It’s been just over 13 months since the introduction of the EU’s E-Commerce VAT Package in the guise of the One Stop Shop (OSS) and of the Import One Stop Shop (IOSS). After what has widely been hailed as a success by the European Commission (EC), what, if any, changes can we expect going forward?
The EC has recently issued the final report of its consultation on ‘VAT In the Digital Age’. Within this they discuss various potential changes for the use of OSS, in what they call the ‘Single Place of VAT Registration’ in the EU, and IOSS.
Potential changes to the One Stop Shop (OSS)
The first option would be to continue with the current VAT system introduced on 1 July 2021 with some minor amendments and potentially additional guidance or quick fixes to improve the implementation and use of OSS.
The second option would be to extend OSS to also include the domestic B2C supplies of goods, including a small change to the scope of OSS to cover this.
The third option would be to extend this even further by not only including domestic B2C supplies of goods but also extending to B2B supplies by non-established businesses. Due to the complexity of this option, the EC have broken this down into three possible sub-options:
- Extending the use of OSS to intra-EU supplies and intra-EU acquisitions of goods, in situations where these relate to the first leg of the B2B2C transactions that are increasingly important in e-commerce, particularly for supplies facilitated by electronic platforms.
- Combining with option one above to increase coverage of OSS to all B2B supplies of goods and services, while leaving the current VAT refund mechanisms (via the EU VAT refund system and 13th VAT Directive (86/560/EEC)) in place.
- Having the same coverage as option two above, while also introducing a deduction mechanism into OSS, thereby allowing businesses to use it to claim back the deductible input VAT incurred in a Member State where they’re not established.
Finally, the fourth option for OSS changes would be an extension of OSS as in option two above plus the introduction of a mandatory reverse charge for B2B supplies by non-established persons. This would replace the current extended-reverse charge rules under article 194 of the European VAT Directive and would require harmonising the implementation of these rules in all EU Member States.
Potential changes to the Import One Stop Shop (IOSS)
In terms of the options for changes to IOSS, the first option would be the same as the proposed OSS option, that is to continue as is with possible minor amendments if required.
The second option discussed is the removal of the current €150 threshold as well as the custom duties threshold. This could be beneficial for suppliers operating systems for orders below and above €150.
The third option is making IOSS mandatory, which could be for either:
- All deemed suppliers; or
- Taxable persons distance selling into the EU over a certain threshold (an amount of €10 000 was provided); or
- All taxable persons making eligible distance sales of goods into the EU.
This option could be implemented on its own or in combination with IOSS option two above and possible OSS options.
Whichever way the EC decides to extend OSS and IOSS, a thorough review of all options will be needed as a simplification could result in a more complex system. At this stage it may be easier to introduce some of the simpler options, such as including domestic transactions for OSS and extending the threshold for IOSS and making this mandatory.
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