Following the publication of various circulars by the Federal Ministry of Finance in Germany in 2021, rules on the taxation of guarantee commitments were made effective 1 January 2023. This blog explains how this affects insurers and other suppliers.
Scope of the rules for guarantee commitments
The Ministry of Finance published its initial circular in May 2021. This was in response to a Federal Fiscal Court judgment. It concerned a seller of motor vehicles providing a guarantee to buyers beyond the vehicle’s warranty.
In these circumstances, the circular confirmed that the guarantee is not an ancillary service to vehicle delivery but is deemed to be an insurance benefit. As such, it would attract IPT instead of VAT – unless the guarantee is considered a full maintenance contract.
The circular did not prompt immediate concern within the insurance sector. Markets outside the motor vehicle industry weren’t concerned either. The presumption was that it was limited to the specific context of the motor vehicle industry.
Matters changed the following month. The Ministry of Finance clarified that the tax principles it outlined in fact applied to all industries. As a result, the scope of these rules became potentially limitless in Germany. All guarantees provided as additional products to goods or services sold are now within the scope of the application of IPT.
The clarification could impact industries like those organisations selling electrical items and household appliances.
Effect on insurers and other suppliers
The effect on traditional insurance companies should be relatively limited as they do not usually provide guarantees as part of the sales of goods and services. There could arguably be a significant impact on other suppliers that do provide such guarantees.
First and foremost, there is a potential increase in the cost of providing the guarantees caused by the application of IPT. Unlike input VAT, a supplier cannot deduct IPT from its taxable income – it must either increase prices to compensate or accept a less favourable profit margin.
Any companies that purchase the guarantees cannot reclaim the IPT either, as they can do with VAT. The standard IPT rate of 19% in Germany is high compared to most European countries. This exacerbates these issues.
There are also practical considerations to bear in mind for suppliers obliged to settle IPT with the tax authority. They are presumably required to be registered for IPT purposes like insurers, although the Ministry of Finance has not formally confirmed this.
Perhaps more difficult is the issue of licensing. The Ministry of Finance circulars focus on taxation, leaving it unclear whether other suppliers are now required to obtain a license to write insurance under German regulatory law.
The European Union is a collective but its Member States have their own rules and nuances where VAT is involved. Knowing what rules are at play is essential when trading in the EU, and that’s where Sovos’ EU VAT Buster comes in.
Each Member State has its VAT threshold for sales. Though, collectively, things changed when the EU VAT Reform came into force. Bookmark this blog so you always have the key facts available when dealing with EU VAT.
What is the VAT registration threshold for EU countries?
For intra-EU B2C supplies, the VAT registration threshold in the EU changed on 1 July 2021. The EU introduced a new lower threshold of €10,000 for businesses established in the region, while a threshold does not govern those outside the region.
For European businesses, that threshold applies annually and is related to all sales in the EU. There is no revenue threshold for non-European companies, and they must be VAT registered in all Member States they sell within.
For other activities, many EU Member States have domestic supplies for established companies, whereas in most instances non-established companies do not benefit from any threshold.
The table below highlights a selection of EU Member States and the VAT number format for the country.
VAT by Country EU
The below table shows VAT details for several countries. The VAT rates were last updated on 17 February 2023 and include the main reduced rates (countries may also have zero rates – read our blog to better understand how VAT works between European countries).
For more information, including relevant data on additional countries, speak to our expert team.
Format: Nine characters. Includes one or two alphabetical characters (first or last or first and last).
Switzerland (non-EU)
7.7%
2.5%, 3.7%
Format: Nine characters, ends with MWST/TVA/IVA.
Example: CHE 123.456.789 MWST.
United Kingdom (non-EU)
20%
5%
Format: Nine characters.
Example: GB 123 4567 89.
Common terms: Explained
EU VAT is a vast topic, especially considering each country within the union has its own nuances. As such, many questions are asked of us regarding it. Here are some of the most common phrases you may encounter, as well as some frequently asked questions – and the answers.
VAT Destination Principle
The Destination Principle is a concept which allows for VAT to be retained by the country where the taxed product is being consumed. It’s applied to the Goods and Services Tax in India, and on many EU supplies.
VAT Origin Principle
The VAT Origin Principle is a concept which requires that the applicable VAT rate for a transaction is determined by the Member State where the seller is based.
Union OSS
The Union OSS (One Stop Shop) is a scheme for intra-EU business-to-consumer supplies of goods and services. It was introduced in July 2021.
Non-Union OSS
The Non-Union OSS (One Stop Shop) is a scheme for companies that are not established in the EU. It allows them to register and pay VAT for all business-to-consumer supplies of services in a single EU Member State. It was extended from the previous Mini One Stop Shop (MOSS) in July 2021.
VAT intermediary
All goods imported into the EU are subject to VAT. Businesses selling imported goods under EUR 150 can utilise IOSS (Import One Stop Shop) to simplify their VAT Compliance. To obtain an IOSS VAT registration, most non-EU companies need to appoint an intermediary – such as Sovos.
Deemed Suppliers
Marketplaces may become the deemed supplier of some business-to-consumer transactions when they cross borders, taking on VAT obligations. This means that a marketplace would gain responsibility for collecting and reporting VAT from the consumer.
VAT thresholds
To stay compliant with tax regulations, companies need to know the varying VAT thresholds of the EU Member States. In July 2021, the EU introduced a universal distance selling threshold of €10,000. For other activities, many EU Member States have domestic supplies for established companies, whereas in most instances non-established companies do not benefit from a threshold.
Cross-border supplies
Cross-border supplies involve goods being transported from one country to another. In some cases, goods may cross multiple borders on the journey from the supplier to the final destination of sale. When dealing with cross-border supplies, you may create a requirement to register for VAT.
Customs charges
There are no customs charges when goods are transported from one EU Member State to another. There are customs charges for goods originating outside the EU. Such charges are generated from customs controls at borders and are dependent on a specific set of rules.
Import duties
In the EU, Import duty is tax payable based on the value of imported goods and can include VAT and customs duties.
Frequently Asked Questions
Which EU country has the highest VAT?
Hungary has the highest standard VAT rate of any European country, sitting at 27%. Croatia, Denmark, and Sweden are joint-second at 25%.
Which EU country has the lowest VAT rate?
Luxembourg has the lowest standard VAT in the EU at 16% for 2023, though this will return to 17% in 2024. No country can charge a standard VAT rate below 15%.
What is the minimum standard rate of VAT applicable in the EU?
No EU Member State can charge under 15% as a standard VAT rate. Luxembourg has the lowest standard rate among the Member States at 16% (albeit temporarily).
Is VAT the same in all EU countries?
Although the European Union has somewhat created a uniform tax protocol, each EU Member State has its own VAT rates.
Do I pay VAT on EU purchases?
If you buy or receive goods for business purposes from another country in the EU, you must pay VAT on the transaction at the rate dictated by the type and place of supply.
What is EU VAT threshold?
Businesses need to know the unique VAT threshold of the EU Member States. As of July 2021, the VAT threshold for distance selling in countries in the EU is €10,000. For other activities, many Member States have domestic supplies for established companies – though, typically, a threshold is not applicable for non-established companies.
Do I need to register for VAT in the EU?
VAT registration is applicable for non-resident companies to trade in a country, with specific requirements outlined by the EU and individual tax authorities.
The VAT in the Digital Age (ViDA) package has been officially adopted and will substantially change how trade within the EU is conducted and reported.
The new rules will ultimately digitize the European VAT system. Details regarding the changes may be complex. This guide will help you:
Keep track of the latest updates
Understand the potential impacts
Evaluate and benefit from these changes
What is VAT in the Digital Age?
Simply put, ViDA is a new set of rules that will enable EU countries to use technology to improve the current VAT system and better prevent fraud. Its implementation will bring significant changes to how you operate in these countries.
With ViDA’s official adoption, businesses operating in the EU can start to have a clearer picture of the upcoming changes and their impact on everything from compliance costs to technology requirements. Companies are diving into the details to prepare and adapt to this new tax landscape.
To assist your business in navigating the challenges surrounding VAT in the Digital Age, Sovos has created this HUB, which will serve as your comprehensive resource for everything ViDA. Bookmark this page and stay up to date.
We will be maintaining and updating this HUB frequently as new information and assets become available.
The EU Commission first proposed the VAT in the Digital Age plan in January 2022. At that point, they issued a call for feedback, which ended in May 2022.
The Commission adopted the proposal on 8 December 2022 and issued a follow-up feedback period that ran until April 2023.
