European VAT rules for e-commerce
The European Union introduced in July 2021 the current e-commerce VAT rules , implementing the OSS scheme, or One-Stop-Shop. This article will outline what entails current e-commerce VAT rules. You may also want to watch our webinar on VAT rules for ecommerce in Europe.
European VAT regulations for e-commerce
OSS scheme allows distance sellers to maintain one single VAT registration and only one VAT return is to be submitted quarterly for sales in all countries.
Still, OSS scheme is voluntary. Therefore, distance sellers who do not join OSS must VAT register in all EU countries where they are selling their goods to final customers, charging VAT at the applicable rate in the country of destination, and submit the correspondent VAT returns in each of these countries.
It is important to note that there are some exceptions to OSS scheme, which we will introduce in the next section: i) transactions made before 1 July 2021, and ii) holding stock in several EU countries, are some of them.
Most important aspects of the European VAT regulations for e-commerce
Old e-commerce VAT rules
Old e-commerce VAT rules are applicable for those transactions performed before the 1 July 2021. That is, an e-commerce business must register for VAT in the client’s country when sales in that given country exceed 35,000€ per year – former distance sales thresholds. This threshold had been increased to 100,000€ in certain countries like Germany and The Netherlands.
For example, if a company established in Germany sold products from Germany to French consumers for an annual value of 30,000€ between January and the 30th of June 2021, it does not have to register in France, but if the value of those sales was 36,000€ it would need to register for French VAT and regularize those sales. The same would apply to sales in any other EU country.
In this article we explain what a VAT number is and how can you get one.
Also, if you imported your products from a non-EU country so they are sold to European customers, and you acted as the importer of records, you would normally need to register for VAT in each country.
Holding stock in the EU
For certain scenarios, OSS scheme cannot be applied to avoid multiple VAT registrations. This is especially true for members of Amazon’s pan-European program, as holding stock in another country obligates the seller to be VAT registered in that country. This also applies for distance sellers who are not in the pan-European program but store their products in a warehouse in another Member State.
Anyone holding stock in a foreign EU country would need to register for VAT in the country where they hold stock. Some e-commerce sellers move their products closer to their potential clients so they can make a speedy supply. This is the case for Amazon FBA sellers. In these schemes where the goods are stored in a foreign EU country, a VAT number in that country is always required.
In consequence, members of Amazon’s FBA or pan-European program can benefit from OSS scheme for reporting their Intra-Community distance sales, but this will not avoid VAT registrations in the countries where they are holding stock. This also applies for distance sellers who are not in the pan-European program but store their products in a warehouse in another Member State.
For example, a French online seller, who is holding stock in France, Germany and Spain must be VAT registered in those three countries where he holds stock, and also join to OSS scheme to report the Intra-Community distance sales made from the different warehouses – eg., a sale made from the Spanish warehouse to a private customer in Portugal.
Additionally, special rules apply for marketplaces such as Amazon or eBay.
There is an annual threshold of 10,000€ that applies for all Intra-Community distance sales and Telecommunications, broadcasting & electronic services (TBE services).
When distance sales do not exceed this threshold, VAT can be charged at your country’s VAT rate, this is, these intra-Community distance sales will have the same VAT treatment as domestic supplies. However, when that threshold is crossed in another Member State, VAT must be charged at the rate of each country of destination.
Check out our overview on all European VAT rates.
If you are performing both Intra-Community distance sales and TBE services, you must account all those transactions to calculate the threshold of 10,000€. Also, this is a global threshold in the sense that it does not apply separately per country of destination, but you must account for all EU Intra-Community distance sales and TBE services made.
Finally, the 10,000€ global threshold can only be applied by Suppliers established, with permanent address or usually residing in only one EU country. Also, the goods must be sent from the Member State of establishment. Therefore, the exemption threshold does not apply if the Supplier is established outside the EU, neither by a Supplier that keeps stock in several EU countries.
One-Stop Shop (OSS)
OSS schemes allow e-commerce businesses to have one single VAT registration for their sales in all EU countries. In this sense, all sales in Europe can be reported in a single VAT return and the VAT is paid in a single country.
There are three possible schemes for sellers to join depending on the type of supplies and the country of establishment: Union OSS, non-Union OSS, and Import OSS.
It is important to note that these are voluntary schemes, therefore, online sellers making intra-Community distance sales or import distance sales may opt to VAT register in each of the countries of destination of the goods.
Which transactions are covered by the OSS schemes?
When you sell products from your home country to customers in your home country, these sales are not covered by the OSS scheme and will be reported in your usual VAT return. If, however, these products come from another EU country, such sales would qualify as intra-Community distance sales and you would report them in the OSS return.
Other types of transactions that are normally covered under the new e-commerce VAT rules include:
- Distance sales of goods and services to non-taxable person in another EU country.
- Distance sales of goods imported from outside the EU in shipments below 150€.
Which companies can participate at OSS?
Non-EU businesses, EU businesses, and marketplaces (also known as a deemed supplier) are eligible. It is important to note that depending on the activity to be carried out and where the business is established, one of the three OSS schemes mentioned above would apply (Union OSS, non-Union OSS, and Import OSS).
Benefits of OSS schemes
E-commerce VAT rules in Europe and the OSS regime provide many benefits for participants. They may avoid VAT registering in multiple countries for simply carrying out cross-border transactions. Things like having to register in different countries, keeping track of due dates, making sure the payments are sent correctly and litigating in different languages can cause a big headache for sellers. OSS regimes lessen the burden on sellers while also reducing their administration costs.
At Marosa we can help you
We understand that e-commerce VAT rules can be confusing, especially when trying to figure out how to correctly prepare VAT returns. The good news is that Marosa has an automated and cost-efficient software that will help you to submit all VAT returns automatically with an easy-to-use wizard that will guide you in each filing.
Get in touch
Still have any questions about what is input and output VAT? We would be happy to help clarify, as well as discuss how our solutions can make your VAT accounting easier.