Tax Talk: Cross-border transactions with the EU

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Following the success of the VAT Mini One Stop Shop (MOSS) scheme, the European Commission has decided to further simplify EU VAT obligations for businesses engaged in cross-border transactions. Irfaan Abdool Wabh explains how the changes affect your business. 
MOSS was designed to make VAT simpler by removing the need for suppliers of business-to-consumer (B2C) broadcasting, telecommunication and electronically supplied (BTE) services to register for VAT in every EU member state where their customers belonged. Instead, they could register for the MOSS scheme and submit a single MOSS return to report the VAT due in the EU member state where their customer belonged. The MOSS scheme was subdivided between the Union scheme designed for EU-established businesses and the Non-Union scheme designed for businesses based outside the EU. 
With effect from 1 July 2021, the scope of the existing MOSS scheme has been expanded. The once narrow MOSS scheme has been renamed to the OSS scheme and now include the following additional supplies:  
  • Intra-EU distance sales of goods 
  • Certain domestic supplies of goods carried out by deemed suppliers (electronic interface) 
  • For EU-established suppliers – all supplies of B2C services taking place in the EU member state in which the supplier isn’t established 
  • For non-EU-established suppliers – all B2C services with premises in an EU member state 
Furthermore, the OSS has brought an end to the long-standing and member state-specific intra-EU distance selling thresholds. A new EU-wide threshold of €10,000 now applies to intra-EU distance sales and BTE services. Interestingly, this EU-wide threshold doesn’t apply to the other additional OSS supplies, such as:  
  • Supplies of BTE services made by a supplier not established in the EU 
  • Intra-EU distance sales of goods made by a supplier not established in the EU 
  • Supplies of services other than BTE services 
Generally, suppliers established within the EU will be permitted to use the Union OSS scheme, whereas suppliers without an EU establishment will be required to use the Non-Union OSS scheme.  An exception exists for intra-EU distance sales of goods whereby a non-EU-based supplier can utilise the Union OSS scheme – presumably as the goods will be located in the EU at the time of sale. However, as noted above, the EU-wide distance selling threshold will not apply, and a requirement to register will exist from the first sale. This maintains the historic EU position following cases such as Schmelz (C-97/09), which determined that only established businesses could benefit from domestic thresholds.  
It is also important to note that a fiscal representative may be required to utilise the OSS scheme. However, this will depend on the local requirements in the EU member state of identification. 

Online marketplaces 

Special provisions have been introduced whereby a business facilitating supplies through the use of an online electronic interface is deemed for VAT purposes to have received and supplied the goods itself. These are known as the ‘deemed supplier provisions’. 

How we can help 

The new rules have been designed to simplify the administrative VAT burden on suppliers with cross-border B2C supply chains and to encourage compliant behaviour through applying a consistent treatment across the EU, e.g. there will no longer be differences in distance selling thresholds between EU member states. Furthermore, they also place an increased compliance burden on electronic interfaces, which facilitate the sale of goods by requiring them to act as if they were the actual supplier of the goods. This will have implications for both the underlying supplier and the electronic interface itself. 

Written by Irfaan Abdool Wabh in our London office.