OSS and IOSS - What Are They and What’s the Difference?
The OSS and IOSS schemes were introduced in 2021 by the European Union with the intention of making cross-border e-commerce easier. But just what are these VAT reporting systems and who are they for?
What is OSS?
On July 1st, 2021 the One Stop Shop (OSS) was launched. It replaced the Mini One Stop Shop (MOSS) and was created to simplify VAT obligations for companies selling goods and services to customers in EU Member States.
A retailer is required to register and pay VAT in any EU Member State where their cross-border sales exceed a certain threshold. Often this means registering for VAT in several different countries, each with its own tax laws, which can be an expensive and time-consuming process. With the One Stop Shop (OSS) scheme, VAT can be paid on sales from all EU countries to a single tax authority.
Let's say you’re an e-commerce company based in Germany and you sell goods to customers in several EU countries. One year, the annual value of those sales exceeds the VAT threshold in France, Italy, and Spain, meaning that the company now needs to register for VAT in each of those countries. Once registered, you will also be obliged to charge VAT on sales and file individual VAT returns.
Thanks to the One Stop Shop VAT system, however, this isn’t necessary, and cross-border VAT obligations can be managed under a single EU VAT registration, without any need to carefully monitor sales in the countries where you operate.
How does OSS work?
There are two programs used under the One Stop Shop: the Union OSS scheme and the non-Union OSS scheme. Union OSS is designed for taxpayers with businesses both in and outside the European Union, while non-Union OSS is intended for businesses that supply B2C goods and services within the EU but are based outside.
Once registered, businesses can use the electronic One Stop Shop VAT system to declare and pay any EU VAT due. However, sellers are still required to charge VAT at the local rate of the Member State where the goods are delivered or the services are supplied.
What is IOSS?
The Import One Stop Shop (IOSS) was also introduced on July 1st, 2021. It allows suppliers to collect, declare, and pay VAT to the tax authorities rather than the buyer in case of goods imported into the EU.
With the exception of Northern Ireland, all goods imported into the European Union from outside the EU are subject to import VAT, regardless of their value. IOSS makes it easier to declare and pay import VAT on low-value items (less than €150). Traditional import VAT regulations apply if the value of the goods exceeds €150.
If the Import One Stop Shop is used, the customer will be charged the appropriate amount of VAT. The products will be considered to have been imported VAT-exempt into the EU.
The IOSS offers similar advantages to the OSS in that you can account for the VAT on your EU sales with a single VAT return.
How does IOSS work?
When selling items to a buyer in an EU Member State, sellers who are registered in the Import One Stop Shop must charge VAT. The appropriate VAT rate is that of the EU Member State where delivery of the goods takes place.
This means that sellers and online marketplaces can collect VAT directly from the purchaser and report this via the electronic IOSS VAT system, rather than having to go through the process of waiting to check the goods through customs and pay the import VAT.
OSS and IOSS registration
OSS or IOSS registration should be completed in the EU country where the items are being transported from unless the goods are being sent from multiple EU countries. Under that scenario, suppliers can choose one of their distribution locations and register with that Member State.
Each EU Member State will have an online One Stop Shop portal where businesses can register and apply OSS regulations. All qualifying shipments made by online sellers, including those made or enabled through electronic interfaces, are covered by this single registration.
For EU suppliers, IOSS registration can be done in their Member State, whereas non-EU suppliers must register via an intermediary already established in the EU. Once registered, the Member State will assign a VAT number to the non-EU resident individual.
To find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers, email us at mycompliance@taxually.com and we’ll arrange a free call with one of our VAT experts.
