VAT in the Digital Age: A Single EU VAT Registration

Patrick Klosek
February 20, 2022

In 2020, the European Commission (EC) adopted a four-year plan to develop a fairer and simpler taxation framework. The Action Plan aspires to tighten up the tax system, ensure that digital platforms are made to follow transparency rules and utilise data better, reducing tax fraud and evasion.

In 2021, the Commission implemented e-commerce changes – another step in the modernisation process. Beginning in July of 2021, the Mini One Stop Shop (MOSS) system was expanded to the One Stop Shop (OSS) and Import One Stop Shop (IOSS).

The implementation of OSS expanded the use of the union and non-union schemes. This allows European and non-European business-to-consumer sellers of digital services and goods to simplify their reporting practices. Meanwhile, IOSS allows businesses to register and import goods into the EU with a value not exceeding €150.

In 2022, there are plans to release legislation under the “VAT in the digital age” Action Plan. Much like its predecessors in 2020 and 2021, the core purpose of this plan is to tackle the issue of fraud and improve the way businesses engage with the VAT system. The Commission has announced three points it seeks to address in its legislation:

  • How VAT treats the platform economy
  • E-invoicing and VAT reporting obligations
  • Single EU VAT registration

Specifically, one point of interest is the single EU VAT registration point, which aims to facilitate compliance among Member States. With this, the European Commission is requesting feedback on how businesses think the I/OSS implementation has gone and on other potential legislative options for the future, including:

  • Extension of OSS to:
    • Cover all B2C supplies of goods and services by non-established suppliers
    • Enable intra-Community supplies and acquisitions of goods, thereby avoiding VAT registration when transferring own goods cross-border
    • Include B2B supplies of goods and services while leaving in place the current VAT refund mechanism
    • Include B2B supplies of goods and services while also introducing a deduction mechanism for OSS
  • Reverse charge made available for all B2B supplies carried out by non-established suppliers
  • Removing the €150 threshold for IOSS so that it applies to distance sales of goods of any value
  • Making IOSS mandatory for:
    • All distance sales of imported goods
    • All distance sales of imported goods above an EU turnover threshold (e.g. €10,000)
    • Marketplaces only

The European Commission began a period of public consultation on 21 January regarding adapting VAT rules in a digital economic landscape. They are seeking feedback on how the EC should adapt VAT tax processes and how they can incorporate technology to solve principal issues in tax, such as fraud and the complexity of its systems. The Commission is accepting feedback in this public consultation period until 15 April 2022 – submissions can be made here.

Sovos will continue to monitor the development of this legislation throughout the year as more information about its structure and impact is released, as these changes are sure to be impactful upon the European VAT landscape.

Take Action

Need more information? Sovos’ VAT Managed Services provide a full IOSS and OSS service for your business. Contact our team to learn more.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Patrick Klosek

Patrick Klosek is a Junior Regulatory Counsel at Sovos. As a member of the Regulatory Analysis team, he focuses on the analysis of emergent VAT and GST changes across the globe. Patrick received his combined B.A. in Economics & International Affairs from Northeastern University and his J.D. from Suffolk University Law School, and is a member of the Massachusetts Bar.
Share This Post

North America ShipCompliant
September 29, 2022
5 Essential Questions to Ask When Searching for a Compliance Partner

Managing beverage alcohol compliance and tax in a rapidly evolving regulatory environment takes expertise and a relentless attention to detail. Odds are, you didn’t get into the industry to spend countless hours each week pouring over mandate changes, tax laws and regulatory updates. Partnering with a compliance software company is an easy way to mitigate […]

E-Invoicing Compliance EMEA
September 27, 2022
Billing SAF-T in Portugal: A New Obligation for Non-Residents

Portugal’s state budget entered into force on 27 June 2022 after protracted negotiations. The budget contained an interesting provision: the obligation to present invoice details to the tax authorities was extended to all VAT-registered taxpayers including non-resident taxpayers, who had long been exempt from this obligation. VAT-registered non-residents now have three options for communicating invoice […]

EMEA IPT
September 27, 2022
Understanding Insurance Premium Tax Prepayments in Italy

Continuing our IPT prepayment series, we take a look at Italy’s requirements. In previous articles we have looked at Belgium, Austria, and Hungary. All insurers authorised to write business under the Italian regime have a legal obligation to make an advance annual payment for the following year. What is the prepayment rate in Italy? The […]

EMEA VAT & Fiscal Reporting
September 23, 2022
Virtual Events and the Risk of Double Taxation

When organising a virtual event, it’s important to determine how this supply will be treated for VAT purposes. We have previously discussed VAT rules and place of supply for virtual events, this blog will discuss the potential future changes to the VAT position for EU Member States. Current VAT position for virtual events in Europe […]

Brazil E-Invoicing Compliance EMEA
September 22, 2022
Brazil Introduces National Standard for the Service e-Invoice

Brazil is known for its highly complex continuous transaction controls (CTC) e-invoicing system. As well as keeping up with daily legislative changes in its 26 states and the Federal District, the country has over 5,000 municipalities with different standards for e-invoicing. The tax levied on consumption of services (ISSQN – Imposto Sobre Serviços de Qualquer […]