As of the 1st of July 2021, the massive reform of the EU VAT rules has entered into force in Europe and has introduced important changes especially for e-commerce and cross-border sales activities.
1 Tax on EU intra-community sales
As far as EU cross-border sales are concerned (meaning between 2 EU Member States) the local VAT rules of the country of departure of the goods apply in the case of sellers possessing the following requisites:
- products are stored in only one European country
- the €10.000 distance sales threshold has not been exceeded
Upon losing one of the 2 above-mentioned requisites it will be necessary to apply and pay VAT due to the country of destination for all sales made in Europe. To get more information on local VAT jurisdiction applicable to sales you can read the following article link.
2 Storage in multiple countries
If you store your goods in warehouses located in more than one European country, as for example do the vendors adhering to Amazon’s pan-European program, as of the 1st of July 2021 you automatically lose the first requisite and you will have to apply tax at destination. And you still have the obligation to register for VAT in each country where your inventory is stored.
3 A single threshold
Following the entry into force of the new reform, the previous sales thresholds (from €35.000 to €100.000) of the single European countries no longer apply and have been replaced by the new single €10.000 threshold.
All the EU cross-border sales towards private customers are counted in the total of this threshold.
It is important to note that even the sales towards countries in which you are VAT registered will be added to the threshold amount whenever a shipment departs from a different country.
4 Registering for the OSS
The One Stop Shop portal has been introduced to facilitate the payment of VAT in all European countries. Once registered for the OSS the online retailers can submit a return and pay VAT for all their EU sales in their own country and don’t have to register and pay VAT in each country in which their products are sold.
If you don’t register for the OSS and you lose one of the two requisites listed under points 1 and 2, you will have to submit a VAT return in each of the countries towards which your products are shipped.
5 Voluntary registration
It’s possible to register for the new OSS scheme even without having lost the requisites in point 1 and 2. Seeing that Italy has one of the highest VAT rates in Europe, this solution could be worthwhile. The choice will depend on whether the money saved by applying the lower VAT rates is more or less than the costs incurred for submitting the quarterly OSS declarations.
6 Foreign tax registration
The moment you register for the new scheme, all your EU cross-border sales will have to be declared through the OSS, and must not be included in the VAT return submitted to your Member state.
For example, if you are registered for German VAT, domestic sales will be declared in the VAT return, whereas sales from other countries will be declared in the OSS return.
It can also occur that supplies to Italian customers are declared in the OSS return if they have been shipped from abroad.
7 B2B Sales
EU cross-border supplies to business customers do not fall under the new regulations and remain unchanged, hence invoices must be issued without including VAT.
Sales are deemed to be B2B only if the buyer has a valid European VAT number, meaning that the validity of the VAT number must be duly verified on the VIES register before issuing the invoice.
8 OSS Return
The OSS returns are due quarterly and must be submitted within the month following the previous quarter. The deadlines are January 31st April 30th, July 31st, and October 31st.
It will no longer be necessary to issue invoices for B2C EU cross-border sales declared on the OSS.
9 Practical examples
1) Assigning the sales to the 10.000€ threshold
2) Applying VAT rate of country of departure or of arrival
10 ZonWizard Settings
ZonWizard helps the seller by calculating which local VAT and tax rate to apply to each transaction based on the regulations and the settings entered by the user for EU cross-border sales.
The tool indicates the date on which the threshold was exceeded, counting only the sales effected on Amazon. If other sales channels are used they will have to be taken into consideration in order to determine whether the threshold has been exceeded or not. By activating the registered for the OSS scheme option the tool will furnish for each country a monthly VAT recap listing the taxable income and VAT amounts of the sales that fall within the OSS return separated from the sales the fall within the VAT return of the Member State.