1. Introduction
The VAT One-Stop Shop (OSS) introduced from 1 July 2021 simplifies VAT obligations for businesses selling goods and services cross border to final consumers in the EU.
Depending on the location of their business, taxable persons will be permitted to:
· Register for VAT electronically in a Member State for intra-Community distance sales of goods and supplies of services to non-taxable persons. This Member State then becomes the Member State of identification.
· Declare and pay EU VAT due on these supplies in a single electronic quarterly return submitted to the Member State of identification. The Member States in which the sales take place are the Member States of consumption.
· Communicate with the Revenue Commissioners in relation to these returns, even where the sales are taxable in another Member State.
An “intra-Community distance sale of goods” is defined as supplies of goods dispatched or transported by or on behalf of the supplier, including where the supplier intervenes indirectly in the transport or dispatch of the goods, from a Member State other than that in which dispatch or transport of the goods to the customer ends.
Within OSS, there are two schemes, the Union scheme and the non-Union scheme.
2. Union Scheme
From 1 July 2021, the EU VAT due on the following supplies can be declared in the Union scheme:
· cross-border supplies of telecommunications, broadcast and electronically supplied (TBE) services to non-taxable persons within the EU
· all other cross-border supplies of services to non-taxable persons within the EU
· intra-Community distance sales of goods, and
· certain domestic supplies of goods (in specific circumstances).
The use of the Union scheme is not obligatory. However, if a taxable person is registered for the Union scheme, this scheme must be used to account for the VAT due on ALL supplies of goods and services within the scope of the scheme.
The Union scheme may be used by taxable persons established both inside and outside the EU.
3. Excisable Goods
Distance sales of goods can cover any type of goods irrespective of value, including products subject to excise duty. The Union scheme covers supplies of goods subject to excise duty in specific cases, depending on the customer to whom the goods are supplied.
The Union scheme can be used to declare supplies of excisable goods where those goods are supplied to:
· non-taxable persons (consumers)
· or taxable persons or non-taxable legal persons whose intra-Community acquisitions are not subject to VAT under the VAT Directive.
Furthermore, the goods must be in free circulation in the EU before the sale, i.e. the goods were produced in the EU or were imported by the supplier into the EU at some point before the sale.
4. Supplier established in the EU
If the supplier is established in the EU, that taxable person may use the Union scheme to declare and pay EU VAT in respect of:
· services (including TBE services) supplied to a non-taxable person who is located in a Member State in which the supplier is not established and
· intra-Community distance sales of goods.
Services provided to a non-taxable person in the Member State in which the supplier is established are to be declared in the supplier’s domestic VAT return.
5. Supplier not established in the EU
If the supplier is not established in the EU and does not have a fixed establishment in the EU, they may use the Union scheme to declare and pay VAT on intra-Community distance sales of goods only.
A supplier who is not established and does not have a fixed establishment in the EU, cannot use the Union scheme to declare EU VAT in respect of supplies of B2C services. These suppliers can instead choose to register for the Non-Union scheme to declare the VAT due on those supplies.
If a taxable person is not established in the EU nor has a fixed establishment in the EU, but has been issued a VAT number by an EU Member State, they can still choose to register for the Union Scheme.
Once a person is registered for the Union scheme, this scheme must be used to account for VAT on all supplies within the scope of the scheme. It is not possible for the VAT due on some supplies to be accounted for outside of the scheme. For suppliers who are not established in the EU and who choose to register for the Union scheme, this means that they must account for EU VAT due on ALL intra-Community distance sales of goods under the scheme.
6. Deemed Suppliers
A taxable person, established in the EU or outside of the EU, facilitating the supply of goods through an electronic interface as a deemed supplier, is treated as any other supplier and can register for the Union scheme to declare and pay EU VAT on:
· intra-Community distance sales of goods, and
· certain domestic supplies of goods, where the supply is facilitated through the electronic interface and the goods and the customer are located in the same Member State.
Only deemed suppliers are permitted to declare VAT due on domestic supplies through the Union scheme.
7. VAT Rates
A supplier registered for the Union scheme will have to apply the VAT rate applicable to their supplies in the Member State of consumption.
8. Member State of Identification
The Member State of identification is the Member State in which a taxable person is registered for the purposes of the Union scheme.
