Are you an e-commerce business and do you ship parcels to other EU member states? Apart from increasing the size of your market, it also causes additional tax obligations. Since July 2021, VAT changes enter into force. The special regime of a single administrative place (the so-called One-Stop-Shop, or OSS) can simplify the levying of VAT throughout EU member states. Be ready for the upcoming changes that will impact B2C entrepreneurs operating in e-commerce and/or shipping goods abroad.
Who is impacted by OSS implementation and changes?
In July 2021, a special regime of a single administrative place (the so-called One-Stop-Shop, or OSS) enters into force.
New rules for VAT application significantly impact entrepreneurs operating in e-commerce and/or shipping goods to end consumers within EU.
New rules only impact shipment of goods to end customers (i.e. B2C model). B2B transactions will not be impacted by these changes.
In the following paragraphs, we focus on those entrepreneurs who consign goods from warehouses based in the Czech Republic. In case of warehouses located outside the Czech Republic, the situation is even more complicated, though we may cover that on a different occasion.
Legacy VAT treatment
Under the legacy rules, as an operator in e-commerce shipping goods to customers in other EU member states, you had two options.
- Either you registered as a VAT payer directly in every single EU member state that you had been shipping goods to. VAT was then levied in the target member state via a local VAT return.
- Or you monitored the turnover you were generating in each EU member state and levied VAT from intracommunity supplies up to a certain threshold in the Czech Republic in the same manner as for a domestic transaction. Whenever the turnover exceeded the threshold, you registered for VAT in the given EU member state and levied VAT in that EU member state in line with the local law.
Annual turnover thresholds, the exceeding of which would trigger an obligation to register for VAT abroad, used to differ state by state. E.g. you could ship goods to Slovakia of up to EUR 35 thousand, for Germany the limit was EUR 100 thousand annually, before the respective local VAT registration obligation kicked in.
However, this regime ends as of 30 June 2021. You should be ready for the changes that the VAT law amendment introduces.
An overview of upcoming changes
New rules, which can be applied on the basis of European legislation since 1 July 2021, brings important changes.
- Threshold which determines whether the e-commerce operator can levy VAT in the Czech Republic, or has to register for VAT in another EU member state, should be considered for all sales realized in all EU member states in total (as opposed to individual testing before).
- The limit is reduced to EUR 10 thousand (excluding VAT) for a calendar year (as opposed to e.g. EUR 35 or EUR 100 thousand before).
If a given e-shop sells goods to other EU member states not exceeding the total of EUR 10 thousand a year (an amount excluding VAT), it will continue to levy Czech VAT when selling abroad. The e-shop will report the VAT in its Czech VAT return and it fiscally belongs to the Czech Republic.
If your e-shop exceeds the amount, you can newly choose from two options:
- Same as in the past, you can register for VAT in the relevant EU member states to which you ship goods. You will report VAT through a local VAT return in each EU member state concerned. Beware that, after exceeding the EUR 10 thousand threshold, you are obliged to register for local VAT after making a single supply there.
- You will use the new One-Stop-Shop (OSS) regime and will communicate with tax administrations of the EU member states concerned via your Czech tax administrator. You will find this regime in the Czech law under the designation of special regime for a single administrative place (“zvláštní režim jednoho správního místa” in Czech).
We’d like to remind you again that when shipping goods to end customers from a place other than the Czech Republic, or when having a fixed place of business outside the Czech Republic, the situation is more complex and you will not always be able to proceed in line with the above.
What is One-Stop-Shop
The special regime of a single administrative place (One-Stop-Shop, or OSS) simplifies the levying of VAT in the individual EU member states. If you register, as an e-commerce operator, for this regime, you will no longer have to communicate with the tax administration of each EU member state individually, but will do so through a Czech tax administrator.
A special web portal set up for these purposes by the Czech tax administration will be available for all e-commerce operators through which to file a VAT return. It will serve to report the total value of supplies made to each EU member state.
Tax returns are filed quarterly and the tax is paid with one amount to a specially designated account of the tax administrator. Tax return is always filed until the end of the month following the given quarter i.e. for Q3, the deadline will be 31 October.
OSS registration process is already live. You can already register now in advance. If you already exceeded the threshold of EUR 10 thousand this or last year, there is no reason to hold off. Registration for One-Stop-Shop can only be done digitally.
If you would like to know what to look out for when registering for OSS? Read the following article.
If you need a tailor-made advice concerning your specific situation, contact us. We will be happy to discuss the issue with you and find the optimal solution for you to address the changes in the tax laws.