VAT eCommerce & One Stop Shop – What does it mean?
International shipping is an important economic growth factor, especially for the e-commerce sector. The EU has also recognized this and will adjust its tax regulations accordingly from July 2021. In addition to fulfilling the requirements of the German Packaging Act (VerpackG) or the German Packaging Ordinance (DSGVO), for example, retailers will be subject to additional obligations as soon as they ship products to end consumers in other EU countries. In summer 2021, the VAT-eCommerce Package decided by the EU Commission in 2017 will be introduced.
What exactly will change from July 2021? We summarized all important news including an explanation of the new One-Stop-Shop procedure for you.
- VAT in the EU: Current regulations for online retailers
- VAT-eCommerce Package: VAT regulation for the EU from July 2021
- Threshold regulation from 2021: This has to be done up to the threshold of 10.000 €.
- One-Stop-Shop-Procedure (OSS): This has to be done from the threshold of 10.000 € on
- Special cases in online trade: What about fulfillment abroad?
- No change for sales to non-EU third countries
VAT in the EU: Current regulations for online retailers
At the moment, if a retailer sells products to European consumers across borders, he must pay tax on the goods in the country from which they were dispatched, within certain turnover thresholds. Each EU country defines different turnover thresholds for this purpose – on average the turnover threshold is 35.000 € per year.
Example: If a German company sends goods with a turnover value of more than 35.000 € per year to France, the company must register with the French tax office and pay the French turnover tax (20%) to France. If the turnover threshold of 35.000 € is not exceeded, the company pays the German turnover tax (19%) to the German state.
Furthermore, companies from third countries are currently exempt from tax on goods whose value is less than 22 €.
As of July 1, 2021, these regulations are to be changed to a large extent, so that the VAT-eCommerce Package adopted in 2017 will apply to all EU countries.
VAT-eCommerce Package: VAT regulation for the EU from July 2021
According to the current draft law for the VAT-eCommerce Package from 2017, the above described turnover thresholds for the individual countries are to be replaced by an EU-wide turnover threshold of 10.000 €/year. This means that as soon as an individual company exceeds this threshold in one EU country, it must fulfil its tax obligations in the corresponding country of destination. In addition, traders who have so far fallen below the individual country turnover thresholds, but generate a total turnover of more than 10.000 € in the entire EU area, will have to pay tax on their products in the respective destination country for a cross-border B2C delivery from July 2021 (for more details on the turnover threshold, see "Threshold regulation from 2021 "). In addition, the previous tax exemption for goods under 22 € will no longer apply, which means that, as expected, more traders will be subject to tax than is currently the case.
Example: If a German retailer sells to private consumers in Spain and his EU-wide turnover is more than 10.000 €, he has to pay the Spanish VAT of 21% – previously it was 19%. Since the sales tax is different in every EU country (from 17-27%), this change can increase the costs for many retailers significantly.
In order for a retailer to meet his tax liability in the country in question, the retailer would actually have to register for VAT purposes in the country of destination. The OSS procedure has been created to ease the administrative burden this entails.
Threshold regulation from 2021: This has to be done up to the threshold of 10.000 €
From 2021 onwards, an entrepreneur must pay tax on the turnover of products sold to other EU countries not in the country of destination but in the country of origin, provided that it does not exceed the Europe-wide turnover threshold of 10.000 € in one year.
One-Stop-Shop-Procedure (OSS): This has to be done from the threshold of 10.000 € on
The so-called Mini-One-Stop-Shop-Procedure (MOSS) has been in existence since 2015 and will be expanded into the OSS procedure for online trade in 2021. From then on, (online) retailers who sell products to different countries and exceed the EU-wide threshold of 10.000 € must report their sales via the OSS system. All EU-wide goods and services in the B2C sector will be listed in the OSS from July 2021.
In addition, retailers will be able to settle their sales tax liability from the different countries directly there by making one payment. In Germany, the Federal Central Tax Office provides the system and redistributes the VAT paid to the respective EU countries.
The One-Stop-Shop procedure is a great relief especially for smaller retailers: According to the new regulation in 2021, retailers who exceed the sales threshold would have to hire a foreign tax consultant or service provider in order to meet the respective sales tax obligations abroad. In addition to the one-time registration costs, this would also result in monthly running costs. By establishing the OSS procedure, retailers save themselves this expense and can report all sales online.
Special cases in online trade: What about fulfillment abroad?
The current MOSS procedure, which will be converted to the OSS procedure next year, is unfortunately not yet compatible with online trade. Special cases such as the use of a fulfillment service provider abroad or sales via a marketplace cannot currently be represented by the new OSS procedure.
Example: If a German online retailer sells his goods via an Amazon program (Pan EU or CEE), the products are often stored in a foreign fulfillment center (e.g. in Poland) and sent from there to French consumers. This transaction gives rise to intra-community transfers and purchases (B2B transactions) that cannot yet be represented in the OSS procedure. The trader must therefore register for VAT in France if he exceeds the threshold of 10.000 €, or in Germany if his sales remain below 10.000 € throughout the EU.
No change for sales to non-EU third countries
The new regulations from July 2021 will only apply to the distribution of goods and services within the EU. All other third countries must observe the new regulations when shipping goods to the EU and vice versa: if a European company ships products to a third country outside the EU, the VAT law of the country of origin (i.e. the country from which the goods are shipped) must be applied. When shipping from Germany to non-EU third countries, the German sales tax law applies accordingly. The obligation to provide proof should be observed urgently (further information).