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Single VAT registration in the EU – update

Extension of OSS return for cross-border B2C and B2B goods and services transactions as part of VAT in the Digital Age reforms. 3 options for transfers of own goods challenge

The European Commission (EC) is set to publish draft VAT Directive amendments by 16 November for the extension of the new One Stop-Shop OSS to all remaining cross-border B2C transactions and some B2B transactions.  The aim is reduce the VAT registrations and reporting obligations and costs, boost tax revenues, encourage the development of the Single Market and cut the VAT Gap. Watch our VAT TV episode on the Single VAT Registration proposals.

The main outstanding questions are:

  • Transfer of own goods, and 3 proposed options to include such intra-community movements to be reported in the OSS and so reduce the number of foreign VAT registrations required by businesses. Especially for B2C when sellers moving their goods to another member state for storage.
  • Other B2C cross-border services when the seller is not resident in the country of the consumer to be included in OSS (see point 2., below)
  • A range of other issues (see point 3 of this blog) already well advanced.

Separate reforms proposals to IOSS are being confirmed following the July 2021 EU VAT e-commerce package reforms that first introduced OSS. The Single VAT Registration in the EU reforms are part of the broder VAT in the Digital Age proposals which includes two other strands:

1. Transfer of own goods included in OSS – 3 options

The 3 options being proposed seek to avoid the current requirement for multiple VAT registration when e-commerce sellers, marketplaces or any other supply chain business is moving their goods across EU borders prior to a sale. These includes extending the new One-Stop-Shop pan-EU VAT registration, currently used for B2C distances sales of goods.

Current VAT registrations requirements – excess VAT burden

When a taxpayer moves their own goods between two EU states, the current rules split this into two VAT transactions which both need reporting to the authorities in the country of departure and arrival:

  1. Country of departure: exempt supply; and
  2. Country of arrival: intra-community taxable acquisition.

The second leg typically requires the business to VAT register to report the arrival; it is then also use to report the local sale with VAT – B2C or B2B. With the rise of e-commerce, and particularly marketplace fulfilment services such as Amazon’s FBA, this has created a huge extra volume in VAT compliance, with costs and admin burdens for particularly small business.

The Single VAT Registration reforms are looking at ways to eliminate this arrivals registration. It has now proposed three options.

  1. Adapt proposed Digital Reporting Requirements reforms to eliminate registration

This option would use the information gained from the proposed e-invoicing or live reporting reforms which are part of the EU Digital Reporting Requirements DRR review.  This would replace the need for a VAT registration in the country of arrival. The transfer could become non-taxable (like leg 1.) or taxable. The DRR requirements, effectively self-invoicing, would provide an adequate recordkeeping evidence. VIES listings requirements for these movements would also be scraped.

For the sale following the arrival, where there is now no local VAT registration to report, the following would be required for the sale:

  1. B2C domestic sale via One Stop-Shop OSS; or
  2. B2B reverse charge, with the customer accounting for the VAT.

The main drawback is if the transfer does no longer constitute any taxable event, it would constitute a rather radical departure from basic VAT principles leading to a possible considerable impact on different provisions or systems (e.g. call-off stock, VIES data, etc.).

  1. Extend OSS to include movement of own goods

2a Movement remains taxable with two transactions – arrival and sale. Both would be reported in the OSS, which would need additional information added to be reported to the member state of indentification (where OSS is registered).

This option is less radical as the main concepts of the current VAT system are kept. In the rather exceptional cases that a supplier, transferring his own goods, would not have a full right of deduction in the Member State of arrival, VAT would effectively be due.

2b As 2a, but the second movement would not be taxable. there would be no issue as regards the right of deduction in relation to the intra-Community acquisition in the OSS. In the case the intra-Community acquisition would be exempt, the taxable person would still have, as mentioned above, a right of deduction in relation to the previous stage. In both cases, mentioning in the OSS would therefore only have to be made in order to follow up on the goods.

  1. Deemed Supplier with OSS recording of the transfer

3a Acquisition remains taxable. For transfers of own goods prior to sale via a digital platform (marketplace) in destination country, the VAT deemed supplier rule could be used.  The transfer would remain a taxable event. The marketplace could use OSS to report the domestic sale; the seller would therefore not have to VAT register.  The platform would would report B2C as domestic sale; but B2B would be reverse charge instead.

This would target the fast-growing fulfilment services of the major marketplaces like Amazon, eBay, Zalando and Alibaba. The major disadvantage is that sellers would be disadvantaged if not using a marketplace to take on the VAT obligations – so would punish those choosing not to use platforms.

3b Acquisition no longer taxable. As above, with the platform taking on the deemed supplier obligations but the arrival would not be taxable. The sale, with the platform as the supplier, would still be recorded in the OSS, but only for information for follow-up of the goods. it would settle the issue of the right of deduction in relation to the intra-Community acquisition since no VAT would be due on the movement of goods due to the lack of any taxable event or because the intra-Community acquisition would be exempt.

2. Extension of OSS to other cross-border services when the seller is non resident

Aside from transfer of own goods, a range of B2C cross-border transactions will also potential now be included within the

  • Installation and assemble of goods
  • Goods made on board means of transport
  • Goods supplied at exhibition or trade fairs
  • Goods at weekly markets
  • Gas, electricity and heating
  • B2B supplies of services where there is a ‘may’ option on using the reverse charge
  • Immovable property
  • Passenger transport services
  • Admission to cultural, sporting, exhibition etc events
  • Restaurant and catering
  • Short-term transport hire

EU VAT in the Digital Age reforms

EU VAT in the Digital Age
3 reforms to improve efficiency of VAT for all and reduce fraud
1. Single VAT registration in the EU; extension of OSS to all B2C and certain B2B Following the 1 July 2021 introduction of the One Stop-Shop (OSS), can this be extended to cover further cross-border B2C and all / any B2B transactions (e.g. movement of own stock across borders) to reduce the foreign, non-resident VAT registrations and returns burden
More details on Single VAT Registration in the EU
2. Digital Reporting Requirements; e-invoicing What options are there to harmonise the digitisation of transaction reporting amongst the member states. The EU is looking at: Continuous Transaction Control (CTC) e-invoicing, live reporting; or Periodic Transaction Controls (PTC) invoice listings. Also if at a country, EU or hybrid-level.
Read more about EU Digital Reporting Requirements (DRR)
3. VAT treatment of the platform economy How can EU member states adapt their tax systems to reflect the new role taken on by Electronic Interfaces - platforms and marketplaces which have enabled millions of private individuals to provide services and goods for the first time. How should the VAT Directive be modified to capture the new dynamics created in the gig and sharing economies, including imposing full deemed supplier VAT obligations on platforms as with 2021 e-commerce package for goods.
EU VAT Treatment of Platform Economy update

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