On July 1, 2021, the EU’s new VAT reform came into effect. The new rules for online sellers are supposed to simplify VAT filings for distance selling within the EU, but also for import VAT due on products from outside of the EU. The VAT reform does not only affect sellers
with their own online shop, but also sellers who use third party platforms like Amazon or eBay can be affected. In this article, we will tell you all you need to know about the new VAT reform.
What is OSS?
The acronym OSS is short for One Stop Shop. The idea behind OSS is to have “one stop” only where you pay VAT instead of having to register for VAT in each EU country where you sell goods.
With OSS, the concept is now expanded to include B2C eCommerce sellers based in EU countries. The new One Stop Shop is not just reforming how online sellers can register and file for VAT though. It also includes the IOSS, the Import One Stop Shop concerned with import VAT registration and filings as well as new, harmonized distance selling thresholds. Let us focus on each of these aspects one after the other.
Simplifying VAT with OSS – How does that work?
Before OSS, you had to register and file for VAT in each European country that your customers were based in. Now, you are able to register in one country only and do your VAT filings all in one. However, there is one exception to this rule. You will still have to register for VAT in EU countries where you store your goods.
Also, the OSS only applies to B2C transactions. For you as an Amazon seller it is important to note that if you store and sell goods through Amazon FBA, this also counts as storing goods in a country, even if it is Amazon who stores them on your behalf.
A new distance selling threshold
Along with OSS, a new EU-wide distance selling threshold is introduced. Instead of having different thresholds for each country to be monitored, there will now only be one threshold. The EU-wide VAT selling threshold is set at 10,000 € per year.
This offers both advantages and disadvantages. On one hand, you do not have to monitor several thresholds for all the countries you sell to, on the other hand, it has now become easier to cross that threshold.
Import One Stop Shop and the end of low-value VAT exemption
The Import One Stop Shop (IOSS) aims to simplify import VAT registrations and filings. Similar to OSS though, it comes with a significant change for when import VAT is due. Up until now, items valued at or below 22€ were VAT exempt. Under the new regulations, sellers can collect, declare and pay import VAT for all items valued between 0 and 150€. But the import VAT exemption for goods valued between 0 and 22€ has been abolished with the introduction of IOSS.
Sellers who profited from being able to offer these items cheaper from outside of the EU due to the VAT exemption will not be able to use that competitive advantage anymore. As an eCommerce seller based in the EU, or with a local representative for your business registered in the EU, you can request a VAT number for all IOSS transactions from your local tax office.
Do I have to use OSS and IOSS?
While the new thresholds as well as the abolishment of the import VAT exemptions apply to every B2C distance online seller in the EU, the use of OSS and IOSS is not obligatory at this point. Therefore, it is up to you whether you want to register for OSS and IOSS or not.
If an online seller opts out of IOSS, import VAT will be collected directly from the customer upon delivery by the shipping company.
As an Amazon seller, it is also possible that Amazon takes care of the IOSS for you and collects and declares import VAT on your behalf. Amazon can provide an IOSS number for you that you can then use on your documents.
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