Background
The so called One-Stop-Shop procedure (OSS) recently adopted as part of the German Annual Tax Act 2020 will replace the current VAT Mini-One-Stop-Shop (MOSS) procedure as of July 1, 2021.
The current MOSS procedure is a special procedure that allows an entrepreneur to centrally pay VAT amounts due in other EU countries. In this way, registration in several member states is to be avoided. Entrepreneurs based in the EU have the option to settle their reporting obligations for other member states in their own country of domicile.
However, the current MOSS procedure is not mandatory. The performing entrepreneur can also register in all states and fulfill his national obligations there. Up to now, both EU and third-country entrepreneurs could only report telecommunications, radio and television services and services provided electronically (so-called TRFE services) to private customers (non-entrepreneurs, B2C) via the MOSS procedure.
What is new under OSS?
As of July 1, 2021, the following will change, among other things:
- Third-country traders will in future be able to report all other supplies to non-traders taxable in the EU-territory under the OSS, and no longer only so-called TRFE supplies as before.
- The current MOSS procedure will be extended to (a) supplies within a Member State via an electronic interface, (b) inner-EU mail-order or online sales, and (c) all B2C services provided at the place of consumption in the EU territory.
- Both third-country traders and EU traders will be able to apply for distance sales of goods in consignments with a tangible value of up to EUR 150 from the third-country territory, a new Import-One-Stop-Shop (IOSS) will be introduced. Both third country entrepreneurs and EU entrepreneurs will thus be able to report distance sales of consignments with a tangible value of EUR 150 or less in the IOSS in the future. In this case, the import of the goods is exempt from VAT.
- Introduction of a de minimis limit of EUR 10,000, which does not apply per country but to the total of all sales covered by the OSS regulation.
The extension of the MOSS procedure to inner-EU mail-order sales offers German mail-order companies the opportunity to report inner-EU sales to private customers for VAT purposes in Germany only.
Selected aspects of OSS
Participation in OSS is not mandatory. In this respect, the entrepreneur has the right to choose. However, by participating in an OSS, the entrepreneur has the option of declaring and paying VAT due in other EU member states centrally (in just one member state). This means that registration for VAT purposes in several Member States can be avoided.
Entrepreneurs established in the EU can thereby fulfill their reporting and payment obligations for the other Member States in the Member State of establishment.
Entrepreneurs established in a third country are in principle free to choose a Member State.
As a result, the OSS will primarily be used to process inner-EU mail-order sales (but only those) and thus cross-border deliveries to end consumers within the EU. Merchants with a single central warehouse in their country of domicile or “Fulfillment by Amazon merchants” who have merely agreed to store their goods in their country of domicile will thus indisputably benefit from the OSS.
However, if a German online merchant also uses a foreign warehouse (e.g., as part of Fulfillment by Amazon “FBA”), at least two types of transactions will be conducted that cannot be processed through the OSS process under the current legislation:
inner-EU shipments with taxation of the notional intra-EU acquisition in the case of shipments of items to a foreign Amazon warehouse or by Amazon between foreign FBA warehouses, and
- purely domestic deliveries in other EU countries (e.g. from a Polish FBA warehouse to an end consumer in Poland).
With regard to invoicing for inner-EU mail-order sales, the German VAT Act (Section 14a (2) UStG) stipulates that there is generally an obligation to issue an invoice for such distance sales. However, this does not apply if the entrepreneur participates in the OSS procedure.
Participation in OSS
For companies based in Germany, participation in OSS must be applied for at the Federal Central Tax Office (BZSt). For entrepreneurs based in third countries, special regulations apply to the application for participation in the OSS procedure.
VAT reporting obligations under OSS
For each taxable period (= calendar quarter; Section 16 (1d) sentence 1 German VAT Code), the entrepreneur must electronically submit a VAT return to the tax office to which he has notified participation in the special taxation procedure within one month of the end of the taxable period; this also applies if no sales were made using OSS.
In doing so, the entrepreneur must separate the transactions attributable to the respective EU member state and subject them to the tax rate applicable in the respective EU member state. The entrepreneur must calculate the tax himself.
A permanent deadline extension is not possible.
We will be happy to assist you with questions and the implementation of OSS for your company.
Sources: BZSt, Steuerberaterverband
Photo: Thomas Müller, Pixabay
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