From 1 July 2021, the EU introduced its e-Commerce VAT Package. The package replaces existing distance-selling rules and extends the Mini One Stop Shop (MOSS) into a wider-ranging One Stop Shop (OSS).
This represents a significant change to VAT rules for B2C supplies of goods and services, both as imports to the EU as well as intra-EU trading. The new, significantly lower pan-EU threshold of €10,000 (€0 for businesses established outside the EU) will impact most businesses who now need to account for VAT on more supplies.
Compared to the requirement for multiple VAT registrations under longstanding distance selling rules, with the OSS simplification, businesses may be able to register in one Member State and report all EU transactions through a single OSS return filed periodically. Payments are collected and distributed from the tax authority in this Member State to others where the VAT is due.
The EU e-Commerce VAT Package introduced three schemes under OSS:
From 1 July 2021: The EU e-Commerce VAT Package came into effect. Whether or not a business decides to use the OSS schemes, they now have to account for VAT in all countries where they have a VAT liability. This may result in additional VAT registrations being required.
Failure to submit returns and make payments or notify the relevant tax authority of a significant change in supply chain (e.g. warehouse) on time can result in penalties. These can be imposed in each Member State where VAT is due or even expulsion from the scheme. Consequently, the penalisation of a single late return in multiple countries creates significant exposure to penalties.
Repeated noncompliance can lead to exclusion from the OSS schemes. The taxpayer then needs to register for VAT in all Member States where it has a VAT liability.
If expelled from the scheme, the two-year exclusion period could have significant commercial consequences as compliance costs are likely to increase and new VAT numbers will be required urgently.
Exclusion from IOSS may require the business to change its commercial arrangements with its customers which could have a significant impact on sales or increase compliance costs.
Implementing the changes required to comply with the EU e-Commerce VAT Package into your ERP system could take significant time and resources. Sovos can help ease the tax burden and help you prepare for and understand the right solution for your business.
Our large advisory team can help you navigate the complexities of modern VAT compliance.
Contact us to discuss how we can help your company prepare for the digital future of tax.