OSS VAT Returns: Deadlines, Exclusions and Penalties

Luca Clivati
August 22, 2023

Sovos’ recent observations of audits by EU Tax Authorities are that Tax Officers are paying more attention to the contents of One Stop Shop (OSS) VAT Returns. They have challenged, and even excluded, companies from this optional scheme.

OSS VAT returns must contain details of supplies made to customers in each Member State of consumption by the taxable person. Supplies that need to be reported are as follows.

Non-Union scheme

Supplies of services to non-taxable persons taking place in the EU. This includes supplies of services taking place in the Member State of identification.

Union scheme

Supplies of services made to non-taxable persons taking place in a Member State in which the supplier is not established. This includes the intra-community distance sales of goods.

Additionally, a taxable person can also declare domestic supplies of goods for which they are a deemed supplier in the Union scheme.

OSS VAT Return exemptions

A taxable person might be excluded by the Member State of identification from the scheme for several reasons. Considering the most common reasons, it’s important to note the following:

  • Reminders to submit an OSS return have been sent to the taxable person (or their intermediary) for three preceding return periods, and no VAT return has been submitted for the respective return period within 10 days of the reminder being sent
  • Reminders to make a VAT payment have been sent to the taxable person (or their intermediary) for three preceding return periods, and the full amount has not been paid within 10 days of receiving each of these reminders – unless the outstanding amount for each return is less than EUR 100

Let’s look at two case studies to further demonstrate the above.

Frequency of OSS VAT Returns

A taxable person submits a quarterly OSS return and pays the VAT owed by the last day of the month, following the end of each quarter. If they have not sold any goods in the EU during a tax period, they should submit a nil return.

OSS VAT Return deadlines

Taxable persons must submit their quarterly OSS VAT returns according to the following schedule.

  • Quarter 1: 1 January to 31 March
    • Submission period: 1-30 April
  • Quarter 2: 1 April to 30 June
    • Submission period: 1-31 July
  • Quarter 3: 1 July to 30 September
    • Submission period: 1-31 Oct
  • Quarter 4: 1 October to 31 December
    • Submission period: 1-31 January

If the due date falls on a weekend or bank holiday, the deadline is not moved to the next workday.

Case Study 1

A company, established and VAT registered in Spain, applied to the optional OSS Scheme under the Union scheme.

This company has an e-commerce store and customers can request delivery to their premises in any EU Member State. Under the terms and conditions on the website, the company clarifies that this channel is only for private individuals.

However, during an audit carried out by the German Tax Authorities, it has been noticed that some supplies are carried out in favour of business customers.

In some cases, the business customers have just shared their company name. In other cases, the companies have included their German VAT number in the purchase order on the internet (e.g. under “Additional comments”) and this information has been included on the invoice issued by the Spanish company.

Under these circumstances, the German Tax Office has provided the Spanish company with a warning as:

  • The OSS VAT Return cannot include B2B supplies
  • German VAT has been accounted for by the Spanish company and recovered by the German business customer – however, this supply is not subject to German VAT but should be zero-rated in Spain according to art. 138 of the EU VAT Directive
  • An amendment of the OSS Return was required

Case Study 2

A company established and VAT-registered in Turkey applied to the optional OSS Scheme under the Union scheme in Slovakia.

This company has an e-commerce store and customers request delivery from Slovakia, where the main supplier of the Turkish company is located, directly to their premises in any EU Member State.

Due to financial issues, the Turkish company has not paid its VAT liabilities despite submitting the OSS VAT returns on a timely basis.

Slovakian Tax Authorities have decided to exclude the company from the OSS Scheme.

Under these circumstances, the Turkish company:

  • Will remain excluded from using any of the three schemes (OSS Union Scheme, OSS Non-Union Scheme and IOSS) for two years
  • Must be ready to incur penalties and interests for the late VAT payments in any EU Member State where the supplies were carried out (up to 27 audits)
  • Will be required to register for VAT in each Member State they carry out supplies – no threshold is applicable for companies that are established outside the EU

What’s next for OSS?

The information about the supplies, available from EU Tax Authorities, will increase massively with the implementation of the Central Electronic System of Payment information (CESOP).

On 18 February 2020, the EU Council adopted a legislative package requesting payment service providers to transmit information on cross-border payments originating from Member States and on the beneficiary (“the payee”) of these cross-border payments.

Under this package, payment service providers offering services in the EU will have to monitor the payees of cross-border payments. They will have to transmit information on those who receive more than 25 cross-border payments per quarter to the administrations of the Member States.

As mentioned by the Tax Authorities:

  • The objectiveof this new measure is to give tax authorities of the Member States the right instruments to detect possible e-commerce VAT fraud carried out by sellers established in another Member State or a non-EU country
  • This information will be stored, aggregated and cross-checked with other European databases and made available to anti-fraud experts in Member States via a network called Eurofisc.

Payment Service Providers in the EU will need to report cross-border payments on a quarterly basis as of Q1 2024, with the first report due by 30 April 2024.

Sovos’ recommendations

We suggest double-checking the quality of the data included in your OSS Returns to the possibility of exclusion from the scheme.

Sovos’ experts are at your disposal to support you through a pre-audit of your data or corresponding with the Tax Authorities. Contact our team for more information.

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Luca Clivati

Luca joined Sovos in 2022 and is a senior manager of the consulting team within Compliance Services. He holds a Master’s degree in International Economics and has 13+ years of experience on cross-border transactions and international VAT and GST. Luca specializes in tax consulting advisory focusing on indirect taxes, diagnosis, solution, development and implementation of clients’ tax requirements, VAT compliance and tax due diligences within the EU and in jurisdictions outside of it (mostly Norway, Switzerland, New Zealand, Australia and Singapore).
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