As we commented in a previous article, the new Royal Decree-Law 7/2021, of April 27, 2021, was published on April 28, 2021, which adapts, in Article 10 of Title V, the internal regulation to the European Union directives in relation to VAT on e-commerce, in order to tax at destination and reduce the administrative charge for businessmen who make cross-border sales.
In this regard, it should be noted that, according to its Eighth Final Provision, the entry into force of the tenth article was postponed until July 1, 2021.
Many questions have been raised in this regard, and for this reason we have decided to expand the information with a new article in which we will explain in more detail the specific operations for the companies or professionals affected by these changes.
It must be very clear that with this regulation, what they intend is to adapt to the rule of VAT taxation at the place of destination, instead of at origin, as it has been done until now. This ensures that VAT is paid where the goods and/or services are consumed.
The VAT One-Stop Shop, also known as OSS (One-Stop Shop), includes all services provided to EU consumers, and distance sales of goods to EU buyers, whether the contact is direct between buyer and seller, or through an Electronic Interface (online marketplaces or platforms that allow transactions between a buyer and a seller through these). And the one created for Imports is also called IOSS, which stands for Imports One-Stop Shop. The latter includes distance sales of goods shipped from outside the European Union, for a value not exceeding €150 and which are not subject to special taxes.
The one-stop shop is an electronic system through which a company or professional can register in a Member State of the European Union (Member State of Identification), and that registration is valid for the entire European Union. Thus, the company or professional does not have to register in each and every one of the Member States in which it has its final consumers, but through the Member State of Identification it will comply with the tax obligations derived from the operations included in the One-Stop-Shop in the rest of the Member States. In other words, you can declare and pay the VAT due on all cross-border sales included in the scope of the OSS in the EU, from the country in which you are registered.
This system allows trade to be streamlined. The final consumer will know from the moment of purchase the final price, already including taxes, and therefore the transaction will also be more transparent.
How does the system work from july 1, 2021?
Direct sales of goods or services to final consumers located in other Member States of the European Union will continue to be subject to Spanish VAT, as long as the limit of €10,000 is not exceeded.
As soon as the annual limit of €10,000 of sales to individuals in other Member States is exceeded, the VAT corresponding to the State of the final consumer where the goods are delivered must begin to be applied. To speed up the process, you can register in the OSS one-stop shop system, using form 035.
They register in a member state and it is there where they submit the declaration and pay the VAT on all distance sales of goods and cross-border supply of services to end-consumer customers within the EU.
Only if you do not exceed €10,000 of distance sales in Europe in a year can you deregister from the system, but if you exceed this limit again, you will have to re-register.
The VAT charged to the purchasers, final consumers, in each country, will be paid to the Tax Administration by means of Form 369. This form shows the VAT base and the VAT due in each Member State.
The company, in addition in its normal VAT liquidation (form 303), will declare the taxable base of Intracommunity operations in box 123.
And what about Imports of goods?
From July 1, 2021, the VAT exemption on the import of small consignments with a value of less than €22 will be eliminated. This means that all goods imported into the European Union will be subject to VAT.
Imports of goods exceeding €150 do not change in terms of the procedure applied until now. VAT on the import must be paid at the customs office of entry into the European Union.
However, in the case of distance sales of goods imported from third countries or territories to the European Union that do not exceed €150, the declaration and payment of VAT can also be expedited and simplified through the Import One-Stop Shop, IOSS.
So, instead of having to wait to check the goods through customs and pay the import VAT, sellers and virtual marketplaces or platforms can now collect VAT directly from the buyer and report and pay that VAT in the new online Import Single Window System (IOSS). And the courier transporting the goods would only have to report the code of the seller, marketplace or platform, a code called IOSS VAT, to declare the import at customs and deliver it to the final consumer.
In this way, with these models and new form of collection, the system is simplified and the release of goods for free circulation is accelerated in a very significant way.
However, if the seller, marketplace or platform is not registered in IOSS, it would have to be the courier or transport company who is responsible for collecting the import VAT in order to clear and deliver the goods to the final consumer, and subsequently declare and pay the VAT to the Tax Agency.
In summary, the One-Stop Shops created, allow to speed up and simplify the operations carried out to final consumers between Member States of the European Union. It is important to analyze your activity, and if you have any doubts about the specific operation applicable in your case, we recommend that you consult a professional to organize the procedure correctly from the beginning. Sales over €150 are still included as imports and follow the same procedure as before.