New rules for online retailers from 1 July: VAT reform, delivery thresholds and One-Stop Shop (OSS)

Some of you may already have heard about it or seen it in the media: from 1 July 2021, one of Europe’s largest VAT reforms will be implemented and the so-called One-Stop Shop will be introduced across the EU. In the following text we explain what is behind it and which changes you face as an online retailer, so that you keep track of delivery thresholds and distance selling rules.

Online retail has allowed many entrepreneurs to open up new markets and customers, because selling products abroad has long since stopped being rocket science.

For online shop operators, however, it also means dealing with rules and regulations that make smooth cross-border shipping (within Europe) possible. That is not entirely easy, because the previous delivery thresholds for shipping to private customers abroad varied greatly between EU countries: from 35,000 euros as a rule up to 100,000 euros in the Netherlands or Luxembourg.

Let us illustrate this with a practical example: Mr Smith is an online retailer in Germany who supplies private individuals in Slovakia with cosmetics worth 50,000 euros (net) every year. The delivery threshold for shipping to Slovakia is currently 35,000 euros, however, so Mr Smith had to register for tax in Slovakia and pay the local VAT of 20% there.

This ends with the reform, because from 1 July a single EU-wide delivery threshold of 10,000 euros in total applies to cross-border B2C distance selling throughout Europe.

• By taking part in the One-Stop Shop (OSS) scheme, which is voluntary, entrepreneurs like Mr Smith no longer have to register in several member states. Instead, they can submit the necessary regular VAT returns for all EU countries centrally via the One-Stop Shop of the country where the business is based. In Germany this is the Federal Central Tax Office (BZSt). Registration is voluntary and can be done via the Federal Central Tax Office’s online portal “MeinBOP” https://www.elster.de/bportal/start. Still need to file your tax return? Here Northern Finance shows you what to bear in mind as a private individual and as a self-employed person.

Important: if you want to use the OSS from 1 July 2021, you must have registered by 30 June 2021, unless you were already taking part in the previous Mini One-Stop Shop (MOSS).

How is turnover measured for the delivery threshold?

The delivery threshold is always measured on net amounts and always relates to the calendar year. It includes the payment for the goods as well as shipping and packaging costs.

What if you sell products via several channels (e.g. via eBay and your own web shop)?

In this case you must add up all the turnover that all your shops together generate in one country.

Does the OSS reporting obligation apply if you already exceeded the delivery threshold in 2020?

Yes, because the delivery threshold of 10,000 euros applies retroactively. If you exceeded it in 2020, the OSS reporting obligation applies from 1 July 2021.

Do the new rules also apply to B2B deliveries?

No, B2B deliveries cannot be reported via the One-Stop Shop, so everything stays as before for you, with local reporting in the country of origin.

So where is the relief for you as an online retailer, and are there exceptions?

The EU OSS system makes tax registration, and the associated red tape, easier for online retailers. It is also intended to prevent tax avoidance by online retailers inside and outside the EU in future.

The exception remains an online shop operator who stays BELOW the delivery threshold of 10,000 euros in total across all EU states in which they sell goods or provide services. Such a business can still declare and pay its VAT in its own country.

The key points of the new legislation at a glance

• The previous delivery thresholds of the individual EU countries for shipping to private customers abroad no longer apply
• Instead, from 01.07.2021 a Europe-wide delivery threshold of 10,000 euros (net) applies to all EU countries combined
• As a result, the vast majority of online retailers become liable for tax in every EU country to which they send even a single parcel
• When using the OSS scheme, local VAT registrations and returns in other EU countries will no longer be needed for cross-border B2C deliveries to end customers (distance sales)
• OSS returns are filed quarterly and must be submitted within one month of the end of the previous quarter
• For this, you have to decide transaction by transaction in which country, and at which local VAT rate, a transaction is taxable
• If you use warehouses abroad, for example as part of Amazon Pan-EU, you still need local registrations and returns in the respective warehouse country

The reform affects all online retailers who supply consumers outside their own home country with goods and services. If this applies to you, take care of joining the OSS now so that, after the legal changes from 1 July, you can continue shipping your products abroad with confidence and the certainty that everything is handled correctly.

(Image source: 123rf by TarikVision)