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VAT OSS across the EU
The changes from 1 July 2021 will completely transform e-commerce settlements across the EU. They can fairly be called a revolution in VAT accounting and a major simplification for taxpayers.
Intra-Community distance selling – a new concept
The legislature uses the concept of mail-order sales. Tax rules for such sales from Poland are set out in Article 23 of the VAT Act, while domestic sales are governed by Article 24. From 1 July 2021 the term will be replaced by intra-Community distance sales of goods (WSTO).
WSTO means a supply of goods dispatched or transported by or on behalf of the supplier (including when the supplier delivers them) from one EU member state to another when the buyer is:
- a VAT taxpayer or legal person not subject to VAT who is not obliged to settle intra-Community acquisitions of goods; or
- a value-added tax taxpayer or legal person not subject to value-added tax who is not obliged to settle the corresponding intra-Community acquisition of goods referred to in Article 9 of the VAT Act; or
- any other non-taxable person.
For a supply to qualify as WSTO, the buyer must therefore be either a non-VAT taxpayer (consumer) or a buyer (taxpayer or non-taxable legal person) whose intra-Community acquisition of goods is not subject to VAT.
Thus, WSTO concerns the same buyers as mail-order sales: in practice, individuals or taxpayers who do not settle intra-Community acquisitions.
Importantly, the place of supply (taxation) under WSTO is where the goods are when dispatch or transport to the buyer ends. There is an exception.
Goods may be taxed in the seller's country if:
- the seller has its business establishment, permanent residence or usual residence in only one member state;
- the goods are sent to an EU state other than the seller's country of establishment or residence;
- the EUR 10,000 sales threshold for the country is not exceeded.
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Important
There is one threshold for each EU country. Once it is exceeded, WSTO is settled in the country of delivery.
Polish suppliers must keep records allowing the total value of WSTO to be determined (this also concerns electronic, broadcasting and telecommunications services supplied to consumers). The records must show when the threshold is exceeded.
Options for settling WSTO
A taxpayer whose WSTO is taxed in the destination country has two options:
- register and settle VAT in the country of destination;
- choose the new VAT OSS procedure.
The legislature has thus introduced new distance mail-order sales rules and given taxpayers the option of settling under VAT OSS.
Important!
Invoices must still be issued for WSTO. This obligation does not apply to taxpayers using VAT OSS, although OSS users may voluntarily issue invoices.
When issuing an invoice under OSS, enter the VAT amount applicable in the EU country to which the goods are sent, rather than the VAT amount of the taxpayer's country of establishment.
The legislature introduced transitional provisions for mail-order sales. If dispatch or transport began before 1 July 2021 and the goods reached the buyer after 30 June 2021, the previous provisions apply.
Who can use the OSS procedure?
OSS covers:
- services provided by taxpayers with an establishment or permanent place of business in the EU but no establishment in the member state of consumption;
- WSTO;
- domestic supplies of goods made by electronic interfaces facilitating those supplies.
Thus, the VAT OSS procedure for electronic, broadcasting and telecommunications services supplied to private individuals in another EU state will be extended to WSTO distance sales of goods.
Choosing OSS
A taxpayer may notify its intention to use the Union scheme in the member state of identification. A Polish taxpayer established in Poland therefore submits the notification here.
Important!
The Ministry of Finance published registration forms for VAT OSS and IOSS (Import One Stop Shop), which simplify VAT settlement for foreign transactions.
If Poland is the member state of identification, the application is submitted electronically via e-declarations to the head of the Second Warsaw-Śródmieście Tax Office.
Importantly, VAT OSS registration is entirely voluntary and depends on the seller's decision.
VAT settlement under OSS
Taxpayers choosing OSS should submit a special return independently of the JPK_V7 filing obligation.
The new return is filed electronically through the e-declarations portal.
It is filed with the Second Warsaw-Śródmieście Tax Office whether or not any goods or services covered by the Union scheme were supplied (zero returns are also required).
Returns are filed quarterly by the end of the month following each quarter. Importantly, if the deadline falls on a Saturday or public holiday, it is not moved to the next working day: it remains the original date. Amounts are shown in euros.
Foreign VAT is settled on a separate return (VIU-D).
Corrections to VIU-D are made in the current return. A return may be corrected no later than three years after the filing deadline for the VAT return in which errors occurred. The correction specifies the appropriate member state of consumption and settlement period.
To recap, if you use OSS you must apply the VAT rate of the member state where goods are dispatched or services are provided. You must collect VAT from buyers on intra-EU distance sales or services and then make quarterly payments of VAT declared on the return. Payment goes to the member state in which you are registered for OSS (example: if registered for VAT OSS in Poland, you pay all tax on all such sales in Poland).
You must also keep records of all qualifying OSS sales for ten years.
If this article interested you, explore our e-commerce accounting services and see how we can help:
Our specialists can help you put this knowledge into practice.
Summary
OSS summary
The new procedure has many advantages. It removes the obligation to register for VAT in other EU countries on exceeding the threshold for mail-order sales to private individuals.
Taxpayers also have one harmonised threshold for electronic, broadcasting and telecommunications services and WSTO for each EU country (EUR 10,000).
Foreign tax can be settled with the Polish tax office (Second Warsaw-Śródmieście Tax Office). A separate return is filed and tax settled quarterly.
In summary, the changes are very beneficial because they will make VAT settlement much easier.
Author: Tomasz Burchard – certified tax adviser (registration no. 12888)
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