On 5 November 2024, during the Economic and Financial Affairs Council (ECOFIN) meeting, Member States unanimously agreed to approve the ViDA package.
Due to the extensive scope of changes, the proposal was forwarded to the European Parliament and approved on 12 February 2025.
The proposal headed back to the Council of the EU for the final green light. Finally, on 11 March 2025, ViDA was officially adopted by the EU, 27 months after it was initially proposed.
The new rules took effect on 14 April 2025, the 20th day following its publication in the Official Journal of the EU, with Member States required to transpose the directive into national law.
While many measures will come into effect only a few years from now, some are effective immediately, such as Member States’ right to introduce mandatory domestic electronic invoicing without needing prior authorization from the EU.
The adopted changes will impact businesses from 2025 through 2035.
VAT in the Digital Age for digital reporting and e-invoicing
Mandatory e-invoicing and Digital Reporting Requirements (DRR) will be introduced for all cross-border B2B transactions throughout the EU. This means that all suppliers and customers will need to submit intra-community cross-border data to their local tax administration in real-time and near real-time after e-invoice issuance and receipt. Each tax authority will channel the data to a central database.
Some changes take effect as of ViDA’s approval on 12 March 2025.
The EU has adopted changes that will reduce the VAT compliance burden for companies that conduct business internationally. This measure will allow them to only register once across all EU countries reducing the burden and administrative issues of having to file in each country independently.
The increasing popularity of the platform economy business model has created a new set of challenges for the VAT system. The ‘VAT treatment of the platform economy’ only relates to the supply of certain services via a platform.
All invoicing and related processes will be impacted. This includes any accounts payable and accounts receivable processes and the associated information systems that support them. You can read the full Q&A with Christiaan van der Valk on how businesses will be impacted here.
How Sovos can help you with ViDA
ViDA, at its core, is about data. The EU is saying that after the fact tax filings that only provide insight into aggregated data for a month or longer are no longer going to be enough.
By leveraging technology, tax administrations can now receive authenticated transaction data detailing every sale and purchase straight from companies’ source systems. Tax is now an always on function, not an afterthought. For more information, please speak with one of our experts.
ViDA is an EU initiative designed to modernize and simplify the VAT system across the block, aligning it with the growth of the digital economy, technological advancements, and improving fraud prevention.
To modernize the EU VAT system, protect revenue and shrink the VAT gap which has been a major issue of economic concern for all countries within the EU. The 2024 Report on the VAT Gap released by the European Commission estimates that EU Member States lost €89.3 billion in Value-Added Tax (VAT) revenues in 2022.
KPMG has estimated that the overall savings in administrative cost currently borne by taxpayers is €51 billion over a 10-year period between 2023 and 2032. The total cost of implementation for businesses and national administrations is estimated to be €13.5 billion for the same period.
The EU Commission estimates that moving to e-invoicing will help reduce VAT fraud by up to €11 billion a year and bring down administrative and compliance costs for EU traders by over €4.1 billion per year over the next ten years.
From 2030, cross-border transactions between EU countries will be subject to mandatory e-invoicing and new real-time reporting with ViDA (Digital Reporting Requirements – DRR), replacing the current requirements for a recapitulative statement.
Additionally, ViDA will build on the already existing ‘VAT One Stop Shop’ model. This will allow businesses selling to consumers in other Member States to register only once for the entire EU, even when moving stock to another Member State for future direct sales to consumers.
Businesses will be able to fulfil their VAT obligations via a single online portal in one single language. Estimates show that this move could save businesses, especially SMEs, some €8.7bn in registration and administrative costs over ten years.
How and when is ViDA likely to impact my business?
Where do businesses go from here?
The EU Commission has proposed the VAT in the Digital Age plan for fair and simple taxation. It emphasizes how tax authorities can use technology to fight tax fraud and benefit businesses while evaluating whether current VAT rules are appropriate for business in the digital age.
To help you keep pace with all of the rule changes being proposed and evaluated, Sovos has put together this eBook in conjunction with our regulatory experts. Inside you will learn about the key elements of ViDA, why it’s being proposed and its potential impacts on your business.
This VAT in the Digital Age eBook includes a deeper dive into the technology implications of ViDA and why technology is front and center of the discussion. It also includes a Q&A with world renowned regulatory expert, Christiaan van der Valk who breaks down some of the most frequently asked questions to date.
This eBook is intended to provide you with a high-level overview of all things ViDA. As new developments become available, Sovos will be providing new content and analysis, so please bookmark our content library and check back frequently for updates.
In the meantime, should you have any questions regarding ViDA and your businesses ability to adapt and manage any part of this program, don’t hesitate to contact us and speak with one of our regulatory experts or read our regularly updated guide to VAT in the Digital Age.
Aimed at making life easier for businesses, the EU E-Commerce VAT Package simplifies the VAT reporting requirements when trading across European Union Member States. This package is part of wider EU VAT reform.
Our live blog collates vital information on the package, with updates whenever governments or tax authorities provide new information. Bookmark this blog or subscribe to our newsletter to stay updated with the latest developments.
EU Commission Proposes Major Reforms for EU Customs including Expansion of the IOSS Scheme
Following Brexit and the introduction of the IOSS, EU customs has seen a significant increase in trade volumes. Now, the EU Commission has put forward proposals to reform current EU customs practices.
The new measures will embrace the digital transformation and lead to a simpler customs process by introducing a data-driven approach to EU Customs that will replace traditional declarations. The aim is to provide customs authorities with the tools and resources to prevent fraudulent behaviour from traders, enabling them to pick out those imports that threaten the EU’s tax take.
The new framework would simplify customs reporting requirements for traders, reducing the time needed to complete import processes by providing a single EU interface and facilitating data use.
EU Customs Data Hub
The EU Commission has proposed a new EU Customs Authority to oversee an EU Customs Data Hub. Over time, the Data Hub would replace the existing customs IT infrastructure in EU Member States, which they believe will save up countries up to €2 billion a year.
The idea of the new Data Hub is that businesses can log all the information on their products and supply chains into a single online environment. This technology will compile the data provided by businesses, providing customs authorities with a 360-degree overview of supply chains and the movement of goods through machine learning, artificial intelligence and human intervention.
Based on the transparency of inputting information into the portal, these businesses will become trusted traders – allowing them to release their goods into circulation into the EU without any active customs intervention. This will allow customs authorities to prioritise their resources and prevent illegal and unsafe goods from entering the EU.
The Data Hub is looking to open by 2028 for e-commerce traders and 2032 for other importers. This will initially be voluntary up until it becomes mandatory in 2038.
Expansion of the IOSS Scheme
The final pillar of the new reforms will be the abolishment of the €150 threshold at which customs duties are charged, effectively expanding the IOSS scheme. Currently, any goods imported at €150 or below are exempt from customs duties, whilst VAT is collected and reported on the IOSS return.
However, this reform will remove that threshold to ensure all goods will be brought into the customs duty regime and prevent fraudulent traders who look to undervalue goods for customs purposes. It is currently believed that around 65% of parcels entering the EU are undervalued.
Under the new reforms, online platforms and e-commerce sellers will become ‘deemed importers’ responsible for ensuring goods sold online to EU customers comply with customs obligations. Such platforms and sellers will charge VAT and duties at the point of sale and settle this via the IOSS return, no matter the value of the order. Therefore, import VAT and duty charges at the border for imported goods will no longer hit the consumer.
One year on for the One Stop Shop – the changes and challenges of the new e-commerce VAT scheme
In this episode of the Sovos Expert Series, Cécile Dessy speaks with Russell Hughes, Consulting Services Manager at Sovos, to explain how these new schemes have evolved during their first year.
The EU E-Commerce VAT Package – What Have We Learned Nine Months On?
It’s been just over nine months since the introduction of one of the most significant changes in EU VAT rules for e-commerce retailers, the E-Commerce VAT Package.
Under the new rules, the country-specific distance selling thresholds for goods were removed and replaced with an EU-wide threshold of €10,000 for EU-established businesses. Non-EU-established businesses now have no threshold.
How the EU E-commerce VAT Package has affected businesses
Initially, the thought of charging VAT in all countries businesses sell to was overwhelming. Though, businesses now see many benefits from the introduction of OSS.
The biggest benefit for businesses is VAT compliance requirements simplification. OSS implemented one quarterly VAT return instead of meeting many different EU Member State filing and payment deadlines.
Businesses that outsource their VAT compliance have reduced their costs significantly by deregistering from the VAT regime in many previously VAT-registered Member States. Businesses also receive a cash flow benefit under the OSS regime as VAT is due quarterly instead of monthly or bi-monthly.
