VAT One Stop Shop:
short and sweet guide for CEE’s exporters and webshops
VAT One Stop Shop (OSS), a long awaited relief for exporters, is coming in full force on July 1st, after being postponed for a half year due to a pandemic. Are you a CEE webshop or in any way belong to the e-com industry? Here’s all you need to know.
95% obligations simplified — a change of status quo indeed
As exporters, we know the pain of becoming successful in a new market! After reaching a certain point in revenue, Germany, the Netherlands and Luxembourg having one of the highest thresholds and Romania charging at one of the lowest, you become a tax payer in that state. Process-wise, this is what we you are used to:
- VAT payment is compulsory in every country where your annual turnover exceeds a certain limit.
- These limits are specific to each EU country.
As of July 1st 2021, two major updates will likely change the way you operate:
- VAT payment is compulsory in one country only.
- There’s one limit: 10, 000 EUR net in one year cumulatively across all markets where you sell. Country-specific VAT thresholds will cease to exist from July 1st 2021.
One country, one portal, your own language
The OSS is an electronic portal which simplifies up to 95% of VAT obligations for online sellers and electronic interfaces throughout the EU, according to EU’s official portal.
You can probably guess some of the advantages, right? “One stop shop enables sellers to do VAT reporting for the whole EU in just one spot. And it’s not even an institution they have to go to, it is way more convenient: since April 1st, you can register to a digital portal where you can submit and manage everything electronically, in your own language, even if the sales are cross-border,” Growww Digital’s co-founder László Szábo explains.
The European Commission agrees: “In practice, a taxable person who is registered for an OSS will electronically submit OSS VAT returns detailing the supplies that can be declared along with the VAT due. The VAT return is submitted quarterly.”
Advantages: Centralizing, cost-efficient and time-saving!
Although you won’t pay less on VAT itself, One Stop Shop actually comes with a lot of cost-cutting benefits. “Up until now, companies needed to keep track of turnovers in each country and when reaching them, they had to register for each country separately, often in person. That was extremely time-consuming, not to mention slow and expensive,” Helena Luxová from Meriglobe explains, “countries such as Spain or France demanded translations of all documents including deed of incorporation, certificate of fiscal residence etc. That makes 1,000 EUR and more per country. Not to mention notaries, apostilles and sending documents via post.”
According to Luxová, there was also a significant cost in having a person who understands domestic taxes and taxation systems in each country, as these systems are so different in each member state: “Now, businesses submit one tax return via one portal and pay in EUR to one bank account. It’s almost as simple as can be.”
Besides cutting down the administrative load, Szabó from Growww Digital believes that the simplification will work towards more cross-border sales, higher transparency in tax payments, as well as a fairer starting point between suppliers from the EU and from the third countries. Last but not least, it is a step forward digitalization and competitiveness of European e-commerce in the global arena.
How to choose the country of VAT registration?
No question this is good news (unless perhaps, you strangely enjoy keeping track of various mentally-draining processes or believe the more paperwork the better, in which case, we are sorry for your loss). But then again, any change stresses businesses out. You need to prepare and the time is now.
So first things first: if you are supposed to manage VAT payments to various markets through one institution in one state, which one should it be?
According to the European Commission, if you are an EU member, once you exceed the 10,000 EUR threshold, you are liable to apply in the country where your business is established. Are you a Budapest-based company selling abroad? That would make Hungary your only VAT registration country now. Are you originally from the Czech Republic, but setting up new legal entities in every country where you expand? In that case, choose one of those states. “If the taxable person has fixed establishments in different EU member states, they are entitled to choose one of those member states,” European Commission states. According to VAT OSS, you are then bound by that decision for the next three calendar years, unless the fixed establishment is dissolved or is moved to another country.
Where to register for Czechia, Hungary, Slovakia and so on?
Each member state has its own portal where you can already register (since April 1st). Once you fill in the registration form, you’ll get access to One Stop Shop portal and everything you submit from now on will be automatically visible in all member states. Once with access, you’ll be submitting a tax return for your cross-border sales in this interface.
Here are the links for CEE’s member states:
One Stop Shop (OSS) in a nutshell
The new legislation applies to B2C suppliers, distant sellers of goods within the EU (webshops) selling their products abroad as well as e-commerce interfaces enabling trade of goods (such as Amazon). The OSS will work in three regimes: the Union OSS for taxable persons seated in an EU member state (this applies to you if you are an exporter in the CEE region), the non-Union OSS for taxable persons from outside the EU and the Import OSS (IOSS) which will apply to goods up to EUR 150 sold directly to European end customers from third countries (e.g. China).
Is the old regime still beneficial for anyone? Not really
Reporting in the OSS regime is voluntary until you reach 10,000 EUR turnover. Below this new EU-wide threshold you can continue to apply the domestic rules for VAT on your cross-border sales: be registered for VAT in all member states and file VAT returns there.
“However, if this applies to you and you do not register in the OSS regime, the limits for mandatory registration that we are accustomed to will no longer apply,” Petr Linx, Manager at BDO, writes, “in practice, this will mean that if you start selling goods to a new EU member state in July, you will likely have to register for VAT in that market and pay VAT there from the first transaction.” Can it still be beneficial for some businesses to stay under the old regime? “No, it really is not worth it,” Helena Luxova sums up. There’s no hidden advantage of keeping the status quo. So, let’s jump on the bandwagon.
Register for a webinar: tailor-made for webshops expanding to CEE
Join us as we break down the process of applying One Stop Shop solution for exporters in CEE in our up-and-coming online event on 7th July from 14:00 CET with Lilla Németh, Director of Tax services at RSM Hungary Tax and Financial Advisory Services Plc.
NOTE: This article focuses on the impact VAT OSS has on suppliers and webshops in the CEE region and therefore focuses on information relevant to that audience. One Stop Shop itself works in three regimes and covers much more ground when it comes to importing from third countries or territories (IOSS) If that applies to you, here’s a super comprehensive summary.