The location in which a taxable person can register for the purposes of the Union scheme depends on the location(s) in which the business is established. If the taxable person is established in Ireland, he or she can register for the Union scheme here only.
If the taxable person is not established in the Community, but has a fixed establishment in Ireland, he or she is obliged to register in Ireland, if this is the only Member State where they have a fixed establishment, should he or she wish to avail of the Union scheme.
If the taxable person is not established in the Community but has more than one fixed establishment in the Community, the taxable person may choose one of those Member States, in which they have a fixed establishment, to be their Member State of identification. This choice will be effective for the remainder of the relevant year plus a period of two years.
If the taxable person is not established in the Community, and has no fixed establishment in the Community, and wants to avail of the Union scheme in respect of intra-Community distance sales of goods, he or she must register for the Union scheme in the Member State in which the dispatch or transport of the goods begins. If there is more than one Member State from which the goods are dispatched or transported, the supplier may choose one of those Member States as the Member State of identification. This choice will be effective the remainder of the relevant year plus for a period of two years.
9. Suppliers obligations under the Union Scheme
9.1 Union Scheme VAT Return
Once registered for the Union scheme, a taxable person must submit a quarterly Union scheme VAT return electronically by the end of the month following the end of the tax period covered by the return. This Union scheme VAT return will include all EU VAT due in each Member State where a supply has been made under the scheme for the period in question. This VAT will be remitted to the Revenue Commissioners for onward transmission to the relevant Member States of consumption.
The Union scheme VAT return must be made whether or not any supplies have been made during that quarter. If no supplies have been made during a calendar quarter a nil return should be submitted. The contents of the Union scheme VAT return will be different depending on the supplies made by the taxable person concerned.
Every Union scheme VAT return made under this scheme is to contain:
- the person’s identification number (issued at registration), and
- for every Member State of consumption of goods and services in which VAT is due:
(a) the total value of supplies made covered by the Union scheme during the tax period, exclusive of VAT
(b) the total amount broken down by rate of corresponding VAT
(c) the applicable rates of VAT, and
(d) the total VAT due in respect of the supplies.
9.2 Records
A taxable person registered for the Union scheme must keep records of all transactions covered by the Union scheme for a period of 10 years from 31 December of the year in which the transaction was carried out. The records must be sufficiently detailed for the Member State of consumption to verify that the Union scheme VAT return is correct.
These records must be made available on request of the Revenue Commissioners or the Member State of consumption and must be provided electronically.
9.3 Exchange Rate
Where supplies have been made using a currency other than the euro, the exchange rate to be used is that published by the European Central Bank on the last day of the calendar quarter to which the Union scheme VAT return relates. If there is no publication on that date, the rate on the next day of publication is to be used.
9.4 VAT deductions
A taxable person making use of the Union scheme is not entitled to deduct VAT incurred in the Member State of consumption. Instead, they are to use the provisions of Council Directive 2008/9/EC, which provides for a system of electronic VAT refunds and which lays down detailed rules for the refund of value added tax to taxable persons not established in the Member State of refund but established in another Member State.
If the taxable person using the scheme is obliged to be VAT registered in a Member State for business activities not covered by the Union scheme, the taxable person will deduct the VAT incurred in that Member State in relation to the activities covered by the Union scheme in the normal VAT return submitted to the tax administration of that Member State.
10. Removal from the Scheme
The Revenue Commissioners will remove a taxable person from the Union scheme if the taxable person persistently fails to comply with the rules of the scheme.
It should be noted that where a taxable person is excluded from the Union scheme for persistently failing to comply with the rules of the scheme, they will also be excluded from any of the special schemes (non-Union scheme and IOSS) in any Member State for two years following the period during which the person was excluded.
11. Registration for multiple schemes
It is possible for a taxable person to register for multiple schemes, depending on where that person has established their business and the supplies that they are making.
A taxable person established in the EU can be registered for both the Union scheme and the Import One Stop Shop (IOSS), where they are making supplies covered by those schemes.
A taxable person established outside of the EU who is registered for the Union scheme in relation to intra-Community distance sales of goods in the EU may also be registered for the non-Union scheme and can also opt to register for the IOSS, where they are making supplies covered by those schemes.
Professional advice should be sought on your VAT obligations.