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What are the different options available to sellers’ for VAT compliance?

What are the different options available to sellers’ for VAT compliance?

by admin
August 24, 2021

Cross Border VAT Compliance

Value added tax or commonly known as VAT is collected uniformly by all sellers of goods and services at every stage of the supply chain.  Therefore, every party involved in the product contributes to the tax structure, invariably, from the producer, distributor, retailer and end consumer  Unlike sales tax where only the final consumer takes the burden.  

The E-commerce platform is gaining recognition and is widely used commonly in EU states.  Further, the pandemic only consolidated its necessity.  If going by statistics, nearly 25.5% of ecommerce in Europe is online cross-border.    However, with the sales through ecommerce platform in 2017 is around €602 billion, yet VAT non-compliance costs EU member states around EUR50bn (USD61bn) each year.  

The new VAT rules in place from July 1, 2021, brings forth a new set of rules and regulations for complying. 

The following steps need to follow for VAT compliance:

1. VAT returns through one-stop shop (OSS):

Sellers participating in OSS Scheme:

The following  for conditions needs to be met for registering under OSS scheme:

1. A taxable person established in the EU

  • Who supplies goods within the EU  
  • Supplies services to a member state even if he is not established

2. A taxable person not established in the EU

  • Who supplies goods within the EU

3. Deemed supplier (marketplaces like amazon)  either established or non established in the EU

  • Who supplies goods within the EU
  • Certain domestic goods supplies

Sellers registration procedure under OSS scheme:

  • Register for VAT in a single member state for all EU sales of goods and services 
  • Apply the member state VAT rate where the goods are dispatched or services rendered
  • Collect VAT from the buyer of goods and services
  • Submit and make payment quarterly VAT return through OSS portal member state where you are registered for OSS
  • Maintain records of all eligible OSS sales it facilitates over 10 years

Sellers not participating in OSS scheme:

Sellers not interested in participating in the OSS scheme, need to register, collect and remit VAT in each EU member state.

2. VAT returns through Import one-stop shop (IOSS):

Sellers participating in IOSS Scheme:

This scheme benefits suppliers and marketplace not based in the EU to  collect, declare and pay the VAT to the tax authorities, instead of making the buyer pay the VAT at the moment the goods are imported into the EU.

The following  for conditions needs to be met for registering under IOSS scheme:

  • Import or transport consignment from outside the EU at the time of sale
  • Import or transport consignment from outside the EU not exceeding a total of Euro 150, irrespective of number of items in the consignment
  • The items are not subjected to excise duties like alcohol, PC etc.

Sellers registration procedure under IOSS scheme:

  • Since, not established in the EU State, need an intermediary to fulfil their VAT obligations under the scheme
  • Register for VAT in a single member state for all EU sales of goods and services 
  • Apply the member state VAT rate where the goods are dispatched or services rendered
  • Provide the IOSS VAT number and amount of VAT to be paid by the buyer in the EU during custom clearance
  • Collect VAT from the buyer of goods and services
  • Submit and make a monthly VAT return through the online IOSS portal of the EU member state where you are registered for IOSS
  • Maintain records of all eligible IOSS sales it facilitates over 10 years

Sellers not participating in IOSS scheme:

Sellers not interested in participating in the IOSS scheme, need to register, collect and remit VAT in each EU member state.

3. VAT returns through deemed sellers (Marketplaces like amazon, eBay):

The marketplace is liable for VAT when it facilitates supplying goods, made by an actual seller not established in the EU, to buyers in the EU:

  • Intra-EU distance sales of goods
  • Domestic supplies of goods
  • Good released into free circulation into the EU
  • Value of goods imported into the EU shipment value is below Euro 150

Deemed sellers registration types:

  • For goods imported outside the EU they need to register under IOSS, if they do not prefer, they are not liable for taxation
  • For the goods available in the EU, but sellers based out, under OSS, they can register; if they do not prefer, then register where the customer is based

Deemed sellers registration procedures  under IOSS / OSS:

  • Follow the guidelines as the normal sellers under both schemes do

Also Read: The New EU VAT Rules Affect Online Marketplace

Final thoughts:

Before starting the process for registration, go through the requirements:

  • Registration is required under IOSS or OSS or normal way
  • Do we have the appropriate software for incorporating the changes

Find the right service provider to help you do the needful formalities. We at Salesvat specialize in guiding our clients through the process.  Give us a call, we will help you do the needful.

Disclaimer: The views and opinions expressed in our blogs and articles are for information purpose only. Our blogs and articles do not constitute advice and should not be relied upon for making any of the business decisions. Please get in touch with your accountant or seek professional help.



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