VAT settlement abroad – key aspects for e-commerce sellers
Accounting for VAT abroad is becoming increasingly common with the growing popularity of e-commerce in the international arena. For e-commerce entrepreneurs, the need to properly settle VAT in transactions with customers outside the country is becoming an unavoidable challenge. In this context, the concept of intra-Community distance selling of goods and the VAT OSS (One Stop Shop) procedure are becoming key elements in successfully conducting international online sales. In this article, we will discuss both the principles of accounting for intra-Community distance selling of goods and the benefits of using the VAT OSS system, as well as the essence of VAT registration for entrepreneurs operating in the international e-commerce market.
Intra-Community distance sales of goods (CTSO)
Intra-Community distance sales of goods are an important part of e-commerce within the European Union. As part of B2C (business to client) transactions, where goods are shipped to consumers in different EU countries, it is necessary to properly settle VAT.
What is an intra-Community distance sale of goods?
The term “intra-Community distance sale of goods” refers to the supply of goods sent by a supplier from one country to another. It covers various cases, including delivery to taxpayers and non-business individuals. Intra-Community distance selling of goods requires proper determination of the place of supply of goods, which determines the obligation to settle VAT in the buyer’s country. For e-commerce sellers, understanding the intra-Community distance selling of goods rules and the limits of the value of sales is key to successfully conducting international online sales.
Limits and how to account for intra-Community distance selling of goods
The limit for sales of goods and services to buyers from other European Union countries is €10,000 per year. If the value of sales exceeds this limit, the seller must take appropriate steps, such as registering for VAT in the buyers’ countries or registering for VAT OSS. If the limit is not met, the seller can choose from three options: accounting for sales the same as domestic sales, voluntary registration for VAT in the buyer’s country or registration for VAT OSS.
Sales settlement in the VAT OSS system
E-commerce sellers, especially those operating in the European market, often have to deal with tax complexities. However, since the introduction of the VAT OSS (One Stop Shop) system, the procedure for settling sales to foreign consumers has become much simpler and clearer.
VAT OSS, replacing the previous MOSS (Mini One Stop Shop) system, makes it possible to show all sales in one VAT-OSS declaration. In practice, this means that you can report all sales with foreign VAT in your country of registration, Poland, for example. Importantly, you pay this tax at the rates of the countries to which you sale your products.
Note, however, that participation in the OSS system is voluntary, but if you choose to do so, you must settle all transactions to consumers from European Union countries in the system. It is not possible to apply this procedure selectively.
Under OSS, you cannot declare domestic sales to domestic consumers, foreign local sales, i.e. shipping goods from a warehouse in another EU country to a recipient in the same country, or sales to businesses, i.e. intra-Community supply of goods.
How VAT on intra-Community distance sales of goods is settled by a VAT-exempt taxpayer
VAT-exempt taxpayers have certain limits that they must monitor, especially when it comes to intra-Community distance sales of goods. If the value of sales exceeds €10,000 per year, you should consider registering for VAT in the buyer’s country or using the VAT OSS system.
However, exceeding this limit does not affect the VAT taxpayer’s status in your domestic country.
How to settle VAT on sales of services to EU consumers
The OSS system covers not only sales of goods, but also services provided to consumers from EU countries. You can settle services such as accommodation, cultural, sports, educational, catering and many others using this system. However, it is important to note that for services other than telecommunications, broadcasting and electronic services, the limit of 10 000 euros does not apply. Even if the value of these services does not exceed this limit, it is necessary to register for VAT in the buyer’s country or use the OSS.
amavat® provides a comprehensive, customized service for your OSS VAT obligation cases. Learn more about it on our website: VAT One Stop Shop (OSS) Registration.
VAT registration
In the context of e-commerce, VAT registration is crucial for sellers dealing with entities from other European Union countries. If you are in the e-commerce business and make sales or purchases of goods from taxpayers outside your country of registration, you are required to register for EU VAT.
If you are an online seller and keep warehouses abroad, such as through Amazon’s FBA program or other sales platforms, registration for VAT in the country where the goods arr stored is mandatory. This includes sellers who use storage services offered by e-commerce platforms, as well as those who have their own warehouses abroad. Inter-warehouse transfers and local sales from a warehouse in a country to an end customer in the same country cannot be shown on the OSS VAT return, so it is necessary to register for VAT in the respective countries where you have e-commerce operations.
Summary
The implementation of the OSS (One Stop Shop) VAT system has significantly simplified the sales accounting process for e-commerce entrepreneurs operating on the European market. It allows to consolidate all transactions in a single declaration, eliminating unnecessary bureaucracy. Although participation in the OSS system is voluntary, its use is becoming increasingly preferred by e-commerce businesses due to its simplicity and transparency. Nonetheless, it is important to keep in mind the need to monitor sales limits and register for VAT in the relevant countries, especially if those limits are exceeded. For e-commerce sellers, compliance with the intra-Community distance selling of goods rules and the VAT OSS system is becoming a key element in successfully conducting international business. For further assistance and support on issues related to VAT settlement abroad, you are welcome to consult with our experts: Contact us – amavat ®.
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Iga Turniak
