Due to the July 1 rule changes marketplaces become the deemed suppliers for VAT on certain transactions, bringing a series of reporting and record-keeping obligations. In this article, the final one in our series, we shed some light on these obligations.
Other articles in this series include:
As mentioned in our second article in this series, the rule change extends the successful Mini One-Stop Shop (MOSS) system, introduced for the sales of B2C cross-border digital services in January 2015, to the new One-Stop Shop (OSS) covering all B2C goods and services.
These new EU VAT rules also introduced the Import One-Stop Shop (IOSS). The IOSS can be used by marketplaces when they are the deemed supplier with sales of goods that do not exceed €150 in a consignment.
Registration for OSS, just like its predecessor, is optional. The key benefit in registering for OSS is that there is one single VAT return for all B2C sales of goods and services. The Member State where the business registers (note: EU-based businesses must register where they are established) will then be responsible for distributing the correct VAT to the relevant EU tax administration.
Pre-registration for both the OSS and the IOSS opened in most EU jurisdictions on April 1, 2021. Registration for IOSS is also optional. By opting to register for the IOSS provides a much better end-customer experience.
There is more general information available in the Guide to the VAT One Stop Shop.
In a new administrative approach, corrections can now be made in subsequent VAT returns without the requirement to correct previous VAT returns.
In summary, registration will bring benefits to marketplaces filing quarterly OSS and monthly IOSS returns (where relevant) in a single EU Member State.
The carrot for businesses is having one EU registration and one EU VAT return for all of their B2C supplies of goods and digital services. As opposed to the stick approach of having to register in multiple EU Member States.
Once registered, if the online marketplace is a deemed supplier (for the supplies of goods only) then its reporting obligations will be similar to those of a ‘normal’ supplier. However, the type of records it will be obliged to retain differs based on whether or not the online marketplace avails of one of the special registration schemes (the IOSS or the OSS).
The marketplace is also dependent on its underlying suppliers providing correct and up-to-date information so that the correct information used to determine the VAT can be reported.
The Explanatory Notes (on page 24) provide a summary of what information the marketplace may need to collect from its underlying suppliers, it includes:
In addition, transaction data will also need to be stored as tax authorities may ask to see records of the details about each transaction linked to a specific marketplace seller.
When an online marketplace is the deemed supplier for VAT purposes then their record-keeping obligations are covered in Article 63c of the EU VAT Directive. See below for a table reproduced from the EU VAT Explanatory Notes.
Where there is no use of one of the special registration schemes then the online marketplace will need to comply with Article 242 of the EU VAT Directive, which states the “records shall be sufficiently detailed to enable the tax authorities of the Member States where those supplies are taxable to verify that VAT has been accounted for correctly.”
In addition, these records must be made available electronically on request to the Member States concerned and must be kept for a period of 10 years from the end of the year during which the original transaction was carried out.
There is also guidance provided for scenarios when an online marketplace is facilitating the supply of goods and services but is not the deemed supplier. In such a scenario, the reporting obligations to be adhered to are covered by Article 53c(2) of the EU VAT Directive.
The Explanatory Notes add that online marketplaces should — in respecting the proportionality principle — keep the following minimum pieces of information:
We believe that these VAT reporting obligations for marketplaces and their sellers can only be met by applying technology to determine the correct VAT treatment of sales of goods at the time of checkout.
For more information on Taxamo’s offering check out the Taxamo Marketplace page here: https://www.taxamo.com/marketplace.html
The information contained in this publication (“Information”) has been provided to you for general information purposes only and we recommend that you obtain professional advice before acting or refraining from action as a result of the Information. Taxamo accepts no liability for any loss occasioned to any person acting or refraining from action as a result of the Information.
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