UK
  • Singapore
  • Hong Kong
  1. Osome Blog UK
  2. OSS or IOSS? VAT One-Stop-Shop Rules for E-commerce in the EU

OSS or IOSS? VAT One-Stop-Shop Rules for E-commerce in the EU

On the 1st of July 2021, the European Union’s (EU) existing VAT rules will be replaced by two new alternatives: the One-Stop-Shop (OSS) scheme, and the Import One-Stop-Shop (IOSS) scheme.

The goal is to simplify the way selling is done within the EU by enabling suppliers to declare the VAT for all their transnational European B2C sales on a single return.

In this article, we’ll take a look at the two schemes—outlining what they are, why they’re useful, who qualifies, and when VAT returns need to be submitted.

If you’re wondering how else to start selling in the EU, we’ve prepared a guide to help you register you for VAT, handle tax reports and filings, and provide a fiscal representative if you need one – all in Europe.

The OSS Scheme

The OSS scheme aims to streamline and simplify the process of VAT obligations for businesses operating in different EU member states. Technically speaking, the OSS itself is an electronic portal that businesses use to pay the VAT they owe as a result of e-commerce sales to EU-based consumers.

When using the OSS, businesses pay VAT according to the rate of the Member State where their goods are dispatched to—or where their services are supplied.

Note

They must also keep all relevant records for a minimum of 10 years.

However, it’s worth noting that there are actually two separate versions: the Union One Stop Shop and the Non-Union One Stop Shop.

So who uses which version, and under what circumstances? To find out, check out the tables below.

Supplies of services to consumers (B2C)
Non-EU established taxable person/supplier Non-Union scheme (OSS)
EU established taxable person/supplier Union scheme (OSS)
Distance sales of goods within the EU
Non-EU established taxable person/supplier Union scheme (OSS)
EU established taxable person/supplier Union scheme (OSS)
Domestic supplies of goods by deemed suppliers
Non-EU established taxable person/supplier Non-Union scheme (OSS)
EU established taxable person/supplier Union scheme (OSS)

Who Qualifies?

The OSS scheme is for services, intra-Community distance sales of goods, and sales of goods through an online electronic interface. It exists for businesses that supply goods and services to non-taxable persons in different member states. Defined services include:

  • Cultural
  • Educational
  • Sports
  • Scientific
  • Immovable property

The OSS can be used by:

  1. Taxable persons established in the EU (that are not deemed to be supplie

In this case, the OSS can be used when supplying B2C services that take place in Member States where the person is not established. It can also be applied to distance sales of goods within the EU.

  1. Table persons not established in the EU

For all distance sales of goods within the EU.

  1. Electronic interfaces (whether established in our outside the EU) that facilitates supplies of goods (and is deemed to be the supplier)

This would apply for distance sales of goods within the EU, as well as the domestic supply of certain goods.

The New Rules Regarding Thresholds

The existing local thresholds for intra-Community distance sales have been replaced with a new EU-wide threshold of €10,000—this will be applicable to the total supply of intra-Community distance sales of goods sold to all member states, and digital services supplied to final consumers in other member states.

If the threshold is not exceeded

The supply will be taxed according to the VAT rate of the seller’s country.

If the threshold is exceeded

Note

This only applies to sellers using the OSS scheme. Intra-Community distance sales of goods and digital services that exceed the threshold will be taxed according to the VAT rates of the member states in which the consumers live. However, the VAT itself can be paid via the UK tax authority (i.e. HMRC).

How Does The Threshold Apply To Services?

You can only apply the threshold to digital services, and not to other services supplied in the consumer’s resident EU state (such as construction work).

If the seller has a permanent establishment within another EU member state, it cannot apply the threshold to the distance sales of goods and provision of digital services in that member state. The VAT for the supply of the goods and services must be declared in that member state by using the normal process.

Submission Of Returns Under The OSS Scheme

The OSS return is submitted quarterly—by the end of the first month of the next quarter. For example, the first deadline is 31 October 2021. The VAT that companies owe must be paid on the same date as they lodge their declaration. Unlike the current MOSS scheme, the data provided on an OSS return can be changed on the next OSS return—not by correcting an earlier return.

If the supply is located in a different nation to the business’s permanent establishment

The return can also be used to declare the goods or services covered by the OSS scheme which are supplied by permanent establishments in other EU states if the place of supply is not the state where the permanent establishment is located.

If supply is in the same location as the business’s permanent establishment

On the flip side, if the permanent establishment is also the same place as the supply, then the supplies are declared on a standard VAT return.

The IOSS Scheme

The Import One Stop Shop (IOSS) special scheme is for distance sales of goods imported from non-EU countries.

The IOSS scheme is being introduced to simplify the declaration of import VAT for low-value consignments. After all, remember the VAT exemption for import consignments with a value of up to €22 was abolished on the 1st of July 2021.

What’s Changing?

