New One Stop Shop: What it means for non-EU businesses supplying services to the EU
Do the new One Stop Shop (OSS) requirements mean that any company providing services B2C to the EU from outside the EU will have to register for OOS and start charging VAT (see section 3.1.3 of the Explanatory Notes of the VAT e-commerce rules)?
Confirmation from the European Commission stated: ‘The so-called non-Union OSS scheme was introduced by Article 359 of the amended VAT Directive, which provides that Member States shall permit any taxable person not established within the Community supplying services to a non-taxable person who is established in a Member State or has his permanent address or usually resides in a Member State, to use this special scheme. This scheme applies to all those services supplied within the Community.’
And from the European Commission website, there is still some confusion as the non-Union scheme can be used:
- Exclusively by (online) sellers not established in the EU.
- For all B2C supplies of services taking place in the EU made by these non-EU online sellers.
So where many assumed the OSS was for the supply of online sales, which from the above would indicate is the case, the first statement refers to all services. Still not clear? Nor are we and we are still seeking further clarity and will update this blog accordingly when new information comes to light. We suggest that you will likely still need to check with the destination country tax authority as the statement above states that a member state is allowed ‘to use this special scheme’ rather than it must use the scheme.
Aside from the requirement to register for OSS, the timing of when to register also comes into question because if supplying services primarily B2B and then there is a requirement for B2C, can you delay invoicing whilst you wait to register for OOS? This may lead to many companies having to register just in case with the relevant costs involved.
Once you have registered for OOS, the next problem is how you can automate the correct tax determination and there will be many of you out there who will not have considered the potentially costly requirements to enhance your own ERP solutions to be able to calculate the tax. Many entities that we review do not even make the split between the supply of goods or services in their accounting systems and the OOS for non-EU entities applies to services and not goods and whether the taxable person being supplied is registered for VAT or not. So the registration status of your customer is essential, along with identifying that the sale is for services and not goods.
Of course, if shipping goods, VAT will be applied on import but how to prove a service took place? I am not sure that many ‘non-taxable persons’ will voluntarily be contacting the tax authorities to report that they were not charged VAT on a service that they received and happy to then pay the extra 20+%! So how the supply of B2C services who are not registered for VAT can be policed will be an interesting task!
Get in touch with us for more information on how our experts can implement our automated solution in your business to ensure compliance with the new requirements.