If you are an e-commerce or Amazon FBA seller struggling to navigate the complex world of VAT, look no further, as OSS VAT can simplify your VAT compliance. Keep reading to learn all about OSS VAT.
OSS VAT for E-Commerce and Amazon FBA Sellers
Value-added tax (VAT) is a consumption tax levied on goods and services in many countries worldwide.
In the European Union (EU), VAT is a significant source of revenue for member states. It has a considerable share in ensuring the functioning of the EU’s single market.
To address challenges in VAT compliance, the EU has introduced two new VAT schemes: the Import One-Stop Shop (IOSS) and the One-Stop Shop (OSS).
In this blog, we will focus specifically on OSS, explaining how the OSS VAT system works, who can benefit from it, and what e-commerce sellers need to do to comply with its requirements. Let us start!
What is the traditional EU VAT system?
If you are selling goods to customers in multiple countries in the EU, which is likely the case if you are an e-commerce seller, you have no choice but to register for VAT in each country you have customers and file separate VAT returns.
This is how the traditional EU VAT system worked. Imagine the hassle and headache it can bring for small business owners.
But thanks to OSS, or One-Stop-Shop, a simplified VAT system made possible by the EU on July 1, 2021, the VAT compliance process for businesses that sell goods and services online to customers in other EU member states has been easier than before.
What is OSS, and how does it work?
With the tedious process under the traditional VAT system, it is undoubtedly a relief to use OSS since you are only required to register for VAT in a single EU member state and then file a single VAT return for all your EU sales.
As a result, if you sell goods to customers in different EU countries, you no longer need to register for VAT in each country.
However, remember that not all sales can be processed under OSS VAT. Only sales of goods and services to customers in other EU member states can be filed through OSS, and sales to customers outside the EU or your home country are subject to the traditional VAT rules.
What Can E-Commerce Sellers Do?
It is truly a game-changer for e-commerce sellers to use the OSS VAT system when complying with VAT regulations. To improve your VAT compliance through OSS, remember the following essential steps:
Register for VAT in a single EU member state
Before availing yourself of the OSS VAT system for your e-commerce business, you will first register for VAT in a single EU member state where you have a fixed establishment, such as a warehouse or office.
Collect the correct VAT rate from your customers
Collection of VAT is done upon sale with the applicable VAT rate. Keep in mind that the VAT rate will depend on the country where your customer is located.
Report and remit the VAT due on your sales
You can use the OSS VAT system to file sales to customers in other EU member states instead of having multiple VAT returns. You need to file a single VAT return for all your EU sales and pay the VAT due to the tax authority in the member state where you are registered for OSS VAT.
To further guide you on your VAT compliance, you can seek professional tax advice from an accountant. They will help you navigate the complex VAT rules and regulations that apply to your business and ensure that you are compliant with all relevant requirements.
Frequently Asked Questions
Do I still need to comply with local VAT rules in each country where I have sales?
This is a common question that many e-commerce sellers have when it comes to the OSS VAT system.
The good news is that if you are registered for the OSS VAT system and have already reported and remitted VAT on your EU sales using the system, you no longer need to comply with local VAT rules in each country.
Can I claim input VAT through the OSS system?
Unfortunately, the answer is no – you cannot claim input VAT. The OSS system only accommodates reporting and remitting the VAT you collect on your sales to customers in other EU member states.
If you purchase goods or services for your business, you can only claim input VAT in the member state where you are established for VAT purposes (i.e., the country of origin of your business).
How does OSS differ from IOSS?
The main difference between the IOSS and OSS schemes is the type of goods to which they apply.
The IOSS scheme applies to distance sales of low-value goods imported into the EU. In contrast, the OSS scheme applies to sales of goods and services supplied within the EU, whether they are distance sales or not.
As an e-commerce seller, you should understand the differences between the IOSS and OSS schemes and choose the most appropriate for your business needs.
If you sell low-value goods imported into the EU, the IOSS scheme may be your best option. On the other hand, the OSS scheme may be more suitable if you sell a wide range of goods and services within the EU.
OSS VAT system is a great tool for e-commerce and Amazon FBA sellers who sell goods and services to customers in other EU member states. We hope this blog can help you comply with EU VAT regulations.
You can always seek professional advice from Sterlinx Global for specific guidance on your VAT compliance.