As we recently reported, the VAT E-Commerce Package and the one-stop shop (OSS) that is existentially linked to it are to be introduced on July 1, 2021.
Our partner bevh has now asked the BMF about this and received the answer that Germany is sticking to this date, although the BMF and Germany was/is the biggest supporter of postponing this reform even further.
What does this mean in concrete terms and how should you as a trader, tax consultant or software provider prepare for this fundamental reform?
Much of the information currently circulating is vague and sometimes incorrect. Let us therefore bring light into the dark.
Note: The content of this blog post is based on a lecture and the subsequent discussion I gave at the 2020Value Added Tax conference of Handelsblatt Fachmedien on September 9 in Düsseldorf. Due to Covid19, this event took place on site to a limited extent and in parallel digitally.
VAT E-Commerce Package / OSS
In the following, we explain the concrete effects using the example of an online retailer based in the EU.
What can you report about the OSS?
An online trader established in the EU will only be able to report certain imports from third countries to non-entrepreneurs and - this is the main point - his intra-Community distance sales via the OSS.
Intra-Community distance selling? You can find the definition here.
§ Section 3c (1) sentence 2 UStG n.F.: An intra-Community distance sale is the supply of goods transported or dispatched by or on behalf of the supplier from the territory of one Member State to the territory of another Member State (...) to the purchaser (note: private individuals or atypical businesses) (...).
Ultimately, this is the (soon to be) former mail order business. Since there will be no more national delivery thresholds in practice from 1 July 2021 - with the exception of an EU-wide threshold of 10,000 euros net - deliveries to non-business customers will then be taxable in the country of destination.
In order to avoid registration and local submission of Value Added Taxdeclarations in the country of destination - in case of doubt in all 27 Member States - these transactions can be declared centrally in the Member State of establishment via the OSS.
In Germany, the Federal Central Tax Office (BZSt) is responsible for providing OSS.
Unfortunately, the OSS is outdated even before its introduction. Many relevant transaction types will not be able to report on it.
What can be reported about the OSS - what not?
Reporting via the OSS
- Notification of all intra-Community distance sales via the OSS in the country of residence - i.e. for German traders via the BZSt. This also includes, for example, distance sales from a Polish Amazonwarehouse to a non-entrepreneur in France. In this case you do not have to register for OSS in Poland.
- Notification of distance sales taxable in Germany, if they come from a fulfilment centre in another EU country (e.g. Poland) (More on this in a moment, when the topic is chaos).
Reporting via local registrations
- Deliveries within the same EU country where the foreign fulfillment center is located in the EU. This applies to both B2C and B2B transactions.
- Intra-Community movements/acquisitions in other EU countries
- Amazon-Commingling transactions in other EU countries - see here.
- Input tax amounts in other EU countries
A question that is currently being answered differently, even by experts:
Is the OSS procedure not available to me as a merchant if I have one or more local registrations abroad and also need these for the above-mentioned types of transactions?
The answer is that both procedures can be carried out in parallel and are also useful.
OSS and local registration in parallel?
The future German regulation in § 18j para. 1 sentence 4 UStG (new version) has so far caused some confusion.
Entrepreneurs can only participate in the special taxation procedure (note: OSS) in the same way for all Member States (' ).
Uniformly only refers to intra-Community distance sales. You can either only report these completely (= for all EU countries) via the OSS or continue to do so via local registrations.
What is guaranteed to cause chaos in practice?
If one follows the explained system, online traders based in Germany, for example, will also have to report sales in Germany via the OSS, which are taxable in Germany.
How can this happen?
In modern online trade, products are no longer delivered only via a central warehouse. For example, a large part of the goods Amazon is handled from fulfilment centres in Poland and the Czech Republic.
If we look at the lower branch in the chart - B2C deliveries from Poland to Germany - these transactions, which are taxable in Germany, will no longer be reported to the German tax office via the German UStVA from July 2021 onwards - but via the OSS.
Currently there is no exchange of information between the BZSt and the German tax offices regarding the reconciliation of (M)OSS sales. A comprehensive report on these and other problems of the (M)OSS procedure by the Federal Audit Office can be found here.
This will have to change if, from July 2021 onwards, German online traders are not to start sending out all the risk signals in the tax office because they - supposedly - no longer explain part of their taxable turnover in Germany.
A few procedural aspects of the OSS procedure
Regardless of the complexity mentioned so far - for which the OSS was never conceived, to be fair - there will also be simplifications.
- The obligation to issue an invoice does not apply to turnover covered by the OSS scheme.
- A single tax period applies to these transactions: the quarter - with payment due by the 30th calendar day following the quarter.
- The VAT liability is settled uniformly for all distance sales - illustrated in the following diagram using the MOSS procedure as an example.
- Important: Anyone who repeatedly misses the deadlines for submitting their declarations or payments can be excluded from the OSS procedure.
What happens next?
At the request of our partner - the bevh - the Federal Ministry of Finance has published the following timeline and some clarifications (source: round mail of the bevh of 9 September 2020)
- Before the beginning of the FIRST registration period, a registration notification must be sent to the BZSt by electronic means. This can be done from 1 April 2021. Contrary to the international regulation to register at least 15 days in advance, this has not been adopted in the German regulation. It is therefore sufficient to submit the registration notification one day before the first registration period. Do you want to use OSS from 1 July 2021? Then you must have submitted a registration notification for your company by 30 June 2021 at the latest.
- The pan-European delivery threshold of 10,000 euros from 1 July 2021 will not be adopted until the Annual Tax Act 2020. At present it cannot be said with certainty that the delivery threshold of 10,000 euros can be fully utilised for the period from 1 July to 31 December 2021. A decision on this is expected at the end of November/beginning of December and corresponding announcements are expected in January 2021.
- Those traders who have already been refused participation in the MOSS or IOSS regulations are excluded from using the OSS regulations.
Save the date: 3 - 6 November 2020 - Practitioners for practitioners discuss the effects on business processes!
From 3 to 6 November, the non-profit TeCIT Club (Technology, eCommerce, Indirect Taxes) will launch a webcast series in which even affected companies (retailers, logistics providers and marketplaces) will discuss the effects of this important legislative reform.
Further information - soon also the possibility to register - can be found on this page.
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... and forms for the leading online retailers in Europe besides the handling of the current EU-wide Value Added Taxcompliance, Intrastat and financial accounting also offers numerous other compliance services via a unique platform.
Of course, from 7/2021 on we will be able to report your remote sales automatically and easily as never before via OSS.
If you want to know more about how you Value Added Taxcan efficiently and securely map compliance, financial accounting and much more via a platform, then book your individual and free initial consultation with the compliance experts from Taxdoo!
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