What is the VAT OSS scheme?
The VAT OSS scheme, or One Stop Shop, is a European Union VAT settlement system designed for businesses making certain cross-border supplies to consumers. It allows a taxable person to declare and pay VAT due in other EU Member States through a single electronic return submitted in the Member State of identification. The scheme reduces the need to register for VAT separately in every country where the relevant customers are located.
VAT OSS is primarily relevant to business-to-consumer transactions. In practice, it is commonly used by online retailers selling goods to private individuals in other EU countries, as well as businesses supplying services to consumers across borders. VAT is generally charged at the rate applicable in the Member State of consumption, rather than at the rate applicable in the supplier’s country of establishment.
The OSS framework is based on Council Directive 2006/112/EC on the common system of value added tax, as amended by the EU e-commerce VAT package. It includes the Union OSS, the non-Union OSS and, separately, the Import One Stop Shop scheme. Each arrangement applies to different categories of transactions and taxpayers.
What does the VAT OSS scheme cover?
The Union OSS may be used by EU-established businesses for intra-EU distance sales of goods to consumers and for selected cross-border services supplied to non-taxable persons. It may also be used by certain businesses not established in the EU for intra-EU distance sales of goods. In addition, it can apply to certain domestic supplies made by electronic interfaces that are treated as deemed suppliers for VAT purposes.
The non-Union OSS is intended for taxable persons not established in the EU that provide services to non-taxable persons in the EU. It enables them to report VAT due in multiple Member States through one registration, without having to establish a separate VAT registration in each Member State where VAT is due.
The Import One Stop Shop, usually referred to as IOSS, applies to distance sales of imported goods, excluding excise goods, in consignments with an intrinsic value not exceeding EUR 150. This threshold follows Article 369l of Council Directive 2006/112/EC. IOSS is a separate regime and should not be confused with the Union or non-Union OSS procedures.
Using OSS does not replace all local VAT obligations. A business may still need VAT registration in a particular Member State, for example where it stores goods locally, makes domestic supplies outside the scope of OSS, or has other reporting obligations. The scope of the scheme should therefore be assessed against the business model, logistics structure and contractual arrangements.
When is it worth using the VAT OSS scheme?
The VAT OSS scheme may be particularly useful for e-commerce businesses selling goods from Poland or another EU country to individual customers in several Member States. It can also be relevant for providers of electronically supplied, telecommunications or broadcasting services, as well as other services for which the place of taxation is in another Member State.
Entrepreneurs should consider OSS before expanding into foreign consumer markets, launching an online store with EU-wide delivery, using marketplace platforms, or moving inventory to warehouses located in other Member States. It is also advisable to review OSS eligibility when changing a fulfilment provider, introducing new sales channels or supplying goods through an electronic interface.
For private individuals, the scheme is less likely to create direct filing obligations. However, it may affect the VAT rate included in the price of goods or services purchased from an online seller operating across the EU.
A prompt VAT consultation can help identify the correct place of taxation, determine whether OSS registration is available and prevent errors in VAT charging. Incorrect treatment may result in tax arrears, interest, penalties, duplicate registration obligations or disputes with foreign tax authorities. Proper documentation of customer location, transport arrangements, invoices and transaction records is also important for demonstrating compliance.
Legal support in relation to the VAT OSS scheme
Support from a law firm in VAT OSS matters may include in particular:
- assessing whether the Union OSS, non-Union OSS or IOSS procedure is applicable;
- reviewing cross-border e-commerce and service supply models;
- identifying VAT registration obligations in Poland and other EU Member States;
- verifying the correct VAT rates and place-of-supply rules;
- analysing marketplace, fulfilment and warehousing arrangements;
- supporting VAT OSS registration, reporting and correction of filings;
- assisting during VAT audits and correspondence with tax authorities.
Need assistance with the VAT OSS scheme? Contact us.