One-Stop-Shop (OSS): Definition and explanation
Here you will find everything you need to know about the new one-stop shop regulation!
Plus: The 7 most important answers to the major reform in online retail.
Read on to find out what will change for companies in online retail from summer 2021.
The ability to offer goods and services to customers in other countries is one of the biggest advantages for shop operators in the field of e-commerce. Shop systems such as Shopify or WooCommerce make it particularly easy for online retailers.
However, tax laws are still lagging behind in this area. The question often arises as to where and in what form deliveries abroad have to be taxed. In the country of origin? In the country of destination? Or even in both countries?
From 1 July 2021, there will be some changes in this regard for all entrepreneurs in Germany and Austria.
In this blog, I'll tell you what the terms one-stop shop, MOSS and Vat e-commerce are all about and how you can benefit from them as a retailer. I also have a few tips on how you can prepare for the upcoming changes today.
Before that, a short explanatory video from our CEO Sebastian.
This regulation previously applied within the EU
For deliveries that were sent to foreign countries within the European Union and that reached or even exceeded a certain threshold, VAT must be paid by entrepreneurs in the recipient's country.
If you remain below the threshold, you pay tax on the goods in the country from which the delivery was dispatched. All EU countries define their own turnover thresholds.
On average, the delivery thresholds to other EU countries are around 35,000 euros net per year. The exceptions are Germany, Luxembourg and the Netherlands, where the threshold is 100,000 euros net per year. Until Brexit, the UK was also part of the exceptions, where the threshold was 70,000 pounds sterling per year.
For you as an entrepreneur, this means that you must be registered for tax purposes by the tax office in the country to which your goods are destined. VAT returns must then be submitted on an ongoing basis and the VAT must be paid to an account abroad in accordance with the sales made. But only sometimes, depending on the national regulations.
Complicated, isn't it? These obligations have cost a lot of time and money so far, as you always have to keep a close eye on the threshold values. What's more, each EU country has its own tax rates, making VAT registration and tax returns correspondingly cumbersome.
The good news: experts have already thought about it. As of 1 July 2021, the regulation is to be harmonised throughout the EU and significantly simplified for all companies!
Above a certain threshold, deliveries of goods in other EU countries had to be taxed. However, the thresholds differed from country to country.
Vat e-commerce package and one-stop shop: This is set to change for online retailers
From 1 July 2021, the different delivery thresholds of all EU countries are to be abolished. Instead, an EU-wide delivery threshold of 10,000 euros net will be introduced.
This means that if the net contribution of your goods deliveries to customers exceeds the threshold of 10,000 euros, you as a company will ALWAYS have to pay tax on your goods in other EU countries. It doesn't matter whether you ship to France, Austria, the Netherlands or Hungary.
The basis for this is the so-called EU VAT reform of 2017, which includes the VAT e-commerce package. As part of this reform, the exchange between tax authorities should become easier, which in turn should prevent tax fraud.
The original plan was to start the VAT reform on 1 January 2021. However, as it was already clear in advance that many countries were not yet ready for the changeover at this time, the EU member states agreed on a postponement. The new start date for implementation in practice is now set for 1 July 2021.
However, the standardised delivery threshold is not the only advantage for you and your products.
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One for all: what the One-Stop-Shop (OSS) can do
So that you don't have to look for your own tax advisor in all EU countries in future, a technological simplification was also decided as part of the legal reform, the so-called One-Stop-Shop.
What is a one-stop shop - definition:
In business and public administration, a one-stop shop offers the opportunity to carry out all the necessary bureaucratic steps required to achieve a specific goal in just one place.
This includes various bureaucratic tasks, financial tasks, tax returns, but also company start-ups.
Under the new VAT law, the OSS system is now to be used within the EU internal market to automatically tax cross-border deliveries in the respective country of destination. Registration and processing will take place at a central point in the online retailer's country of origin.
The different thresholds will no longer apply!
The 7 most important questions and answers on the subject of OSS
1. How does the OSS procedure work?
Selling to other EU countries is now much easier for you as a retailer. This is because every shop operator who offers their goods throughout the EU and is liable to pay tax in the respective country due to exceeding the threshold value of 10,000 euros net per year can simply register their sales with the OSS in future and also pay VAT via the OSS.
