Changes for sale of goods from inside the EU to buyers inside the EU:
Three major changes that affect the VAT threshold, the tax rate applicable to cross-border orders, and tax filing for businesses in the EU:
- Ending of the threshold rules for distance sales. Currently, once EU merchants reach certain thresholds in EU countries, they must register for VAT in those countries. For example, Germany is 100,000 euros, and France is 35,000 euros. On July 1, these distance sales thresholds will be lifted. Unless the micro-business threshold is applies, cross-border sellers will be required to collect VAT based on the buyer's country of residence from the first sale.
- A new threshold for micro-enterprises within the EU. There is a new exemption for micro-enterprises established in EU countries with annual sales of no more than 10,000 euros in the past two years. Merchants who meet this exemption condition can continue to collect the local value-added tax rate of the EU country where the shipment originates for all EU countries they ship to, and continue to pay taxes to their local tax authorities.
- One-stop service (OSS) filing. Merchants can now submit a single VAT return, called OSS filing, which is applicable to multiple EU countries and does not require separate tax registration for each country. Merchants can use OSS to submit and remit VAT for any EU country to which they ship, provided that the country is not their home country, or is not a domestic supply from the country where they have a physical location or inventory at. For these mentioned countries, merchants should continue to submit local returns. OSS simplifies the filing process and eliminates the hassle of registering in multiple countries. Merchants need to submit electronic quarterly VAT returns through their domestic OSS portal and ensure that they keep all eligible OSS sales records for 10 years.
For those who are not eligible for the exemption for micro businesses, you can choose to submit a single VAT return for the entire EU (One Stop Shop filing) or a separate VAT return for each EU country you ship to .
Changes for sale of goods from outside the EU to buyers inside the EU:
All orders shipped to the EU are now subject to VAT. Before July 1, 2021, EU buyers are exempt from paying VAT when they purchase goods with a total value of less than 22 euros from countries outside the region. From July 1, 2021, buyers will be required to pay VAT for all purchases not exceeding 150 Euros. Import VAT and customs duties will continue to apply to orders above this 150 Euro limit. Merchants who ship goods to EU buyers from outside the EU can choose to impose value-added tax on orders less than 150 euros to simplify the customer's buying and shipping experience. If a merchant chooses not to impose a value-added tax on exports to the EU under 150 euros, the carrier will charge the customer when the goods are delivered.
Import One-Stop Shop (IOSS) filing. Merchants who choose to impose VAT on orders below 150 Euros should use the newly launched Import OSS (IOSS) to submit a monthly VAT return for all low-value products exported to the EU. Non-EU merchants who choose to use IOSS may need to appoint a VAT intermediary.
FAQ - Frequently asked questions
- How to register for OSS?
Each EU member state has an online OSS portal where you can register. This single registration will apply to all sales by consumers in other EU member states where you have no physical presence.
- In which EU country should I register for OSS?
EU merchants must be registered in the country where they were established. In principle, non-EU merchants should register in the country of origin of the shipment. If the goods are shipped from multiple EU countries, non-EU merchants can choose the EU country they want to register. Consult a tax professional to ensure you make the right choice for your business.
- What should I do to use OSS?
If you use OSS, you should:
- Apply the applicable value-added tax rate of the member country where the goods are sent to or where the services can be taxed
- Collect VAT from buyers for selling goods or providing services within the EU
Submit an electronic quarterly VAT return through the OSS portal of the member country where you registered for OSS
- Pay quarterly the VAT declared in the VAT return to the member country where you have registered with OSS
- Keep records of all eligible OSS sales receipts
- Why should I register OSS as an EU merchant?
Registering for OSS simplifies the filing process and eliminates the need to register in multiple countries.
- Does VAT apply to orders including tax or excluding tax?
The 150 euro threshold does not include tax and applies only to the value of the goods (excluding transportation and insurance costs, unless they are included in the price and are not separately noted on the invoice).
- Why should I register IOSS to sell to the EU as a non-EU merchant?
For merchants who choose to impose VAT on low-value goods from buyers across the EU at checkout, IOSS will allow single return filing. In addition, customs authorities may process imported goods faster. Without IOSS, the goods may stop at the border for valuation inspection, which may cause delays in delivery and/or additional VAT assessments.
- I am not sure how the recent EU VAT changes will affect my business. what should I do?
If you are not sure how these changes will affect your business, you should contact the EU or your Tax Advisor. You may also want to appoint a representative, such as a lawyer or accountant responsible for your tax reports and payments.