As part of this EU VAT reform, we saw the removal of low-value consignment relief. This change meant import VAT was due on all goods entering the EU. It brought many non-EU suppliers into the EU’s VAT regime, with the European Commission (EC) announcing over 8,000 currently registered traders.
EU Member States had some hiccups, including not recognising IOSS numbers upon import, leading to some double seller taxation. But for most businesses, IOSS enables them to streamline the sale of goods to EU customers for orders below €150. The EC recently hailed the initial success of this scheme by releasing preliminary figures showing €1.9 billion in VAT revenues collected to date.
Want to know more about the EU VAT reform and One Stop Shop and how it can impact your business? Download our detailed guide.
Update: 22 November 2021
IOSS Four Months On
As with any new initiative, IOSS has not been without its issues. Here we look at some of those issues early into the new VAT system.
EU VAT reform and double taxation
Some clients tell us there is some confusion with their freight forwarders, who continue to operate the “landed cost” model even though the seller intended to sell under IOSS.
Under this model, the seller charges the customer an amount including VAT. The freight forwarder then imports the goods in the name of the customer. Then, the freight forwarder settles the customer’s import VAT liability and seeks reimbursement from the seller.
In this case, the local tax authority receives the VAT due as import VAT. However, freight forwarders still use this model in cases where the seller has provided its IOSS registration number.
Although the customer pays import VAT, the seller also accounts for supply VAT on its IOSS return. Double taxation must be funded by the supplier if the seller reimburses the freight forwarder without correcting the error.
Fraudulent IOSS VAT number usage
The EC removed low-value consignment relief on 30 June 2021. It levelled the playing field and reduced the VAT gap by dealing with fraud. However, there appears to be a gaping hole in the system, meaning fraud is just as possible, and the playing field is anything but level.
Where a shipping document includes an IOSS number, the underlying assumption is that the goods are under €150, and the seller will pay the VAT due. The IOSS number is checked for validity but not identification of IOSS number ownership.
IOSS numbers are widely available online, especially for online marketplaces. We are hearing that some unscrupulous sellers are using valid IOSS numbers that belong to other businesses.
This activity allows them to sell goods knowing they will never have to account for VAT in the EU, thereby undercutting local suppliers. The owner of the IOSS number does not account for this VAT, and the tax authority will find this discrepancy during an audit.
Issues with particular types of transaction
There is confusion around certain categories of goods and their IOSS treatment. Businesses can sell magazines and other goods under a subscription service, and the subscription period can often be more than one year.
In an annual subscription scenario, there will typically be one payment at the beginning of the subscription and then a succession of deliveries of goods – 12 for a monthly subscription.
So, the question is, how are subscriptions treated under IOSS? Where IOSS is applicable, if the seller reports the full amount at the outset, there will be a mismatch between the VAT return and the imports. If the seller reports an amount equal to one month’s subscription month, then VAT is accounted for late since VAT is generally due at the earlier of the issue of the invoice or the receipt of the payment.
How is the IOSS eligibility assessed? Is it the value of each shipment or the value of the subscription considered when determining whether the intrinsic value is less than €150?
There is speculation that each consignment’s value determines if a seller can use IOSS. We put this question to one EU tax authority. They replied that we could find the issue of subscription treatment within the rules on when the seller must account for VAT. The rules clearly state that tax authorities consider goods supplied at the time when the seller accepts payment.
In this case, the tax authority recognises all 12 magazines as supplied when the seller accepts payment. If that payment is above €150, then IOSS is not available. Not all Member States share this view. It raises the question of which tax authority decides – where the business is registered for IOSS or where the VAT is due?
Need more information on IOSS and how it could impact your tax compliance? Get in touch with our team.
Update: 8 September 2021
The EU E-Commerce VAT Package: Lessons Learned Two Months On
Delays and teething problems
Unfortunately, there were initial delays and teething problems when the EU introduced the E-Commerce VAT Package. We expected this with the adoption of such significant EU VAT reform, but as with any new scheme, the tax authority can resolve this over time.
Some examples include:
Netherlands system issues: The introduction of the system in the Netherlands appeared to cause an IT glitch whereby the system did not recognise Article 23 licenses to defer import VAT.
Data submission inconsistencies: There are inconsistencies in how taxpayers must communicate data to the relevant tax authority.
Varying file format requirements: Some Member States require businesses to submit data in a .csv file, whilst others ask for a .txt file. The Netherlands requires taxpayers to key data directly onto its website.
Data issues: Sweden was briefly unable to receive data, but this was resolved in less than a week.
IOSS processing errors: Some freight forwarders used the shipment date and not the payment date causing the tax authority to process some ineligible consignments under IOSS. This inconsistency will lead to an underpayment of VAT, and it will be necessary to reconcile the data.
Intrastat reporting: Neither the Directive nor explanatory notes mention how businesses should report Intrastat.
Goods import issues
Some Member States disallow the import of specific categories of goods due to local restrictions, e.g. foodstuffs, plants, etc.
It’s sometimes unclear if freight forwarders have used IOSS or not. This confusion could lead to repeated errors of VAT underpayment or overpayment.
Some non-EU vendors are trying to avoid an IOSS registration by stating that the customer is the importer of record. While this occurred before IOSS, it did not occur as much as it does now – and was not always spotted or queried.
However, since the introduction of the IOSS, some tax authorities, including Germany, have questioned this approach. In some cases, the carrier who imports the goods acts for the non-EU vendor and the buyer is unaware of their identity.
OSS Explained – Explanatory Notes for July 2021 VAT E-Commerce Rules
On 30 September 2020, the EC published its Explanatory Notes on VAT E-Commerce Rules. It provides practical and informal guidance on upcoming e-commerce regulations. The EU initially adopted this EU VAT reform under Directive 2017/2455 and Directive 2019/1995.
The Explanatory Notes set out to explain the practical aspects of the upcoming changes to place of supply rules and reporting obligations for certain online supplies in Europe. It specifically addresses: B2C distance sales of goods imported from third countries, intra-community distance sales of goods, and cross border supplies of services.
The explanatory notes provide further guidance on applying OSS and IOSS schemes. It includes scenarios where Electronic Interfaces (such as marketplaces) are liable for VAT collection and remittance relating to underlying suppliers transacting on their platforms.
The OSS scheme:
For EU-EU goods deliveries, suppliers are no longer required to register and file VAT returns in every EU Member State where they’ve exceeded distance selling thresholds. Instead, a new EU-wide threshold of €10,000 applies, after which VAT must be collected and remitted based on the destination of the goods.
Under the OSS, suppliers (or deemed suppliers) may elect to register once in their Member State of identification and file a single, simplified OSS return for all their EU distance sales.
A similar scheme, the Mini One Stop Shop (MOSS), already exists for electronically supplied services by EU and non-EU suppliers. The EU will broaden its scope to include all B2C services where the VAT is due in a country where the supplier is not established.
B2C suppliers participating in OSS must use it for all supplies under the scheme. However, it shouldn’t be seen as a drawback because the EU designed the OSS scheme to reduce admin burdens.
For example, in addition to simplifying registration requirements, OSS imposes no obligation to issue a VAT invoice for B2C supplies. (An EU Member State may opt to impose invoice requirements for service invoices only, but not for goods).
The IOSS scheme:
Distance sales of goods imported from third countries, with an intrinsic value no greater than €150, may be subject to the new IOSS simplification regime. It is designed to facilitate smooth and simple VAT collection on B2C imports from outside the EU.
With the concurrent repeal of the €22 low-value consignment relief, IOSS is an attractive option for suppliers looking to reduce administrative and compliance burdens.
Under this new EU VAT reform, a supplier (or deemed supplier) may elect to register – via an intermediary for non-EU suppliers – for IOSS in a single Member State. It allows them to collect VAT in the respective EU country of destination and remit monthly IOSS VAT returns.
The new e-commerce rules explanatory notes emphasise the overriding goal of making VAT collection more effective, reducing VAT fraud, and simplifying VAT administration.
Nevertheless, businesses must be careful to ensure that their internal systems are properly configured prior to the changes taking effect.
Singapore’s new Low Value Goods (LVG) rules came into effect at the beginning of the year. As of 1 January 2023, private consumers in the country must pay 8% GST on goods valued up to SGD 400 imported via air or post from GST-registered suppliers.
From 1 January 2024, the GST will increase to 9%.
Prior to this change , Low Value Goods procured locally from GST-registered businesses were subject to GST. Goods imported overseas via air or post were not. This change treats all goods consumed in Singapore in relation to GST.
