OSS & IOSS: Selling online to EU customers

During the pandemic millions of customers went online to purchase both goods and services and, as the UK was entering the final stage of the road map to end lockdown, the EU were introducing new rules in a bid to make life easier for both ecommerce businesses selling to customers across the EU and their customers.

The new VAT measures, which came into effect on 1 July 2021, only cover online sales to consumers in the EU as supplies of services business to business (B2B) have not changed post-Brexit i.e., they are subject to the reverse charge, whilst exports of goods are zero rated and subject to VAT and duty in the destination country.

What is One Stop Shop (OSS)?

The OSS is a new online portal which enables businesses to account for non-UK VAT due on supplies of certain services and intra-EU distance sales of goods to customers across the EU. In terms of services, only certain specified types supplied to consumers (e.g., telecommunication services), cause VAT to be chargeable in the customer’s country as for most services supplied by UK businesses to EU consumers UK VAT is chargeable.

There are two versions of the OSS: a Union OSS for businesses with an establishment in an EU country, or Northern Ireland and a non-Union OSS for businesses established outside the EU, for example, the rest of the UK.

Do you need to sign up to OSS?

UK businesses will need to consider signing up to the OSS if they make sales to consumers of either goods from within the EU or Northern Ireland, for example where they have stock held in a warehouse in the EU, or services of the types that are treated as made where the customer belongs.

What are the benefits of OSS?

Signing up to OSS is optional but can be beneficial, as it means businesses can report and pay non-UK VAT for all sales to EU consumers which are subject to VAT in the country where the customer is located. This negates the need to register for VAT in all EU countries in which a business makes supplies to consumers.

Signing up to non-Union OSS requires registering with a tax authority in a country within the EU and once signed up, a business must use the OSS to report all supplies made to EU consumers.

What is Import One Stop Shop (IOSS)?

The IOSS can be used to report and account for non-UK VAT on online sales of goods from outside the EU to consumers within the EU. It only applies to consignments with a value below €150 (£135.00).

Administratively, the IOSS works in the same way as OSS, but non-UK VAT is reported and accounted for monthly rather than quarterly.

Is IOSS optional?

The use of the IOSS is optional and if a business chooses not to sign up to OSS it is the customer’s responsibility to pay import VAT when the goods arrive in the country of destination.

What are the benefits of IOSS?

The primary benefit of signing up for IOSS is improved customer service. The goods move through Customs much faster as the VAT does not have to calculated and paid before the goods are released and the customer knows the cost of the goods when purchased, as there are no hidden costs when the goods go through Customs.

To sign up to IOSS, a business with no establishment in the EU needs to appoint an intermediary to act on their behalf in the country of IOSS registration.

If you are interested in signing up to OSS or IOSS or both, Shorts are happy to provide additional information and assist with OSS/IOSS registrations.