The VAT OSS (One Stop Shop) system is a simplified VAT settlement mechanism that came into effect in the European Union on July 1, 2021. Its primary purpose is to make it easier for businesses to settle VAT on cross-border sales to end consumers in different EU member states. With VAT OSS, companies can avoid registering for VAT in every country they send goods or provide services.
VAT OSS, what is it?
VAT OSS (One Stop Shop) is a system that allows EU and non-EU entrepreneurs to simplify tax settlements related to distance sales. Under VAT OSS, a business can register in one member state and file a single VAT return covering sales to other EU countries.
Key features of VAT OSS:
- Instead of registering in each EU country, a business registers only once in one member state.
- One quarterly VAT return is filed to cover all transactions in EU countries.
- VAT is accounted for at the rates in effect in the purchasers' countries, meaning that the trader applies the VAT rates in effect in the member country to which he supplies goods or services.
VAT OSS is particularly useful for entrepreneurs engaged in e-commerce, digital services, and remote goods delivery.
OSS VAT - To whom does it apply?
VAT OSS applies to entrepreneurs who provide certain types of transactions to consumers in the EU. The main groups subject to the OSS VAT procedure include:
- E-commerce sellers are entrepreneurs who sell goods to consumers in other EU countries, e.g., online stores making cross-border distance sales.
- Electronic, telecommunications, and broadcasting service providers - e.g., streaming platforms, cloud services, or software sales.
- Non-EU entrepreneurs - non-EU companies that provide services or sell goods to consumers in the EU can also use the OSS procedure.
- Entrepreneurs making remote deliveries of goods from warehouses in the EU - this applies, for example, when an entrepreneur warehouses goods in one member state and sells them to consumers in other EU countries.
However, OSS VAT is not compulsory – entrepreneurs can decide whether to use this system or prefer classic VAT settlement in each EU country where they sell.
What does the OSS procedure consist of?
The OSS procedure is designed to make life simpler for entrepreneurs. It makes VAT settlement more transparent and convenient. The OSS procedure consists of several key steps:
-
Registration for VAT OSS
A business must register for VAT OSS in one of the EU member states. Registration is done online through the National Tax Administration. -
Filing VAT returns
A registered trader submits one standard VAT return for all transactions covered by the OSS. The declaration is filed quarterly and includes sales details in each EU country. -
Charging VAT according to local rates
When selling, a business must use the VAT rate in effect in the country where it supplies goods or services. The OSS system helps manage the different VAT rates in the EU. -
Tax payment
After filing the return, the businessman pays the VAT due to the tax administration of his OSS registration country. The country then distributes the tax to the relevant EU member states. -
Monitoring sales thresholds
Entrepreneurs must keep track of their sales turnover, as there is a turnover threshold (€10,000 per year) below which they can account for VAT in their home country. Once this threshold is exceeded, the VAT OSS must be used.
Benefits of the OSS procedure:
- Significant simplification of VAT formalities.
- Saving time and resources by eliminating the need to register in each EU country.
- A single place for VAT settlements in different member countries.
VAT OSS is a modern tool for businesses operating in the EU that simplifies tax settlements and facilitates cross-border sales. It allows companies to focus on business growth instead of complicated administrative duties. When considering the OSS procedure, entrepreneurs should carefully analyze their needs and the benefits of this solution. VAT OSS is a response to the challenges of modern trade and an opportunity to simplify tax obligations.