The SGD 400 threshold does not include:
Transportation
Insurance costs
Any duties payable to Singapore Customs
For example, a private individual orders an item that costs SGD 390. Additional transportation fees are SGD 20. As the threshold excludes transportation fees, the product’s value is SGD 390. The consumer will have to pay GST on the purchase to the supplier.
Since 1 January 2023, GST is also levied on supplies of imported non-digital services purchased from GST-registered overseas suppliers. As a result, all B2C supplies of imported services – digital or otherwise – that are supplied and received remotely are taxed.
Non-established suppliers – such as electronic marketplace operators and re-deliverers – must register, charge and account for GST where:
Their global annual turnover exceeds SGD 1 million
The value of B2C supplies of import low value goods, digital services and non-digital services made to non-GST-registered customers in Singapore exceeds SGD 100,000
Companies may also voluntarily register.
Businesses should assess if these changes trigger the need to register for GST and other compliance challenges.
It can be difficult to know where you stand regarding EU VAT changes and European tax laws. There have been sweeping changes implemented in recent years.
This blog breaks down the major updates, including the EU VAT reform, to help ensure your business is on the right path. Additionally, you can speak with our team of experts for personalised assistance with VAT compliance or have a look at our solutions for VAT compliance for e-commerce.
What is EU VAT reform?
To keep up with the digital age, the EU changed how its VAT system works in July 2021. The EU e-Commerce VAT Package was part of this. So was the One Stop Shop (OSS), which intends to make cross-border trade less of a headache.
With OSS, companies can declare and remit the VAT due on certain sales in a single language and within just one Member State tax administration.
OSS introduced three schemes:
Import One Stop Shop (IOSS) for law value goods delivered outside the EU
Union One Stop Shop (Union OSS) for intra-EU B2C deliveries of goods and services
Non-Union One Stop Shop (Non-Union OSS) for non-EU to EU services, previously known as the Mini One Stop Shop (MOSS)
What are the latest EU tax laws and changes?
Prior to the EU VAT reform, e-commerce sellers of goods needed to have a VAT registration for each of the EU Member States that they traded in – providing they had a turnover above a particular threshold. The threshold was dependent on the country.
With the changes that arrived on 1 July 2021, these thresholds were replaced by a single, universal threshold of €10,000 for EU businesses. If turnover exceeds that figure, VAT must be paid in the Member State where the goods are delivered. Non-EU businesses have no threshold.
What is the current EU VAT rate?
While the EU’s lowest agreed standard rate is 15% as per the VAT Directive. Luxembourg has the lowest standard rate at 17%, whereas Hungary has the highest at 27%. Other countries fall within that range.
What has changed since July 2021?
On 8 December 2022, the European Commission proposed changes in relation to the VAT in the Digital Age initiative.
While nothing was been implemented at the time of publishing, the proposal offers up significant changes and is one of the more prominent developments in the history of VAT in Europe.
The Commission proposes changes to the VAT Directive, specifically affecting:
Again, the regulatory change is yet to come into effect. It requires formal adoption by the Council of the European Union and the European Parliament, as well as a unanimous positive vote by the Member States but if approved these will include significant changes.
Do I now have to pay VAT on EU goods?
If your company is based in the EU then VAT is likely to be chargeable on both purchases and sales of goods within the region. Exceptions do exist, however.
Where VAT is charged depends on the type of supply and is determined by the EU’s place of supply rules which determine where VAT is due, i.e., country of supplier or country of delivery.
What is OSS and does it come with new tax regulations?
The One Stop Shop abolished distance selling thresholds that were in place and created a centralised electronic platform for VAT. The change means that where intra-EU supplies exceed the €10,000 EU threshold (no threshold for non-EU companies), VAT is due in the Member State of the delivery – regardless of the level of sales in that country.
European businesses can take care of all their VAT obligations for sales across the entirety of the EU through the OSS. The scheme allows for any VAT due to be accounted for in a single VAT return, making life easier for businesses that trade across the EU. Companies trading in the EU are eligible to utilise OSS, and there is also a non-union OSS scheme for businesses outside the EU for digital supplies.
Visit our OSS guide for more in-depth knowledge of the scheme.
Get in touch today to understand how ever-changing VAT e-commerce rules in the EU affect your business.
Still have questions? Maybe we have answered them already below:
Will VAT change when we leave the EU?
The most recent country to leave the EU was the United Kingdom. The UK hasn’t changed its VAT system however businesses selling into Europe have needed to change their business practices.
Isthe UK still in the EU for VAT purposes?
No, the UK maintains its own VAT rate and tax system. Different rules apply for businesses in Northern Ireland.
Can EU countries change VAT?
Yes, an EU country can change its VAT rate within the guidelines set by the EU VAT Reform.
VAT Determination - Monitoring and Reporting
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International businesses with complex, multijurisdictional supply chains need to ensure their VAT determination decisions are right every time.
Monitoring supply chain transactions creates challenges for tax and IT teams attempting to address determination decisions, especially if done manually.
Whilst SAP leads the way in advanced accounting software, conducting analysis and managing corrections accurately within the off-the-shelf SAP system can be complex. Conducting data checks and changes manually is time consuming and error prone, and SAPu2019s limitations make monitoring determination processes across the supply chain challenging.
The simple solution for accurate VAT compliance reports
The Monitoring and Reporting module within our VAT Determination suite simplifies data checking and can help to uncover errors before they become an issue.
Sovos VAT Determination is a flexible, automated suite of SAP modules providing efficient, transparent and correct identification of VAT determination processes across chain transactions for sales and purchases, including VAT ID checks, monitoring and reporting. Sovos VAT Determination u2013 Monitoring and Reporting includes two vital elements: a tool for checking data and finding errors for VAT reconciliation and advanced VAT reports for additional data queries and VAT analytics.u00a0u00a0
Sovos VAT Determination – Monitoring and Reporting module is a certified add-on for SAP
Instantly monitor and verify VAT determination data for VAT reconciliation reports
Minimise audit risks by comparing general ledger and account balances with postings against specific tax codes
Improve accuracy of data aggregated for periodic reporting including VAT Returns, EC Sales Lists, Intrastat and SAF-T
Increase compliance with accurate, comprehensive report submissions to tax authorities
Cost and time savings with process automation for manual analysis and data correction
Reduce the risk of penalties from incorrect filings with in-depth monitoring and reports
Automate VAT ID validation for effective invoice processing and periodic reporting
Get in touch: find out more about VAT Determination - VAT ID Validator with our team of experts.
Automate VAT ID validation process and save time
Changing suppliers and introducing new companies to supply chains is a common requirement for multijurisdictional businesses. As part of due diligence, VAT ID checks are obligatory, with requirements varying across VAT and GST jurisdictions.
Manually processing customer VAT numbers to ensure they’re legitimate can be incredibly time-consuming and resource intensive. For certain transactions, checking the validity of the VAT identification numbers is a necessary requirement for tax exemption.
Delays or errors in the VAT ID validation process can have a knock-on effect on supply chains, delaying clearance at customs and increasing the risk of financial penalties during an audit, affecting future profitability.
Teams could save valuable time and improve data accuracy by implementing an automated VAT ID validation solution.
Increase compliance with advanced VAT ID check capabilities
Sovos VAT Determination – VAT ID Validator module is an SAP-certified add-on, providing automated VAT ID checks across multiple VAT and GST jurisdictions. It provides qualified retrieval, validation and storage of VAT ID validation results via official centralized authority databases.
The software reduces the manual process of verifying VAT numbers and offers the possibility of automated checking directly from your SAP system. It helps teams establish a best practice approach to increase compliance and achieve accurate, reliable and fully transparent VAT determination decisions for sales invoices as well as being key to the evaluation of purchase invoices.
Sovos VAT Determination is a flexible, automated suite of SAP modules providing efficient, transparent and correct identification of VAT determination processes across chain transactions for sales and purchases, including VAT ID checks, monitoring and reporting. Sovos VAT Determination – VAT ID Validator is one of four add-ons available within the suite.
Sovos VAT ID Validator module is a certified add-on for SAP
Save time with an automated VAT ID validation solution
Secure and intelligent SAP-certified add-on for customer and vendor tax ID verification
Automated tax ID verification via various interfaces including VIES, BZSt and Finanz Online
Fully integrated VAT ID checks within SAP processes, including Order to Cash (O2C) and Procure-to-Pay (P2P)
Classification of results into green, yellow and red lists for a comprehensive overview
Qualified retrieval, validation and storage of VAT ID validation results via official national tax authority and EU databases
Reduce time spent on VAT ID validation with mass queries, autofill options and tailored configuration
Improve efficiency and reduce tax compliance risk with intelligent automation
Get in touch: find out more about VAT Determination - Sales with our team of experts.
