Many international ecommerce businesses may have come across the mysterious-sounding OSS slogan and wondered what it means, so let’s explore this concept in more detail:

In a nutshell, OSS stands for One Stop Shop, an acronym for three different VAT special schemes, which is a tax and duty collection procedure that can be applied to consumer transactions. The OSS is a special VAT scheme for businesses selling goods and services to consumers within the European Union (EU) and is specifically targeted at businesses that sell online.

The system’s latest version was introduced on 1 of July 2021 as a part of the EU’s objective to modernize and simplify the VAT system, particularly for ecommerce. The previous system MOSS (Mini One Stop Shop) only applied to businesses selling online services within the EU.

Until the extension of the OSS to goods in 2021, a business selling goods to a consumer always had to be registered for VAT in each EU Member State where it had customers. This registration obliged enterprises to comply with national VAT law and its specificities. This created a significant administrative burden for businesses, especially small and medium-sized enterprises (SMEs) and made it difficult to comply with VAT rules.

OSS will make it easier to comply with VAT laws and will harmonize the differences in VAT laws between countries. A harmonized VAT system in the EU is expected to facilitate the growth of SME’s and promote cross-border ecommerce. However, businesses must ensure that they comply with the new rules and register in time to avoid potential fines and penalties.

How does OSS work?

The new OSS will, therefore, simplify the VAT process by allowing businesses to register for the special VAT scheme in one EU Member State and submit a single VAT return for all their sales within the EU. The VAT collected will then be correctly allocated to the Member States based on the customer’s location and the sales realized.

The OSS operates on the single return principle, hence its name: One Stop Shop. At its best, this system allows VAT on sales to all 27 EU Member States to be declared in one single declaration and paid in one single payment. Under the OSS, the second EU Member State, the Member State of identification, collects the tax for the Member State of consumption. The tax authorities of the Member States then settle the tax paid between the different countries.

The special schemes allow for the declaration and payment of VAT on distance sales of services and goods to consumers. The services sold can be, for example, passenger transport services, the sale of tickets for events or even accommodation services.

The scheme is based on EU rules and guidelines. Where there are no rules, the EU Member State applies its national VAT law. The special VAT scheme is administered by the European Commission, which defines the common rules that apply to the OSS.

Why register?

OSS has been created to make it easy for businesses to declare and pay the VAT due within the EU. The OSS is, therefore, intended to reduce the administrative burden on businesses, particularly online traders.

By centralizing VAT obligations for consumer sales through specialized systems, businesses don’t have to register for VAT in each Member State separately and declare and pay VAT in each buyer’s country separately.

Joining the scheme is optional. If decided not to, the trader must register for VAT separately in each Member State to which he sells and is obligated to follow local VAT laws. The OSS procedure has simplified this under a special scheme managed by the EU Commission.

Is OSS system right for your business? Contact us and let’s talk more!

Photo by The New York Public Library on Unsplash