The One-Stop-Shop is a new VAT scheme introduced in July 2021 by the European Union. With its introduction, the steps toward EU-wide VAT compliance for online sellers changed greatly, as the procedure was connected to the establishment of new cross-border delivery thresholds and changed both VAT registration and return duties. There are a few points that are especially important for Amazon and FBA sellers:
- Cross-border delivery thresholds
- Mandatory registrations for VAT duties
- Taxation of goods sold
- Obligatory filings of returns and reports
- Payment of VAT
New cross-border delivery thresholds
Until the introduction of the VAT One Stop Shop, Amazon sellers had to take care of value-added-tax matters abroad once their cross-border sales to a certain country exceeded that country’s delivery threshold. The thresholds of European countries were usually set at either €35,000 or €100,000. Once that happened, online sellers had to:
- Tax their products with country-specific VAT rates
- Register for VAT abroad
- Turn in regular VAT returns abroad
The duties outlined above still exist. However, the country-specific VAT thresholds were replaced with a lower EU-wide threshold of only €10,000 when the OSS was introduced. This threshold is reached by cross-border sales to all foreign European countries combined.
While you no longer need to monitor several delivery thresholds, you now have to register for VAT much earlier and most likely in a lot of countries at once. Instead of completing several registrations, Amazon sellers can instead take advantage of the One-Stop-Shop.
Mandatory registrations for VAT duties
To participate in the One-Stop-Shop scheme, you need to complete an OSS registration in your home country. This registration for the One-Stop-Shop replaces foreign local VAT registrations when it comes to cross-border transactions. However, this only applies as long as you only deliver but not store products across borders. Storage immediately leads to a registration duty in the country of storage.
This is why the One-Stop-Shop’s usability for Amazon FBA sellers is smaller than for pure Amazon sellers who sell only from their home countries to customers abroad. Amazon FBA sellers need to register in all countries that are included in their chosen FBA program as their products could potentially be stored in Amazon warehouses in these locations. However, the OSS can still be advantageous for FBA sellers.
Taxation of goods sold
The taxation of goods is the same between OSS users, but it does differ between the OSS and threshold usage. If you are not registered for the One-Stop-Shop, you automatically take advantage of the cross-border delivery threshold. In this case, all sales below the threshold are treated as domestic, and the VAT rates of your home country apply, no matter where your customers are located. Once the threshold is reached, all further sales are subject to the VAT rates of the countries in which your customers are residents.
When using the One Stop Shop, the threshold no longer applies. Therefore, every single sale is subject to country-specific VAT rates. In both cases, the biggest challenge Amazon sellers face are reduced country-specific VAT rates. If you are selling products from multiple product categories and niches, various reduced rates may apply or not apply, depending on the customer's home country. No matter if you are using the OSS or not, it is important to keep track of these rates and the transactions.
Obligatory filings of returns and reports
When using the One-Stop-Shop, a regular OSS report substitutes regular foreign VAT returns for cross-border transactions. While the OSS report is just a single document, the collection of data and the calculation of VAT rates are a challenge. For the report, you need to sort your transactions into every possible combination of country of departure, country of destination, and VAT rate, and then enter them into the OSS documents provided by your home country.
Furthermore, this only applies to cross-border transactions. If you are an FBA seller and products get shipped from a warehouse in a foreign country to customers in the same country, those sales need to appear in a regular local VAT return. Shipments from that warehouse to customers in a third country, however, appear in the OSS reports. Therefore, the One-Stop-Shop complicates matters for FBA sellers but can still be useful, especially if the number of storage countries is comparatively small and the variety of customers high.
Payment of VAT
Payment of VAT is where the OSS is most beneficial. If you are not using the One-Stop-Shop or are an Amazon FBA seller, you will need to pay your VAT liabilities to the foreign tax authorities. These follow different deadlines, request differing information, and have their own procedures.
In contrast, the VAT liabilities as declared in the OSS report can be paid combined to your domestic tax authorities. The responsible tax office then redistributes the correct amounts between the countries to which the VAT is owed.
The One-Stop-Shop changed the landscape of VAT regulations across the European Union greatly. Whether or not participation in the OSS is useful for you depends on your business model and your client base. If you don’t store abroad or only in a small number of countries, or if you are selling products on various marketplaces and to customers in a variety of countries, the One-Stop-Shop could be a good option for you. You may want to consider finding a VAT service provider specialized in the Amazon and FBA E-Commerce business, can aid you in this decision.