Automate VAT determination for sales invoices
Multijurisdictional supply chains cause complexity for VAT determination decisions, for both tax and IT teams. Accuracy of sales invoices is a key element of the determination process and non-compliant invoices can lead to issues along the supply chain, from delayed clearance at customs to cashflow challenges due to rejected invoices or late VAT recovery.
Limitations in SAP functionality mean custom coding is often required to achieve reliable determination decisions, but customisation has cost and maintenance implications across IT, finance and tax departments.
Implementing automation within your SAP software can alleviate these challenges and provide accurate VAT determination functionality for complex transactions within the supply chain.
Your tax and accounting teams can focus their efforts on more business-critical tasks, with confidence in the data for feeding downstream processes such as invoices to trading partners and reporting at the end of each fiscal period.u00a0
Accurate data and VAT treatment for sales transactions
Designed to provide data accuracy for sales invoices, Sovos VAT Determination u2013 Sales is a single SAP-certified add-on, providing effortless determination of the different parameters needed for ensuring VAT compliance of sales transactions.
Through automatic classification and identification of specific circumstances under which sales transactions are conducted, the Sales module ensures an accurate VAT treatment and reduces the risk of costly errors.
Sovos VAT Determination is a flexible, automated suite of SAP modules providing efficient, transparent and correct identification of VAT determination processes across chain transactions for sales and purchases, including VAT ID checks, monitoring and reporting. Sovos VAT Determination u2013 Sales is one of four add-ons available within the suite.
Sovos VAT Determination - Sales is a certified add-on for SAP
Confidence in correct tax decisions when booking a sales transaction
Secure and intelligent SAP-certified add-on tailored for complex supply chains
Reduce tax audit and compliance risk with better quality data for sales invoices
Automatic data identification and full transparency for sales transactions
Extendable functionality to handle unique VAT requirements
Automation saves time and reduces possible sources of errors
One-off integration of a single SAP add-on provides cost savings compared to ongoing customisation requests
Strengthen audit compliance and improve invoice verification accuracy
Get in touch: find out more about VAT Determination - Purchasing with our team of experts.
Automate the purchase invoice validation process
Complex supply chains come with transactional complexities. For multinational companies trading across multiple borders and between many VAT-registered businesses, VAT determination decisions can be difficult to get right every time.
Incorrect VAT determination has operational and financial consequences. This is why itu2019s important to validate purchase invoices to ensure goods and services are correctly classified and any compliance risks are identified early.
Invoices must be checked to meet stringent criteria to enable VAT deduction entitlement, but these checks can be too complex to perform manually. Non-compliant invoices can impact VAT recovery and therefore cashflow, reputation and risk financial penalties during an audit.u00a0
An automated solution tailored to your purchasing requirements
Sovos VAT Determination u2013 Purchasing alleviates the burden involved in approving purchase invoices by validating that the VAT decisions they comprise are correct, freeing up tax and IT teams to concentrate on other important aspects that are core to your business.
The Sovos VAT Determination u2013 Purchasing add-on extends SAP standard VAT determination, providing you with confidence in the data accuracy of incoming purchase invoices.
Sovos VAT Determination is a flexible, automated suite of SAP-certified modules providing efficient, transparent and correct identification of VAT determination processes across chain transactions for sales and purchases, including VAT ID checks, monitoring and reporting. Sovos VAT Determination u2013 Purchasing is one of four add-ons within the suite with extensive functionality capable of handling the most complex of supply chains.u00a0u00a0
Sovos VAT Determination - Purchasing module is a certified add-on for SAP
Increase compliance by validating incoming purchase invoices
Secure and intelligent SAP certified add-on for monitoring and validating incoming purchase invoices
Automated VAT assessment for all incoming transactions ensuring data accuracy and compliance
Reduced compliance risks with correct classification for input tax deduction
For EU-based companies, VAT is chargeable on most purchases and sales of goods within the European Union. As a manufacturing company, this can result in many different VAT rates being charged.
Choosing the right country for entry into the EU can be a tough decision, especially considering countries have their own rules. Take into account that you may not know the location of goods and the situation can soon become complex.
Manufacturers can suffer disruption to their supply chains – which can often already be sophisticated as is – if this is not dealt with effectively. But where to start?
Our VAT experts are here to help. Join them in our upcoming webinar to learn about:
The current state of play in the manufacturing industry
What VAT implications you are likely to run into and how to combat them
When and where is the VAT between European countries charged?
Authorities in the EU charge VAT on all taxable supplies of goods or services at each stage of the supply chain. Our blog on who pays VAT, the buyer or seller, explains why in more depth. This is a significant distinction from Sales Tax, which only applies to the final supply. Some goods and services, such as healthcare and financial services, are exempt from VAT.
Companies must also distinguish if they are supplying goods or services to another business (B2B) or a private individual (B2C). This difference dictates how and where they need to charge VAT.
Supply of services
The general rule for B2B is that the product or service is taxed where the customer is established, while B2C services are taxed in the supplier’s country.
There are some special rules, however, such as those related to immovable property or events.
Supply of goods to businesses (B2B)
The situation starts to get complicated when transporting goods between countries. The taxable person must take the nature of the goods supplied and how the supply takes place into account.
When dispatching or transporting goods between businesses in different EU Member States, Intra-Community Supply (ICS) and Intra-Community Acquisition (ICA) of goods occur. An Intra-Community Supply of goods is a transaction where the goods are dispatched or transported by, or on behalf of, the supplier or customer between the EU Member States and is exempt, providing it meets certain conditions.
At the same time, a customer making an Intra-Community Acquisition is a taxable transaction. Where the ICA has been carried out define the location of tax, namely the location of the goods after the transport has finished.
Different rules apply to the export of goods to countries outside of the EU where the VAT is charged in the country of import. Instead, the location of the goods once they’ve arrived sets where the supply is. It is then treated as zero-rated in the Member State of export if it meets specific evidence requirements.
We know how complicated this sounds and our experienced team can answer your questions about this side of VAT. Contact our VAT experts here.
How VAT is charged
Generally, the business charges output VAT on the supply when the supplier carries out a taxable supply. The customer then deducts input VAT on the purchase, if valid to do so.
In some instances, the reverse charge mechanism applies. The reverse charge requires the customer to account for the VAT and is also known as a ‘tax shift’.
Where it applies, the customer acts as both the supplier and the customer for VAT purposes. The company charges itself the applicable VAT and then, where that service relates to taxable supplies, it recovers the VAT as input tax in the VAT return. The VAT charged is instantly reclaimed.
Typically, the customer must provide the supplier with a valid EU VAT number to use the reverse charge.
Whilst the general rule on supplies of goods above applies, the rules have changed over the years to apply VAT where the goods are consumed.
When a business sends goods from one Member State to a private individual residing in another Member State, the VAT rate of the country of the customer should apply – unless the supplier can benefit from the EUR 10,000 threshold per annum.
In such a case, the supplier can charge the domestic VAT rate and report the sales below this threshold in the domestic VAT return. However, this exemption does not apply to suppliers established outside the EU or keeping stock in several EU countries.
To minimise the administrative burden of businesses registering in all EU Member States where the goods are delivered, the EU launched the OSS (One Stop Shop).
OSS schemes have simplified the supply of goods by taxable persons to private consumers:
Companies have a single VAT registration for sales carried out in all EU Member States
As such, suppliers only file VAT returns and pay the tax in one country – instead of all of them
Provisions can also apply to businesses outside of the EU through the non-union OSS scheme
Businesses established in the EU are entitled to use the Union and Import schemes, whereas non-EU companies can take advantage of the non-Union, Union and import schemes.
IOSS (Import One Stop Shop) simplifies the registration obligations for sellers established outside of the EU that sell goods to private individuals in the EU. Similar rules apply for the OSS, allowing the seller to register in one Member State where they account for VAT in their VAT returns.
Other advantages of using this scheme include exemption from import VAT and avoiding customs duties. This scheme, however, is restricted to consignments up to EUR 150.
Ready for a deeper dive into VAT rates? Here’s an overview.
