Special VAT schemes have rules set by the European Commission which must always be followed in payment and declaration. In case the special scheme does not have its own regulations, the national VAT legislation applies to the declaration and payment of the unified VAT scheme.

Failure to declare by the due date affects the penalties which depend on the Member State of consumption. The Commission has defined uniform guidelines for tax collection, and the national VAT law of the Member State of consumption will affect to reminder and determination of the sanction.

What is the role of the Member States in late declaration?

The law of the Member State of consumption controls late payment fees and declaration fees. When the Member State of consumption reminds the company about late payment, both the tax and the penalty for late payment must be paid directly to the Member State of consumption after the reminder. In this case, it is no longer possible to pay OSS payments through the Finnish Tax Administration. The timeliness of the declaration is controlled by the Member State of consumption, which determines the late payment fee in accordance with its national law.

What is the role of the Member State of identification in the special scheme as a supervisor of violations?

The Member State of identification supervises violations of the special scheme and reminds the Member State concerned to submit the declaration in due time. Tax authority of the Member State of identification has the obligation to remove a company from the OSS following repeated failures to report. A situation where a company has submitted three consecutive late declarations under the special scheme will be interpreted as continuous neglect.

Removal from the OSS will lead to a two-year quarantine period, during which the company may not use any of the special VAT schemes, nor may it use an intermediary under a special scheme. During a suspension period, there are two options to continue business:

1. 1. The business must register for local VAT in the Member States where the goods and services are consumed.

2. 2. The business closes the e-commerce and stop selling to certain Member States altogether.

After the suspension period, the vendor has the option of re-registering for the special scheme. The quarantine period for the special scheme is defined in the EU Directive.

How is the late fee determined when Finland is the Member State of consumption?

If Finland is the Member State of consumption, for a late declaration, according to the national VAT legislation, a late fee of 3 euros is charged for the first 45 working days – after which a late fee of 2% of the tax amount is charged. In the case of a later return, the earlier return can be corrected without a late fee.

If the later return is the first time that new information from the previous period is provided, a late fee will be charged to the customer. In this case, in connection with the adjustment, the customer is considered to have failed to fulfill his reporting obligation for the previous period.

How to avoid late fees?

A late fee can be avoided by submitting the declaration information correctly and on time by the due date. For the time being, the voluntary system must comply with the rules set by the EU Commission. The best possible situation for all authorities and the companies themselves is one where all sales can be reported correctly at once, so that corrections don’t have to be made later.

Need help with registration or advice on OSS? Contact us and let’s discuss your situation further!

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