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VAT-OSS rules for the whole EU — What is Intra-Community distance sales of goods?
VAT-OSS for the whole EU
The changes from 1 July 2021 will entirely change e-commerce settlements throughout the European Union. It is safe to say that this is a revolution in VAT settlements and a great convenience for taxpayers.
Intra-Community distance sales of goods — a new concept
The legislator uses the concept of mail-order sales. The taxation rules for this sale from Poland are set out in Art. 23 of the VAT Act. In the case of domestic sales, the regulations result from Art. 24 of the VAT Act. From 1 July 2021, the above concept will be replaced by Intra-Community Distance Sales of goods.
- Intra-Community distance sales of goods should be understood as the delivery of goods shipped or transported by the supplier or on his behalf (as well if the supplier himself delivers them) from the territory of one European Union country to another European Union country when the buyer is:
- A taxpayer of value-added tax or a legal person who is not a taxpayer of value-added tax, who are not obliged to settle intra-Community acquisition of goods or a taxpayer of value-added tax or a legal person that is not a value-added tax taxpayer, who are not required to settle intra-Community acquisition of goods corresponding to the intra-Community acquisition of goods (referred to in art. 9 of the VAT Act);
- Any other non-taxable entity.
It should also be noted that in order for a given supply to be considered an Intra-Community distance sales of goods, the transaction must be made either to a non-VAT payer (consumer) or to a buyer (who is a taxable person or a non-taxable legal person), for whom the intra-Community acquisition of goods does not are subject to VAT.
So in the case of Intra-Community distance sales of goods, we are talking about the same entities that were related to mail-order sales. In practice, these are natural persons or taxpayers who do not settle ICS (Intra-Community Supply).
Importantly, the place of delivery (taxation) at the Intra-Community distance sales of goods is the place where the goods are at the time of completion of shipment or transport to the buyer. There is an exception to the rule.
The goods may be taxed in the seller's country where:
- Has its registered office or permanent residence or habitual residence, only in the territory of one Member State;
- The goods are shipped to an EU country besides that of the seller's seat or residence;
- The sales limit set at EUR 10,000 for the country has not been exceeded.
Important
There is one limit for each EU country. Thus, after exceeding the limit, we will switch to the Intra-Community distance sales of goods settlement in the country of delivery.
Polish suppliers are required to keep records based on which the total value of Intra-Community distance sales of goods can be determined (this also applies to the provision of electronic, broadcasting, and telecommunications services to consumers). The records are to ensure when the limit is exceeded.
Intra-Community distance sales of goods billing options
The taxpayer who will tax the Intra-Community distance sales of goods in the country of destination has two options:
- VAT registration and settlement in the country of destination of the goods;
- Selection of a new VAT-OSS procedure.
Thus, the legislator introduced new regulations regarding distance mail-order sales, providing taxpayers with the possibility of settling them according to the VAT-OSS procedure.
Important!
In the case of the Intra-Community distance sales of goods, you still have to issue invoices. This obligation will not apply to taxpayers who will use the VAT-OSS procedure. However, taxpayers using OSS may issue such invoices voluntarily.
When issuing an invoice using OSS, we do not enter the VAT amount of the taxpayer's seat and the amount of value added tax of the given EU country to which the goods are shipped.
The legislator introduced transitional provisions regarding distance selling. If shipment or shipment began before July 1, 2021, and delivered to the buyer after June 30, 2021, the current regulations shall apply.
Who can use OSS (One Stop Shop)?
The OSS procedure covers:
- Services provided by taxable persons established or established in the territory of the EU, but not established in the Member State of consumption.
- Intra-Community Distance Sales of goods;
- Deliveries of goods in a Member State by electronic interfaces that facilitate these deliveries.
That is, the VAT OSS procedure for sales to private persons from another EU country for electronic, broadcasting, and telecommunications services will be extended to the mail order sale of Intra-Community Distance Sales of goods.
Choice of OSS (One Stop Shop)
A taxpayer may submit a declaration informing about the intention to use the EU procedure in the Member State of identification. Thus, a Polish taxpayer established in the country submits such a declaration in our country
Important!
The Ministry of Finance has published application forms for the VAT OSS or IOSS procedure (i.e., Import One-Stop Shop), which facilitate VAT settlement in foreign transactions.
If the country of identification is Poland, the application should be submitted to the Head of the Second Tax Office, Warsaw Śródmieście. We submit applications in electronic form via the e-declarations system.
Importantly, registration for VAT OSS is completely voluntary and depends on the seller's decision.
VAT-OSS and VAT settlement
Taxpayers choosing OSS should submit a special declaration, regardless of the obligation to submit the JPK_V7 file.
The new declaration will be submitted through electronic communication, i.e., via the e-declarations portal.
We submit the declaration to the Second Tax Office, Warsaw Śródmieście. We must submit the declaration regardless of whether the deliveries of goods and services covered by the EU procedure took place (i.e., we also submit zero declarations).
Furthermore, we submit declarations for quarterly periods by the end of the month following each subsequent quarter. Importantly, if the deadline expires on a Saturday or a public holiday, we do not submit it on the next working day, only on the expiry date. We show the amounts in the declaration in EUR.
Foreign VAT is settled in a separate declaration (in the VIU-D declaration)
We correct the VIU-D declaration in the current declaration. A correction of the declaration may be submitted, but not later than within 3 years from the date of expiry of the deadline for submitting the VAT declaration in which errors were found. In the correction, we indicate the appropriate country of consumption and the billing period.
Recall that if you use the OSS, you must: apply the VAT rate of the Member State to which the goods are shipped or where the services are provided. We have to collect VAT from the buyer in the case of distance sales of goods within the EU or provision of services, and then make quarterly payments of the VAT declared in the VAT return. We make payments to the Member State where we are registered with OSS (Example: if we are registered in Poland for VAT OSS, we pay all taxes for all sales in Poland).
In addition, we must keep records of all qualifying OSS sales for 10 years.
OSS (One Stop Shop) — summary
There are many advantages to introducing a new procedure. Thanks to this procedure, taxpayers are no longer required to register for VAT in other EU countries when the limit of mail order sales to private individuals is exceeded.
In addition, taxpayers have one unified limit for electronic, broadcasting, telecommunications and Intra-Community Distance Sales of goods services for each EU country (10,000 EUR).
Taxpayers can settle foreign tax with the Polish tax office (the Second Tax Office Warsaw Śródmieście). We submit a separate declaration and settle the tax for quarterly periods.
In summary, the changes are extremely beneficial because they will significantly facilitate VAT settlements.
Author: Tomasz Burchard — certified tax advisor (entry no.: 12888)
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