EU mode: new VAT rules for distance sales

2021-06-14 08:03:23

Starting July 1, 2021, the currently operating “mini One Stop Shop” (MOSS), about which we previously wrote in our article, will expand.

The MOSS mode that currently applies to telecommunications, broadcast and electronic services will cease to be the “mini”, but becomes the OSS (in English: “One Stop Shop”) and will also apply to distance electronic sales and some services that are physically rendered by non-EU residents to the EU end consumers/individuals (B2C).

Please note that this article covers exclusively transactions provided by Czech taxpayers or by registered in the Czech Republic representative offices, or from the Czech Republic to individuals (B2C) who are physically located in another EU country, via so-called the ‘EU mode’.

Do you sell goods via e-shop and deliver (by mail, courier, express delivery or other service) the goods from the Czech Republic to end consumers/individuals in another EU country?

Until 30 June 2021, you need to monitor the sales turnover in each individual EU country and if the limit is exceeded, an obligation arises to register for VAT in this particular country (for each individual EU country there is a limit from 35 000 to 100 000 EUR).

According to the new rules starting 1 July 2021:

– No more individual limits for each EU country, but the single limit has been introduced for all transactions across all the EU countries in the amount of 10 000 EUR or equivalent in national currency at the exchange rate published by the European Central Bank as of December 5, 2017.

If a taxpayer provides services electronically to individuals in other EU countries, and at the same time sells goods with delivery to these individuals, the cost of all these transactions for all EU countries is summed up to see whether the 10 000 EUR limit had not been exceeded.

When the limit is surpassed, the obligation to pay VAT in the country of consumption arises:

– VAT rate of the consumer’s country is applied

– Issued invoice has to comply with the requirements of the consumer’s country

– When selling goods subject to excise duty, you have to inform in writing the local customs authority and fulfill other conditions established by the country of consumption

– There may be the obligation to pay tax on plastic

How to pay VAT on sales in the country of consumption?

Option 1

Register as a VAT payer or an Identified Person (Identifikovaná osoba) to VAT in each EU state where the obligation to pay VAT arises, submit VAT declarations and pay VAT in each country of registration.

Option 2

Registration to the OSS mode (new alternative). Using a “single place of economic activity” allows a taxpayer to avoid VAT registration in each individual EU state. The new rules will allow companies to fulfill their VAT obligations within the EU (OSS: filing VAT declaration and paying VAT accumulated in all the EU countries of consumption) via the digital online OSS portal, organized by their own Tax administration in their native language.

Registration, VAT declarations and payment of VAT in the OSS mode

– In the Czech Republic, the OSS mode is provided by the Tax Office of the South Moravian Region in Brno (Finanční úřad pro Jihomoravský kraj v Brně). The registration is carried out exclusively in electronic format on the Tax Portal (Daňový portál Finanční správy ČR).

– Condition for the OSS registration: the subject of registration has to be a VAT payer or an Identified Person (in Czech: identifikovaná osoba) to VAT.

– Registration within 10 days of a month consecutive the month when the 1st delivery of goods took place.

– OSS declarations are submitted electronically via the electronic portal.

– The deadline period for filing a report and paying VAT tax is no later than the end of the calendar month immediately following the tax obligation period. If the special OSS mode is applied, the tax obligation period is quarterly.

– In case of failure to submit a VAT declaration: fines and penalties according to the national rules of a state of consumption will apply.

– Payment in EUR currency to the Tax Office of the South Moravian Region in Brno. The Czech Tax Office independently redistributes the paid VAT between the EU states.

In addition, using the special OSS mode will apply to some services:

– services related to real estate (construction, reconstruction, appraisal)

– services in the area of culture, art, sports, education, science, entertainment (performances, concerts, exhibitions)

– services for vehicle short-term rental

– services for transportation of goods and passengers

– other services rendered in the country of consumption

Case 1:

A Czech logistics company provided a Czech citizen with services for transportation of personal belongings from Slovakia to the Czech Republic.

Before 30 June 2021: VAT registration in Slovakia

Starting 1 July 2021: VAT registration in Slovakia or in the OSS mode

Case 2:

The Czech company provided construction services to an individual in Slovakia.

Before 30 June 2021: VAT registration in Slovakia

Starting 1 July 2021: VAT registration in Slovakia or in the OSS mode

Case 3:

A Czech company sold tickets to a Czech citizen for a concert in Germany.

Before 30 June 2021: VAT registration in Germany

Starting 1 July 2021: VAT registration in Germany or in the OSS mode

Questions and Answers:

1. Is a registration to the OSS mode mandatory? – No, the registration for the OSS mode is voluntary. The taxpayer can choose one of two options for declaring VAT in the country of consumption: VAT registration in all the EU countries, where the obligation to pay VAT arises, or registration in the OSS mode (new alternative).

2. Are sales to individuals in the Czech Republic included in the 10 000 EUR limit? – No, goods that do not cross the Czech borders are not included in the 10 000 EUR limit.

3. Do I need to include sales to individuals in the Czech Republic in the OSS declaration? – No, sales to individuals in the Czech Republic are included only in the Czech VAT declaration.

4. For several years, a company that is registered with MOSS has been providing electronic services to citizens of the European Union. Does this company continue to stay in the MOSS mode or is it required to be re-registered to the OSS mode? – Re-registration is not required. Starting July 1 2021, all entities registered in the MOSS mode will automatically continue to operate in the OSS mode.

5. A company is registered to MOSS as a seller of electronic services. In addition to electronic services, we also sell goods through an online store with delivery of goods to citizens in other EU countries. Do we need additional registration to the OSS mode? – No, additional registration is not needed. Starting July 1 2021, all persons/entities registered to MOSS will automatically continue to work in the OSS mode; and, additionally, they will be able to use this mode to pay VAT on other services provided to the end consumer in another EU member state and distantly sell goods to the end consumers in another EU member states.

6. I sell goods (storage racks for stores and warehouses) through an online store with physical delivery of goods throughout the European Union, with the key customers that are companies and entrepreneurs, sometimes though individuals also buy my merchandise, in this case do I need to register in the OSS? – Registration to the OSS will only be required if the total sales of goods turnover to individuals in other EU countries for previous or current year exceeds 10 000 EUR or equivalent in national currency at the exchange rate published by the European Central Bank as of December 5, 2017.

7. Is the 10 000 EUR limit calculated separately for each EU country? – The turnover for all EU countries is summed up. If a taxpayer provides services electronically to individuals in other EU countries, and, at the same time, sells goods with delivery to these individuals, the cost of all these transactions for all the EU countries is summed up to determine whether the 10 000 EUR limit had been exceeded.

8. Are bank accounts different for VAT payment in the OSS and MOSS modes? To which bank account should I process the payment if the company was registered to MOSS? – For 1st and 2nd quarter, the MOSS users should pay VAT amounts to their existing bank accounts that are assigned for payments to MOSS. For the tax period from July 1, 2021 that is for 3rd calendar quarter the payment has to be made to a different bank account assigned specifically for the OSS mode.

9. To which bank account, assigned for the OSS or MOSS mode, could I pay additional tax if I submit a revised VAT report in MOSS mode for 2nd quarter 2021 or earlier? – Bank account for paying VAT when adjusting in the tax periods before July 1 2021 remains unchanged; the payment should be made to the existing bank account for the MOSS payments.

Read also our articles on OSS modes:

• General OSS rules

 iOSS mode

If you have further questions, please contact DoMyTax specialists. Our team has been engaged in accounting services, tax consulting and tax optimization in the Czech Republic for over 10 years.

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