For e-commerce businesses selling to the EU, VAT obligations can be complex (and costly!). Corporate and indirect tax manager, Andy Kirkaldy, provides an overview of the simplifications that can help when selling to Europe – the One-Stop Shop (OSS), Import One-Stop Shop (IOSS), and marketplace rules – in our latest blog.
Understanding VAT compliance in e-commerce
In 2021, the EU introduced a series of reforms aimed at simplifying VAT compliance, making it easier for e-commerce businesses to expand across borders without the administrative burden of registering for VAT in each member state – helping to reduce compliance costs, prevent fraud, and ensure fair competition.
Although the UK is now outside of EU, UK traders can still benefit from these simplifications.
The One-Stop Shop (OSS)
The OSS is designed for those businesses who hold stock in the EU for sale to EU customers. It generally involves the UK business registering for VAT in the state in which stock is held, and sales can then be made from here to any EU state, with VAT being charged at the local rates of destination. The VAT is then paid across to the appropriate members states via an OSS return. It effectively allows the UK seller to fulfil VAT obligations across multiple EU countries through a single registration…
- Centralised VAT reporting – with OSS, businesses can report all B2C EU sales in a single VAT return, reducing the need for multiple registrations across member states.
- Threshold awareness – the OSS removes individual country thresholds and replaces them with a single €10,000 EU-wide threshold, after which VAT must be collected based on the customer’s location.
- VAT rates and record-keeping – although OSS simplifies registration, businesses still need to apply the correct VAT rates for each customer’s country.
The Import One-Stop Shop (IOSS)
The IOSS is designed for UK businesses who sell low value goods (up to €150 consignment value) from the UK to the EU consumers. For e-commerce businesses selling to EU customers, this scheme can significantly streamline operations…
- Pre-collection of VAT – with IOSS, VAT is collected at the point of sale rather than at customs in the place of destination, making transactions smoother for both businesses and customers.
- Monthly reporting – IOSS requires monthly VAT filings rather than quarterly.
- Enhanced customer experience – by using IOSS, you avoid surprise VAT charges for your customers upon delivery.
Marketplace rules – VAT collection for online platforms
Under the marketplace rules, platforms like Amazon and eBay play a key role in VAT compliance for certain transactions…
- Marketplace as a deemed supplier – for transactions involving imported goods under €150 or any sales made by non-EU sellers (including the UK) to EU customers, the marketplace is responsible for collecting and remitting VAT.
- Simplified compliance for sellers – by shifting VAT responsibilities to the marketplace, many sellers no longer need to worry about VAT on sale, however, it’s crucial to understand when you’re liable and when the marketplace is responsible. For example, if you are importing bulk goods into Germany for storage into an Amazon warehouse, although Amazon will be responsible for VAT on an onward sale, you still need to register to account for the import.
- Record keeping and transparency – even when marketplaces handle VAT, accurate record-keeping is essential for audits and compliance.
The marketplace rules remove the need for UK businesses to register in various EU member states and does not cover sales made from a UK businesses own website.
The OSS, IOSS, and marketplace rules have delivered a new level of simplicity to cross-border VAT compliance, but implementing them requires expertise. By working with a VAT expert who understands these frameworks, e-commerce businesses can focus on the growth knowing compliance is in order.
Get in touch
If you are an e-commerce business selling cross-border, and would like to discuss your VAT obligations in more detail, get in touch with our corporate and indirect tax expert, Andy Kirkaldy, by clicking the button below.
