EU-wide VAT changes for online sellers in 2021
In July of the past year a new VAT procedure that applies across the European Union, the One-Stop-Shop (OSS), was introduced. With the introduction of the OSS, country-specific thresholds were abolished and replaced with an EU-wide threshold.
Previously, country-specific thresholds, usually €35,000 or €100,000, dictated whether or not a VAT registration was required in a foreign EU country. Prior to crossing the threshold, cross-border transactions were treated as if they were domestic ones. Domestic VAT rates were used and the sales were listed in a domestic VAT return.
Once revenue through distance sales to customers in a certain country crossed the threshold of that country, the foreign VAT rates had to be applied, a registration was necessary, and foreign VAT returns had to be filed regularly. Online sellers selling on Amazon and beyond, therefore, had to continuously monitor several thresholds at once.
However, in July 2021 these thresholds were replaced by a new one of only €10,000 that applies EU-wide. That means that all cross-border sales to foreign EU countries now count together toward the threshold, which in turn is reached far earlier than before. A way to mitigate the additional VAT-related responsibilities that arise through the new threshold is the One-Stop-Shop.
The One-Stop-Shop changes the countries in which VAT registrations are mandatory, the countries in which VAT returns need to be filed, and the VAT rates that need to be applied to transactions. These are the main changes that apply once a seller has registered for OSS:
- The new EU-wide threshold of €10,000 no longer applies and country-specific VAT rates need to be used from the first cross-border transaction onward.
- All transactions are listed in a unified OSS return, which needs to be filed in the country of OSS registration, usually the home country of the business or seller.
- Therefore, local VAT registrations and the filing of local VAT returns are no longer necessary, considerably easing the bureaucratic burden for online sellers.
However, the OSS is only usable for cross-border transactions and countries, in which a seller doesn’t store inventory. That means that Amazon sellers using FBA as a fulfilment method still need to complete local VAT registrations in all countries in which their products might be stored or which are part of their chosen FBA program, respectively.
Sales of products that are delivered from a foreign Amazon warehouse to customers in that same country then need to be listed in a foreign local VAT returns, deliveries from a foreign Amazon warehouse to customers in the home country need to appear in the domestic VAT returns, and sales from a foreign Amazon warehouse to customers in a third EU-country need to be listed in the OSS return.
In conclusion, while the One-Stop-Shop aims at easing the tax-related administrative burden of online sellers, it actually increases the complexity for many sellers, especially those processing orders via fulfillment programs like Amazon FBA. That’s why the OSS is a voluntary procedure, though the changed threshold still causes complications for online sellers by itself.
As a VAT service provider specialized on Amazon FBA, hellotax can help Amazon sellers on their way to VAT compliance despite the regulation changes. If you already registered for OSS in 2021 or plan to do so in 2022 we can discuss your options, choose the best route for your Amazon business together, and take care of your VAT responsibilities from that point onward. Our team can register you for OSS and VAT across the EU, our OSS and VAT software prepares detailed and ready-to-file reports, and we also take care of all needed filings. Additionally, applicable VAT rates are automatically identified, documents are translated, and deadlines are monitored.
UK VAT changes for online sellers in 2022
After a year of changes in 2021 for European online sellers, the upcoming year is expected to be calmer. However, due to Brexit and Covid-19, 2022 is going to be an eventful year for online sellers active in the UK.
First of all, the “New Payments Scheme for COVID VAT deferral”, which allows businesses to defer VAT payments from 2020 in interest-free instalments, will end in 2022. All unpaid VAT amounts are then potentially subject to penalties or interest, which means sellers and businesses should prepare payment plans sooner rather than later.
Furthermore, up until January 1st 2022, customs declarations for goods imported from Europe to the UK (with the exception of Northern Ireland) could be delayed. Starting this year, that is no longer possible and businesses should prepare for this change by building in-house capabilities or hiring service providers. In turn, Intrastat reports for arrivals are no longer necessary for most UK businesses.
Starting on the 1st of April 2022, the Making Tax Digital for VAT procedure will apply to all in the UK VAT registered businesses with revenue below £85,000. As a result, digital records of all VAT data need to be kept, VAT returns need to be filed using appropriate software, and all data needs to be “digitally linked”.
On the 31st of December 2022 a last change benefiting most online sellers will be introduced. The currently valid regime penalising taxpayers who file VAT returns or make payments of VAT late, will be updated, as it has long been criticised for being unfair and ineffective. The new regime is expected to be fairer, easier, and more consistent.