Usually, buyers have to submit a customs declaration and pay VAT when the goods arrive in the EU—now, the sellers of the goods can use the IOSS scheme to collect VAT from the buyers upon payment, and declare the VAT to the tax authority in their monthly IOSS returns.

Sellers using the IOSS scheme can add the import VAT to the sales price of the goods at the point of sale—essentially, buyers won’t be slapped in the face with any further tax obligations when they receive the goods.

Once a business (who is using this special scheme) registers for the scheme in one EU member state, and declares and pays VAT on the import of the goods in that member state, they won’t have to do so in every member state to which the goods are imported.

Who Qualifies?

The consignments must tick all of the following boxes:

  • Imported to final consumers whose place of residence is in the EU
  • Located (at the conclusion of the sales contract) in a non-EU country
  • Have an intrinsic value not exceeding €150 and not subject to excise duty

The intrinsic value consists of the price of the goods sold (not including transport and insurance costs—unless the costs are included in the price) and other taxes and charges made by the relevant customs authorities.

Submission of Returns

IOSS are submitted on a monthly basis. Return must be made by the end of the month following the month of supply. If you supplied goods on July 1st, for instance, then you would have to submit your return by the 31st of August 2021. The same applies to the payable VAT.

Similar to the OSS return, if the data reported on the IOSS return has to be changed, you submit the changes on the next IOSS return.

It’s Time For Something New

Out with the old, in with the new. Both schemes aim to simplify the arduous and complicated process of remaining compliant while trading across different EU member states.

Still, let’s face it—working out your VAT obligations is a bore. It’s a needlessly complicated, brain-draining and tedious process that involves time, resources and manpower—resources that you could otherwise put to good use growing your business, and it’s made more difficult by the fact that governments constantly change the tax code.

Sigh no more. With Osome, keeping your books in order won’t keep you up at night. Oh yes, it’s that easy.

If you need any advice or help with the OSS or IOSS, or if you simply want to save your business 40 hours every month, speak to a trusted accountant in the UK here.

Share this post:

Tips to run your business smarter.
Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

You might like it

Running My Business

Should I Close My Company or Make It Dormant?

Choosing between closing your company for good and making it dormant is a huge decision to make. Before taking that step, get to know what the consequences are for each decision. We’re here to help.

E-commerce

Shopify Plans And Prices Analysis: Which Is The Best?

When you start an online business, you will definitely require a platform like Shopify for you to perform basic business operations. This article helps you to see which Shopify plan is best for the stage of the business you’re at.

Entrepreneur's Bootcamp

Tips To Maintain a Compliance Calendar

The repercussions of missing crucial deadlines extend beyond non-compliance and can even include hefty fines, lost revenues and opportunities, as well as decreased productivity.

E-commerce

How Amazon Sellers Can Better Manage Inventory To Improve Sales & Cashflow

Brand owners and sellers of all scales struggle to seek a well-balanced supply chain. Additionally, Amazon has its own inventory management rules, which makes everything even tougher.

E-commerce

10 Best Hosting Providers for E-commerce in 2021

If you are looking to sell online, the right e-commerce hosting provider can make all the difference. However, with a variety of options out there, choosing the best provider can be confusing.

E-commerce

What an Invoice for E-commerce Businesses Needs To Have

For business owners who own and run an online store, you probably already know that invoices must be sent to your customers for the services you provide or the goods you sell, as a form of purchase proof.

Incorporation

How New Company Owners Should Prepare Financial Statements

After you register your company, you may want to start thinking about your company’s finances such as monthly income, expenses and taxes because UK company owners need to submit their company’s annual accounts to Companies House.

Incorporation

What Are the KYC or Know Your Customer Checks In the UK When Opening a Company?

KYC checks are needed for the authorities to combat money laundering and terrorism financing. You might unwittingly partner up with clients who are using their business relationship with your company to launder money or facilitate other nefarious projects.

E-commerce

Top 8 Features You Need On Your Online Shop To Increase Conversion Rate & Average Order Value

Every e-commerce merchant wants to increase their sales conversion rate and boost their average order value. But not everyone goes about it the right way. However, if getting more conversions was easy, everyone would be running a super-profitable store, right?

E-commerce

A New Seller's Guide to E-commerce Fulfillment & Shipping

Ecommerce fulfilment and shipping for your UK-based business matters. This guide unpacks how the right strategy can influence your bottom line and help you find what’ll work best for you - whether it’s in-house fulfilment, dropshipping or a solid partnership with a 3PL.

Amazon

4 Steps How To Succeed In Private Label Sales On Amazon

One of the most common mistakes Amazon private label sellers make is that they just assume they can sell and make money easily when they start private labelling. Learn from Amazon sellers who have tried.

E-commerce

Where Else Do Amazon UK Sellers Sell?

In the fast-paced world of eCommerce – where consumers’ shopping behaviour is changing, many sellers are asking themselves how they can get a bigger piece of the lucrative Amazon pie or how they can make more and more sales – besides from selling on Amazon?

Tips to run your business smarter. Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

We’re using cookies! What does it mean?