Author: Andreu Bové, Partner of Bové Montero y Asociados
On 1 July, the scope of the so-called “ »One Stop Shop » for VAT will be extended. Currently this « one-stop » tax collection system is already being used for certain telecommunication services. The implementation of this new “One Stop Shop (OSS)” system has as its main objectives the simplification of VAT collection and the fight against fraud.
Under the current regulations, a business selling to end customers (B2C) in another Member State is obliged to register for and pay VAT according to local regulations when they exceed a certain sales threshold, which can range from EUR 35,000 to EUR 100,000 or be set in the local currency. In addition, and despite the fact that VAT is a harmonized tax in the European Union, the applicable rates vary from 19% to 27%, so that by waiving the threshold it is possible to reduce taxation by paying VAT in the country with the lowest VAT rate.
The new regulation sets a single threshold of EUR 10,000 for distance sales to end customers in all Member States and creates the optional OSS regime. To be eligible for its optional application, a business or professional must sell to end customers established in the EU and the goods must have been transported from one Member State to another, i.e. that the sale to the final customer is made in a Member State other than that of dispatch or storage of the goods.
A business or professional opting to apply the OSS will submit a single return, as a general rule in the country where the place of business is located, paying the VAT on all distance sales made in the different Member States, with no need to be registered in all the countries where sales are made. However, as it is an optional regime, if distance sales to other Member States exceed EUR 10,000 and the seller does not opt in to the OSS, they will have to register in all the countries where sales are made and pay VAT according to local regulations.
Together with OSS, the IOSS (Import One Stop Shop) has also been created, which, like OSS, is an optional regime that will allow businesses or professionals to register in only one of the Member States and pay VAT through the One Stop Shop system. This new system is only applicable to imports of goods and their subsequent sale with an intrinsic value of less than EUR 150.
There are new regulations, too, for the other side of the VAT coin, the right to obtain a refund on input tax. Businesses using the optional OSS regime will be able to apply for a refund through the procedure provided for non-established businesses.
This new “One Stop Shop” system simplifies so-called distance sales, allowing businesses to simplify the administrative burden by filing a single return. This measure will encourage Catalan businesses to promote their online sales not only in Spain but throughout the European Union.