The Federal Central Tax Office (BZSt) distributes all declarations, including the VAT collected, to the respective EU member states.
Payment of VAT is of course mandatory, but participation in the OSS procedure is not. If you wish, you can continue to use a tax advisor in the respective EU country and also pay the VAT.
2. Mini-One-Stop-Shop: What is the MOSS procedure?
The OSS procedure is actually already in use in a slimmed-down version. Entrepreneurs can already register their digital services and solutions in the so-called Mini-One-Stop-Shop (MOSS). This is referred to as the MOSS procedure.
The Mini-One-Stop-Shop is therefore practically the origin of the "big" One-Stop-Shop, which is planned from July.
3. Who should take part?
For all entrepreneurs who want to save resources. Small and medium-sized online retailers in particular can look forward to the reform, as it makes things much easier. Just a reminder: Without the One-Stop-Shop, a registration fee has to be paid and a financial service provider has to be paid in every EU country in which an entrepreneur offers their goods. This is not only costly, but also time-consuming. This factor is now practically eliminated.
4. Are there exceptions?
Yes, there are. Some transactions are not compatible with the OSS procedure, at least as things stand today. In these cases, the trader must therefore continue to register and pay VAT in the country of destination.
- This special regulation includes delivery within an EU country in which the foreign fulfilment centre of the EU is located.
- If you rely on marketplaces such as Amazon in addition to your regular online shop, you must declare a corresponding proportion of your sales via local registrations in the country of destination despite the new procedure.
- Deliveries of products to foreign fulfilment centres must be reported in both the country of destination and the country of origin.
- In many cases, direct shipping (drop shipping) with Shopify cannot be processed via OSS either.
In any case, you should consult your tax advisor or another expert in the field of finance and tax to be on the safe side.
5. How does the provision apply to EU third countries?
In general, the new provision only applies to the sale of goods, services and merchandise within the European Union. When shipping to third countries, the VAT law of the country of origin applies. Attention: It is essential to observe the obligation to provide proof.
6. How certain is the introduction on 1 July 2021?
As mentioned, the VAT reform was already decided in 2017. Even back then, the EU Commission made it clear that the current laws in the member states were no longer able to cope with the strong growth in online trade. The one-stop shop procedure was intended to remedy this situation.
It is therefore high time to implement the VAT e-commerce package. It should actually have been ready in January 2021, according to the Annual Tax Act 2020, but the necessary technology was not available in many countries. This became clear at the beginning of 2020, when the COVID-19 pandemic finally put a spanner in the works.
However, implementation only makes sense if all EU member states actually have the necessary technological infrastructure. It is therefore not yet possible to say with certainty whether these additional six months will actually be enough.
As things stand today, however, implementation from 1 July 2021 is absolutely realistic.
7. What preparations do I need to make as an online retailer?
From 1 April 2021, you will be able to send a registration notification to the Federal Tax Office (BZSt) digitally in Germany. In Austria, the Federal Ministry of Finance (BMF) is responsible for this.
If you want to use the OSS procedure in time for the start on 1 July, you must have completed the registration at least one day before. So the rule is: register by 30 June to be involved right from the start.
Conclusion & overview: all the top information at a glance
- The One-Stop-Shop procedure simplifies online trade and deliveries within the EU. Delivery thresholds will be harmonised and a central reporting office will be created.
- The basis for this is the EU VAT reform of 2017, which also involved a reform of VAT law.
- With the OSS procedure, only registration in the company's home country is required; reporting of sales by entrepreneurs in other EU countries is largely no longer necessary.
- Some transactions cannot be processed using the one-stop shop procedure, particularly with regard to the use of fulfilment centres in other EU countries.
- The launch date is set for 1 July 2021, with registration possible from April.
If you need professional support with your one-stop shop, simply contact us. Write to our email address
Any questions?
If you have any further questions on the topic or would like professional support, feel free to get in touch with us. Send an email to office@ithelps-digital.com, call us at +43 1 353 2 353, or reach out for us on our contact page.
