit a single VAT return across the entire EU and receive a single tax reimbursement to each of the countries they supply. This program will work as a continuation of the current Mini one Stop Shop (MOSS) scheme that is available to digital service companies.
Therefore, the German physical goods seller who provides B2C tax-exempt supplies to Romanian, Czech, and Polish private customers, would be able to do so without registering in these three countries. If they have met the threshold for EU-wide registration and are registered for OSS in Germany, file one return, and then make a single tax payment (instead of three). However, local German B2C sales will have to be recorded on their tax return for the region along with local VAT is required to be to be paid.
What happens to sellers who aren't from EU? EU?
The VAT exemption that applies to the importation and use of products with a price less than EUR22.00 can be cancelled. At the end of the day, all items that are brought into EU are affected by VAT. Non-EU sellers have a nonexistent registration threshold which means they must sign up with the very initial B2C transaction.
To facilitate VAT compliance for non-EU sellers, the Import One Stop Shop (IOSS)will be established. IOSS permits single tax return filing for businesses that decide to charge VAT at the point of sale on consignments below EUR150.00. If a company chooses not to sign up for IOSS VAT, the IOSS VAT scheme, tax will be billed to the purchaser upon the import of goods from the EU. All goods worth more than EUR150.00 are subject to VAT at the time of their import.
IOSS could be a factor in clearance for customs with the potential for processing imports quicker. For some shipping companies where VAT is assessed at the point of sale, vendors are able to supply the IOSS number in the Commercial Invoice details to the shipping provider for an official declaration of customs.
Important information for retailers
For more information about how to update your tax preferences, check out our documents.
When making changes to your tax setting, it is highly recommended that you consult an expert tax advisor to make sure that the rules are adhered to.
Article was first seen on here