Standard rates
The EU’s lowest agreed standard VAT rate in the VAT Directive is 15%, but it is not applicable in any of the EU Member States. The lowest standard VAT rate in the EU is in Luxembourg at 17%, followed by Malta at 18% and Cyprus, Germany and Romania at 19%. Hungary is one of the EU countries with the highest VAT rate at 27%, followed by Croatia, Denmark and Sweden with 25%.
Reduced rates
Annexe III of the VAT Directive mentions the threshold for applying reduced rates within the EU Member States. The rate cannot be below 5%.
Special rates
There are three types of special rates:
Zero rates – the customer is not charged VAT
Super-reduced rates – less than 5% applied on the sale of limited goods
Intermediary rates – cannot be lower than 12% and is applicable on supplies of goods and services that are not part of Annex III of the Directive
Do I now charge VAT to EU customers?
When concluding if you should charge VAT to your customers in the EU, consider the following:
Who the parties are to the transaction
What you’re supplying
The place of supply rules
What rate of VAT or exemption applies
Who is liable to account for the VAT
EU VAT is always subject to change, so don’t be caught with outdated information. Follow our blog for the latest news on EU VAT rates and analysis of major developments the moment they happen or speak to an expert.
Your guide to the EU VAT e-commerce package
The EU VAT e-commerce package changed VAT rules for cross-border trade.
While the package makes life simpler and fairer for all, the details can be complex. This guide helps you to:
Make the right decisions for your business
Say goodbye to buzzwords, jargon and painful accounting
Ease trade and unlock business growth
Don’t have time for reading? Ask our experts instead, no question is too difficult for them on the EU VAT e-commerce package.
How to trade within and outside the EU
Knowing how to trade within the EU or as a business outside the market is more challenging than ever. Numerous rules to follow. Penalties to avoid. Even finding accurate, up-to-date information is difficult.
Our guide explains how to handle EU E-Commerce VAT compliance, from the moment you advertise a product to when and how you pay your VAT bill. Our guide is ideal reading if you are:
A business affected by Brexit
An ambitious e-commerce company that’s expanding internationally
A tax professional facing EU VAT headaches
An accounting team struggling with new compliance requirements
A curious retailer intrigued by online marketplaces
A finance person tasked with understanding the rules
This guide to the EU VAT e‑commerce package contains:
Information. Lots of helpful information.
We go right back to basics, explaining what EU VAT is, what you need to know as a business, and the goal of the EU VAT e-commerce package.
We cover key facts too, so you can get a solid grasp of what the package is. Don’t forget a timetable with all the important dates you need to know. Then we cover the schemes enabling simpler trade for all.
The idea behind the EU VAT e-commerce package is to level the playing field by simplifying distance selling. The package also means B2C businesses selling into the EU can use the appropriate VAT registrations across the EU according to their requirements instead of registering in each Member State.
The EU VAT e-commerce package consists of three schemes – the Import One Stop Shop (IOSS), One Stop Shop (OSS) and Non-Union One Stop Shop (Non-Union OSS, which used to be the Mini One Stop Shop (MOSS)). Depending on where your business is based and where it operates, you could need to use just one or all three schemes.
All of these are explained later in our guide.
The most important thing to remember is that although these schemes simplify trade, they require businesses to prepare and thoroughly understand the additional requirements involved.
This means:
Life becomes harder for anyone responsible for VAT within a non-EU business
Companies must change how they process and report transaction data
Compliance becomes more complex
The chance of human error increases, as does the risk of penalties
Help is available to make your life easier
The EU VAT e-commerce package affects many parties, from VAT experts and tax managers to e-commerce sellers, entrepreneurs, marketplace store owners, accountants and audit firms.
An introduction to EU VAT: What you need to know
Like other regions across the globe, EU Member States charge VAT on purchases.
Member States is an official term for countries within the European Union, and Value Added Tax (VAT) is a tax collected by businesses on behalf of their government. Generally, the burden for VAT lies with the consumer, who pays VAT that applicable companies then collect through their supply chain.
There is no single standard rate of VATin the EU. The VAT rate varies from country to country. Some tax authorities charge 19%, while others charge 25% or higher rates. The minimum EU standard rate can be no less than 15%.
Businesses must charge the correct applicable VAT rate, as mistakes can cause customer issues or, worse, result in financial penalties.
Explaining how to follow all the rules correctly is covered in our guide that introduces EU VAT as a general concept.
Key facts about the EU VAT e-commerce package
Everyone loves a fact, and we have plenty to share on the EU VAT e-commerce package.
Did you know…
Import One Stop Shop (IOSS) is for low value goods delivered from outside the EU
Union One Stop Shop (Union OSS) is for intra-EU B2C deliveries of goods and for intra-EU services provided B2C by EU established suppliers
Non-Union One Stop Shop (non-Union OSS) is for non-EU to EU services and replaces and extends the previous Mini One Stop Shop (MOSS)
Businesses using any OSS simplification must apply it to all qualifying transactions
Additional record keeping is required for OSS
Declarations for Union OSS and Non-Union OSS are quarterly, declaration for IOSS is monthly
Non-EU businesses might need to appoint an intermediary
Non-EU retailers may need to report under all three schemes
All this talk about different rates, dates and thresholds can be confusing – simplify your life by reading our EU VAT buster on rates, number formats and thresholds.
Timetable of the EU VAT e-commerce package
Businesses need to know where they’ve been to know where they’re heading. This is why we’ve summarised the package’s major milestones since the moment it was first announced.
2016 – European Commission publishes ‘Action Plan on VAT’, introducing a One Stop Shop mechanism for cross-border e-commerce
15 July 2020 – European Commission adopts new Tax Action Plan, a four-year plan to make tax fair and simple
30 September 2020 – European Commission publishes ‘Explanatory Notes on VAT E-Commerce Rules’
1 July 2021 – The EU VAT E-Commerce Package is introduced
8 December 2022 – European Commission proposes changes in relation to VAT in the Digital Age initiative
Keeping track of dates is often time-consuming, especially with so much information spread across many online sources.
OSS stands for One Stop Shop, the umbrella term for all three schemes. Union OSS is a scheme to help EU established suppliers with providing B2C intra-EU services and for B2C deliveries of goods within the EU.
EU established businesses need to register for OSS in the Member State they are established in.
Don’t fear OSS. Our free guide covers everything you need to expand your knowledge.
Want to skip straight to the benefits? Talk to an expert about leveraging the OSS scheme for your business
How to trade outside the EU
IOSS is short for Import One Stop Shop. This scheme simplifies the registration obligations for taxpayers who carry out distance sales of goods imported from third countries to private individuals in the EU. IOSS applies to low value goods, defined as up to €150.
What is meant by distance selling?
This term covers the sale of goods, services or digital content where there is no face to face contact with the consumer. It includes online, postal, and phone sales.
What is meant by a third country?
This basically refers to any country that is not a member of the EU.
Non-Union OSS applies to all services sold B2C by suppliers not established in the EU.
Want to learn more about IOSS? We’ve got an easy to understand ebook about IOSS to help you get to grips with the scheme.
What non-EU countries need to know about IOSS and OSS
Does it pay to be in the EU club? Judging by the fact EU VAT becomes trickier when your business isn’t located within the region, perhaps the answer’s yes. These are the key facts you need to know. If you want more information about what non-EU countries need to know, read more here.
What’s the difference between IOSS and OSS?
IOSS accounts for B2C of goods imported from third countries, whereby the eligible supplies are restricted to a single consignment value of up to €150.
OSS accounts for B2C intra community distance sales of goods irrespective of the consignment value.
The main difference is that with IOSS the goods are located in a third country (outside the EU customs territory) at the time of the sale, whereas with OSS the goods are located within the EU’s territory.
Related content on the EU VAT e-commerce package
Our helpful guide doesn’t stop here. Our experienced VAT experts have produced guides, blogs and webinars to explore everything related to the EU VAT e-commerce package.
This of course depends on what goods or services you are supplying, but unless an exemption or zero rate applies VAT will be due on e-commerce sales into or within the EU.
How does VAT work for e-commerce?
This depends on whether you are selling goods or services as the rules vary, but generally VAT looks to tax the point of consumption, whether that be an individual streaming music in their country of residence or an individual receiving goods purchased online.
Should I be charged VAT from an EU supplier?
Most EU suppliers will need to charge VAT. There are some exceptions, such as the €10,000 threshold for small businesses and depending on the type of product a zero rate or exemption may apply.
Do you charge VAT on digital services to the EU?
Yes, for business to consumer sales, VAT is due in the country of the customers establishment / residence. The OSS simplifications are particularly useful for meeting reporting obligations.
Who is affected by the EU VAT e-commerce package?
