VAT in the Digital Age (ViDA) Single VAT Registration (IV)
6 min. read
The E-Commerce package, which came into effect on July 1, 2021, was the last significant reform implemented by the EU institutions when it comes to simplifying the procedure for VAT compliance for EU and Non-EU taxpayers making transactions where the place of taxability is based within the EU.
Let’s make a short briefing on the most noticeable changes introduced by the E-Commerce package when it comes to the simplification of VAT-related compliance procedures for taxable suppliers:
The extension of the scope defined for the Mini One Stop Shop(MOSS) to One Stop Shop(OSS);
The deletion of import VAT exemption for low-value commercial goods within the EU;
The extension of the scope of transactions covered by the OSS schemes;
Introduction of the Deemed Supplier legal institute for specific B2C distance supply of goods for sales declared via all three types of simplification schemes when all mandatory requirements are met;
Introduction of EU-wide EUR 10 000 threshold for EU-based suppliers of all types of services within B2C as well as for specific categories of B2C distance sales of goods;
Introduction of the EUR 150 threshold for import of low-value goods in consignments from third countries or third territories into the EU(declaration via IOSS scheme).
Thanks to the introduction of the E-Commerce package in 2021, the rules defining the place of taxation have been updated. From this moment on, based on the fact that the country-based thresholds have disappeared, the Value Added Tax became due in the Member State where the customer is based.
For EU-established businesses, there is a possibility to levy VAT following the local rules if the newly fixed cumulative threshold has yet to be reached. The supplier can opt out of these rules and directly apply the taxability regulations connected with where the customer is based.
The results obtained after introducing the E-commerce package in 2021 unequivocally show that the reform was highly successful and that businesses have experienced significant ease regarding VAT compliance duties within the EU, mainly thanks to introducing special OSS schemes for filing and remitting taxes.
Two years after the successful implementation of the EU VAT reform package for electronic commerce and its testing, the EU institutions, as well as the Member States institutions and national and international business associations, have had a chance to shed light on the deficiencies of the system put in place.
At this point, it’s important to emphasize that before increasing the visibility of some of its flaws, the reform harmonized rules for electronic commerce within the EU with great success.
Within more than two years since its introduction, some flaws/restrictions have been identified.
The exhaustive analysis carried out by the VAT expert group, specially contracted by the European Commission, has identified the main types of transactions that impose the mandatory obligation for non-established businesses to follow the path of local registration – in Member States in which the VAT is due.
The following types of transactions have been identified as the main ones that impose the registration obligation on non-established businesses.
Concerning the B2B transactions:
Domestic supplies of goods where the reverse charge mechanism isn’t applicable;
Intra-community acquisition/intra-community supply in/from Member State where the supplier is not established;
Exports from a Member State where the seller is not established;
The situations when the reverse charge mechanism for domestic supplies cannot be leveraged.
Concerning the B2C transactions:
Domestic supply of goods;
Distance sales of goods imported from a third country or third territory.
Through the third pillar of the VAT in the Digital Age package, the European Commission is trying to enhance the simplification of VAT registration procedures for non-established businesses. To accomplish this to the broadest extent and to be aligned with the conclusions reached in the in-depth analysis, implementing the colloquially called OSS 2.0 reform is seen as the rightful answer.
It is expected that the OSS 2.0 reform should simplify the VAT registration process for non-established businesses following the possibilities that will be introduced through these expected novelties:
Expansion of types of the transactions covered by the OSS scheme – also adding B2C and B2B transactions of goods that have been left out within the scope of OSS 1.0 reform (where local VAT registration for non-established businesses is still required (e.g., supply of goods with installation and assembly; supply of goods on board means of transport (ships, airplanes); supply of gas, electricity, heating, and cooling; supply of second-hand goods, works of art, antiques (margin scheme);
Removing the rigorous impediment to being VAT registered in each MS when there is a moving of own stock (e.g., from one warehouse to another, e.g., in the case when the supplier is guided to have goods in the stock located closer to its customer);
Extension of the applicability of the reverse charge mechanism – defined in the possibility that non-established sellers can always use this method within B2B transactions where the recipient isn’t a domestic company;
Making the IOSS scheme mandatory for Digital Platforms;
Making absolute the call-off stock arrangements.
The expected implementation of the third pillar of VAT in the Digital Age reform, the so-called Single VAT Registration, is seen in comparison with the other two pillars as the one that should be “easiest” to be formally accepted by the respected Member States.
The climate, both from the Member States and EU institutions, when it comes to the expansion of the introduced OSS schemes is mainly positive, and for now, the EC proposal is going in the right direction.
Enhancing the simplification for EU-wide VAT compliance using the single point of registration for non-established businesses is undoubtedly a positive move that will reduce the administrative costs for taxpayers and the challenges of simultaneously handling VAT compliance in numerous countries.
Aleksandar Delic 1stopVAT Indirect Tax Researcher (Global Content)
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