EU VAT rules – One Stop Shop

If you sell to different EU countries, VAT can seem complicated. Digital services have been a little easier to handle, where you have been able to pay the EU VAT in one country and then the tax authority in the country of purchase has taken care of the rest.

From 1 July 2021, new VAT directives were introduced for e-commerce companies in the EU. With this, physical goods were also included. They will then fall under a new regulatory framework called One Stop Shop (OSS) within the EU. In addition to allowing e-retailers to manage EU VAT via the tax authority, this will also set a general turnover ceiling for when to start paying VAT to other countries.

Different countries have different turnover thresholds but the new rules will change that. All countries within the EU will now have a turnover ceiling of EUR 10,000, which for Swedes is set at SEK 99,680. If you, as an e-retailer, sell goods above that amount to other EU countries, it means that you must, as before, register for VAT in all those countries or register all sales via the One Stop Shop system, which will be available via the Swedish Tax Agency.

The former Mini One Stop Shop (MOSS) system that handled digital services is now renamed One Stop Shop and includes all services and products sold to private individuals in EU countries.

One Stop Shop makes life much easier for e-retailers who now have the opportunity to avoid individual VAT registration for each country. If you are already registered for VAT in other countries, you should be able to deregister and switch to the OSS system.

This does not mean that the seller does not have to charge local VAT on their sales, but it does mean that they can declare it and pay it to the tax authorities who will then pass on the declaration details and VAT to the country in question.

The new redesign of the One Stop Shop (OSS) covers not only distance selling but also intermediary services, real estate services and consultancy services.

What is IOSS for?

The Import One Stop Shop(IOSS) platform facilitates the collection, declaration and payment of VAT for sellers making distance sales of imported goods to buyers in the EU. IOSS also facilitates the process for the buyer, who is only charged at the time of purchase and therefore does not face any surprise charges when the goods are delivered. If the seller is not registered in IOSS, the buyer has to pay VAT and usually a customs fee charged by the carrier.

So what are the advantages? Actually, there are several!

It is beneficial for consumers to know that when buying goods online from inside or outside the EU, the VAT rate applied is the same as for goods acquired in their home country. The new rules ensure that VAT is paid where the consumption of goods takes place.

The environment for e-commerce in the EU will be simplified, fairer and barriers to cross-border online sales can be overcome, increasing the ability to grow. This also means that businesses in the EU will be able to keep up with businesses outside the Union.

With increased VAT payments and less VAT fraud affecting citizens in Member States, public revenues will increase.

Summary of the proposal

• A common turnover threshold is introduced within the EU for distance sales of goods and sales of telecommunications services, broadcasting services and electronic services (henceforth electronic services). In Swedish kronor, this threshold will be SEK 99 680.
• Intra-EU distance sales of goods and sales of services to non-taxable persons who are taxable in another EU country can be reported under the special schemes. You can declare and pay VAT under the special schemes in the OSS e-service
• The VAT exemption previously available for imports into the EU of lower value goods (€22) is removed.
• A new scheme is introduced for accounting for distance sales of certain lower value goods (€150) imported into the EU.
• So-called platform businesses, which enable the sale of goods through the use of electronic interfaces, may be required to account for and pay VAT on platform sales.

For more information on the new rules, how to register for OSS and all the provisions, visit the Swedish Tax Agency or the European Commission. You can also read the EU’s‘Explanatory Notes on VAT e-commerce rules‘ (PDF).