The EU VAT e-commerce package applies to VAT for intra-EU B2C supplies of goods and imports of low value goods as well as services. It affects cross-border B2C trade and e-commerce, including businesses who sell on online marketplaces. The schemes that make up the EU VAT e-commerce package (IOSS, OSS and non-Union OSS) are currently optional.
TheEU VAT E-Commerce package has been in place since 1 July 2021. This applies to intra-EU B2C supplies of goods and imports of low value goods. Three schemes make up the package. These are based on the value of goods and the location of the sale of goods.
All OSS schemes are currently optional. The schemes mean taxpayers can register in a single EU Member State and account for the VAT due in other Member States.
For companies outside of the EU, the package schemes that apply are:
Non-Union One Stop Shop (Non-Union OSS) – non-EU businesses can account for VAT on all supplies of B2C services where EU VAT is due.
Union One Stop Shop (Non-Union OSS) – non-EU businesses can account for VAT on all Intra-EU supplies of B2C goods that are located in the EU.
Import One Stop Shop (IOSS) – for low value goods delivered from outside the EU, where the intrinsic value of the goods is no more than €150.
Want to understand how OSS and IOSS work? Keep reading!
Exporting products to the EU is challenging. Couriers often have a bewildering number of services. Prices differ from service to service.
There’s no easy way to find fast, cost-effective shipping services, but here are tips to help:
Look for couriers that have information about IOSS and OSS on their websites already
Familiarise yourself with customs forms for the country of import
Ask your courier how they support the schemes and can support your business
Confirm if your carrier can act as an indirect customs representative if you do not have an EU establishment
Does my company need a VAT number?
Businesses with a certain turnover must register for VAT. This varies from country to country. For example, the UK’s VAT threshold is £85,000 for established businesses. If you are interested in a business solution, please get in touch with our sales team.
How do I get a VAT number?
Registering for VAT takes time. Each Member State has its own process for obtaining a VAT number. VAT compliance differs from Member State to Member State.
For non-EU companies, appointing a Fiscal Representative might be necessary. A Fiscal Representative acts on behalf of companies in a local VAT jurisdiction, managing VAT reporting and other requirements. For IOSS, most non-EU businesses will need an IOSS intermediary.
We know registering for VAT is difficult and involves understanding place of supply rules, fiscal representation and many other elements.
The EU VAT E-Commerce package enables taxpayers to register in one Member State to account for VAT in all Member States.
Benefits of applying for a VAT number as a non-EU business
In most cases, a VAT number will be mandatory because of your business’ activity; in some cases, it will be voluntary. There are many benefits to applying for a VAT number.
These include preventing financial penalties and receiving EU VAT refunds. EU VAT refunds depend on certain circumstances, such as on VAT exempt items.
How to register for OSS
The OSS scheme is currently optional. Before registering businesses should consider the benefits and impact on their supply chain.
When a supplier obtains either an the Member State that grants the VAT number becomes known as the Member State of Identification.
Registering for OSS in the UK
As the UK is no longer part of the EU, registering for OSS as a UK business means using the Non-Union OSS, Union OSS or IOSS schemes. There is no need to have a normal VAT registration in the EU to apply for IOSS or a non-Union OSS VAT registration, however, a local EU registration is required before obtaining the OSS registration.
The first step is to understand if an needs appointing. The intermediary, usually an agent or broker, submits the IOSS returns on behalf of the company.
The UK business will need to choose the Member State it wants to register with for the non-Union OSS scheme.
If the UK business has warehouses in the EU, then the company will still need local in each Member State with a warehouse, but they can choose one Member State for OSS registration.
The Northern Ireland Protocol adds even more complexity to cross-border trade. Stop browsing the internet for unhelpful answers; contact our experts for advice instead.
Our team of experts can help you understand OSS and IOSS further. Don’t hesitate to get in touch today, especially about the Northern Ireland Protocol’s effect on trade.
FAQ for non-EU countries
What is VAT number called in USA?
The USA doesn’t have VAT. The equivalent is Sales Tax, with its own permit and tax ID.
DO US companies have a VAT number?
If a US company wants to sell goods into Europe it can register for a VAT number with the relevant Member State tax authority. The business’ supply chain will determine if / where a VAT registration is required.
Do US companies have to pay UK VAT?
This depends on the product or service and whether the US company has activity in the UK that requires it to become VAT registered such as selling low value goods or importing in its own name into the UK.
How much is international shipping to Europe?
The cost of international shipping to Europe varies, depending on where you send goods from and how quick delivery is.
How much does it cost to ship from USA to Europe?
Costs for shipping from the USA to Europe vary, depending on if they are express or standard shipping times. Different couriers charge different prices too.
What is the cheapest way to ship a package from USA to Europe?
This depends on package size, insurance and delivery speed.
How long is shipping from EU to US?
Shipping from the EU to the US can take anywhere from four days to four weeks, depending on customs and import requirements.
You want to sell and trade within the EU with ease?
Tax has always been challenging and ever-changing VAT regulations across Europe add to the complexity, requiring technology adoption to support compliance- related activities.
It’s time for businesses to evaluate how efficiently they’re handling their VAT compliance obligations.
We created this checklist to help you assess whether you already have an effective, scalable solutions that’s optimized for the diverse range of compliance requirements and future-proofed to adapt to coming changes.
If you can tick all the boxes, you’re on the right path to mitigate risk and meet the demands of VAT digitization.
Checklist
How does your current VAT compliance solution measure up?
Compliance coverage across Asia, EMEA, LATAM
Continuous regulatory monitoring by tax experts
Maintained in alignment with regulatory changes
Flexible integration, whatever your systems
Supported by multilingual experts
Built to the latest Information Security requirements
Delivering valuable insights from your data
Scalable, future-proof platform
Functional compliance covering:
VAT Determination
E-invoicing & secure access to digital evidence
Real-time reporting
Periodic reporting (including SAF-T)
Can’t check all the boxes? Don’t worry, Sovos helps ease the increased demands of tax digitization so you can prioritise your core business . We take a future-facing approach to always-on tax compliance with intelligent tools that provide data insights for a competitive advantage.
Nearly every major economy has a form of VAT. That’s 165 countries, each with its own compliance and reporting rules. The main exception is the United States. VAT is by far the most significant indirect tax for nearly all the world’s countries. Globally VAT contributes more than 30% of all government revenue.
Levying VAT is a term used to describe when a company collects VAT on behalf of a tax authority. This happens at each stage in a supply chain when a taxable event occurs. A country’s tax rules define what a taxable event is.
In a nutshell, VAT essentially turns private companies into tax collectors.
How VAT works
VAT is due on nearly all goods and services. This is up to, and including, the final sale to a consumer – that’s you and me.
Applied correctly, VAT should be cost neutral for most businesses. Companies collect VAT from their suppliers, then pay this money to the government. In the UK, this is normally every three months.
As a business this means:
You charge VAT on your invoices or what you sell
This is accounted for in your company’s accounting books
You send a VAT return with all your VAT collections to the tax authority
You then pay the VAT collected
Companies can reclaim the VAT on some of their purchases. When applicable, this means your business pays less VAT when its VAT return is due.
Essentially, this encourages businesses to spend and help an economy grow.
Another thing a company can do is postpone its VAT accounting. There are different reasons why this is allowed, for example, in relation to import VAT.
A VAT return is a document listing all the VAT you have collected and what you are reclaiming VAT on along with various other information on sales and purchases in the period.
Submitting VAT returns is a legal requirement in most countries. The format and frequency vary around the EU, so it’s essential to keep
In addition to VAT returns, businesses might have to submit other declarations. This depends on the company’s trading activity and the requirements in the Member State of registration. This could include or . These can be quite complicated, as we explain here.
Understanding your VAT obligations also requires mapping a supply chain for the country of registration.
The following information applies to larger businesses or businesses selling into the EU.
VAT returns and other declarations – for reporting a business’s liabilities to the tax authority. This is the money owed to the government. The format of a VAT return and its frequency varies across the EU.
Invoicing – The VAT Directive provides the legislation across the EU, but Member States can choose how to apply this to their local laws.
Applying exemptions – a supplier needs to provide evidence that VAT exemptions have been applied correctly. Failure to do so can lead to an exemption being denied. This can result in financial penalties and interest charges.
Recovery of VAT – Member States interpret the requirements for VAT recovery differently.
Intrastat – Intrastat declarations provide trade information, and when required, declarations must be accurate – as with VAT returns, the process in each Member State varies.
Continuous transaction controls – Continuous transaction controls (CTCs) mandates vary. Some requirements only apply to resident businesses and certain thresholds.
So, what is the difference between Sales Tax and VAT?
VAT is a broad-based consumption tax and a form of indirect taxation. It is imposed on goods and services at each stage of the supply chain, with each party paying the government the tax and passing the final cost onto the ultimate consumer.
The idea is that each party effectively only pays VAT on the value added to the product or service. This is because the party can recover the VAT on associated costs (of course, there are exceptions). One of the disadvantages is that it requires accurate accounting.
On the other hand, sales taxes are generally taxes placed on the sale or lease of goods and services.
Usually, the seller collects the tax from the purchaser at the point of sale. Sales tax is calculated by multiplying the purchase price by the applicable tax rate. The seller at a later stage transfers the tax to the responsible government agency.
How does VAT work between EU countries?
The EU VAT Directive 2006/112/EC establishes the rules for where VAT is due in the EU. Member States must implement these rules in a uniform way to avoid the possibility of double or no taxation. This blog goes into details how VAT between European countries works.
How EU countries apply VAT
VAT in the EU happens when:
There’s a supply of goods – Where goods are not transported, the place of taxation is where the goods are made available to the customer. Where the goods are transported, the place of supply is where the transport starts (unless an exemption applies).
There’s a supply of services – For B2B transactions the place of taxation is generally where the customer has established their business. This applies to “intangible” services where the place of consumption cannot be determined easily.
There are certain where the place of consumption can be determined. These are:
Services connected with immovable property (i.e. real estate) – this is taxed where the immovable property is located.
Passenger transport is taxed where the journey takes place.
Activities relating to culture, sport, education and entertainment restaurant services are taxed where the event happens.
Catering services are taxed where the food and drink is provided to customers.
Short-term transport hire is taxed where the transport is used.
Increasingly, digital services to consumers – such as software downloads or content streaming – are taxed in the country of consumption.
A thing called intra-community acquisition of goods occurs – The place of taxation is the place where the transport ends (i.e., the EU country where the goods are finally located after transport from another EU country).
At the point goods are imported – The place of taxation is where goods imported from non-EU countries are generally taxed (i.e., in the EU country where they are cleared for free circulation).
Why EU countries use VAT
There are many reasons why an EU country uses VAT.
VAT can be adjusted up and down depending on how a country’s economy is performing quickly. This means a country can raise taxes quickly or support a certain sector by reducing VAT.
Once collected, the money can be spent on public services, infrastructure, healthcare and other important growth initiatives.
But wait, what about those pesky questions like “should I charge VAT to EU customers?” or “do I pay VAT if buying from Europe?”. We hear these all the time from customers who struggle with VAT rates across different EU countries.
Standard rates, reduced dates, special rates. What’s the difference?
And then you have super reduced rates and zero rates? Let’s not forget intermediary rates.
If your business is expected to charge VAT to EU customers, or you yourself are faced with paying VAT on a purchase when buying from Europe, it’s important you feel confident applying the right VAT rate each and every time.
Have a question about the many different types of VAT rates in the EU? Our tax experts are yet to receive a question that stumps them, and they will happily help unload you from this burden.
Sometimes companies don’t have to pay VAT. This happens when the goods or products they sell fall into an exempt category.
Some examples of exceptions include education and training, charity fundraising and insurance. Insurers instead pay a tax called (IPT).
A VAT exempt business cannot register for VAT, nor can it reclaim VAT. This is slightly different to zero-rated goods or services. In that case, VAT is charged, but at 0%. Some companies can be partly exempt too.
VAT exemptions differ country to country so it’s important to check a tax authority’s website to see whether your business needs to pay VAT. ? We love setting our clients free from their tax compliance burdens so they can focus on growing their business.
Yes. A person or company buying a service or product pays the tax when the item is chargeable.
Do sellers pay VAT?
Sellers pay VAT on any items they purchase for their own business. The VAT they collect from their own customers is paid to HRMC. In some cases, sellers also need to self-account for the VAT due from their customers.
Who pays VAT, the buyer or seller in the UK?
VAT is 20% in the UK. A buyer pays this to the seller when they purchase an item, product or service. There are also some cases where the seller pays the VAT by way of a self-accounting mechanism.
What is the difference between sales tax and VAT?
Sales tax is found in the United States and is a tax applied at state government level on the purchase of goods or services. VAT is a consumption tax and is collected by all sellers in a supply chain, not just charged to the final consumer.
Our large advisory team can help you navigate the complexities of modern VAT compliance. Don’t hesitate to get in touch today.
Serbia is on the final straight to implementing its mandatory e-invoicing, which will come into effect from 1 January 2023. Legislative changes are still being proposed before that deadline to allow for a complete introduction of mandatory e-invoicing to the whole B2B sector.
On 12 December 2022, the Ministry of Finance published the following Laws on Amendments in the “Official Gazette of the RS” No. 138 among others:
1. Amendments to Serbia’s Electronic Invoicing Law
One of the changes regarding the scope of the Law on Electronic Invoicing involves natural persons who are not liable for income tax for self-employment, in the sense of the law governing personal income tax, who will be excluded from the provisions of the Law on E-Invoicing.
Regarding the type of transactions that will not be in the scope of e-invoicing, there will be no obligation to issue an electronic invoice for the sale of goods and services free of charge. Lastly, the legal entities and entrepreneurs who are not VAT payers, nor voluntary users of SEF, will not be obliged to record VAT calculation in SEF if they are tax debtors.
In case of a temporary interruption in the operation of the electronic invoice system, the system will consider an e-invoice as delivered at the time operation resumes. The act of the Ministry of Finance that regulates such procedures will be adopted on 1 April 2023 – three months from the date of entry into force of this law.
Also, the following paragraph will be added to Article 6 stating: “An electronic invoice that has been rejected can be subsequently accepted”. This provision will apply from 1 June 2023 for electronic invoices recorded in the central register of invoices, in accordance with the law regulating the deadlines for settling monetary obligations in commercial transactions.
The law will enter into force on 1 January 2023.
2. Amendments to Serbia’s VAT Law
The changes introduced to the law on VAT that impacts electronic invoicing processes stipulate that an invoice is an electronic invoice accepted by the buyer, as required by the Law on E-Invoicing.
The law ensures that the taxpayer accepting the electronic invoice within the deadline to submit the tax return may exercise the right to deduct the preliminary tax at the earliest date for the tax period where liability occurred. The taxpayer will also need to notify the tax authority about a change of data relevant to the calculation and payment of VAT contained in the registration form. The notification will be exclusively electronic and excludes notice in writing.
The law will enter into force on 1 January 2023, coinciding with the Serbian e-invoicing mandate go live date.
3. Amendments to Serbia’s Fiscalisation Law
The Law on Fiscalisation regulates, among other things, the subject of fiscalisation and the procedure conducted through an electronic fiscal device. The supply of goods and services, conducted by a fiscalization obligor to a legal entity or taxpayer of income from self-employment, outside the retail store, is not considered a retail supply. Therefore, such supply will not be subjected to fiscalization requirements and will not need to be recorded through an electronic fiscal device.
Moreover, the amendments specify that the fiscal receipt does not need to contain the value of the transaction per tax rate as a mandatory element. By scanning the QR code for verification, which has all the parts of an electronic signature when printing a fiscal invoice or a hyperlink for verification when a fiscal e-invoice is issued, it will be possible to receive additional information about the fiscal receipt.
The amendments to the Law on Fiscalisation that impact the future e-invoicing mandate cover changes related to the fiscal invoices issued to legal entities and taxpayers on income from self-employment. Transferring these fiscal invoices to the System of Electronic Invoices (SEF) will happen upon fulfilment of technical requirements. The Minister of Finance will further regulate the method and procedure of data transfer in the future.
Based on Article 7, a separate regulation will control the manner and procedure of data transfer to the SEF platform, that will be adopted within 180 days from the day when this Law enters into force. This means adoption will be in June 2023 at the earliest.
The Law on Amendments and Supplements to the Fiscalisation Act will be enforced on the 8th day following its publication, which took place on 12 December 2022.
Integration of the Fiscalisation system with SEF
The above amendments relate to the plans introduced by the MoF to integrate the Fiscalisation system with the E-Invoicing system (SEF), which will most likely start at the earliest in January 2024. As the Minister of Finance Vuk Delibašić announced on 1 December 2022: “The plan is to integrate the E-Invoicing system with the Customs Administration, e-fiscalization, as well as the creation of a semi-automatic VAT declaration, and an electronic excise tax is also being prepared.”
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