European VAT tax reform changes! Amazon sellers will be taxed across the board

Recently, news came from Europe that the new EU tax law will be officially implemented from July 1, which will trigger a major change in Europe's VAT system!

Many sellers can’t tell what the changes are in the new tax law. Today we contacted the old tax agency Sandstar Cross-border to tell you what IOSS and OSS are after the implementation of the new policy.

OSS (The Union One-Stop Shop): It is the EU's one-stop VAT electronic declaration system. OSS VAT is a new tax law system implemented to reduce tax fraud in the e-commerce industry in EU countries, simplify the VAT declaration process and protect fair competition among local companies. The OSS declaration system will be implemented on July 1.

OSS will be applicable to the declaration of VAT for remote sales of products within the EU. When shipping from the EU to EU buyers, you can choose to use the OSS system in one EU country to declare all 27 EU countries. Companies outside the EU are no longer affected by the remote sales limit and will calculate VAT according to the tax rate of the receiving country. For EU companies, the EU remote sales limit is 10,000 euros (including all 27 EU countries). OSS VAT declaration is a voluntary registration.

IOSS: The Import One-Stop Shop, which means a one-stop VAT electronic declaration system for imports. Starting from July 1, 2021, the EU will cancel the duty-free quota for imports below 22 euros. E-commerce platforms must collect VAT from buyers when selling goods and declare VAT every month through IOSS. IOSS VAT declaration is only for goods with a value of less than 150 euros . For example, if our Chinese sellers ship goods to EU buyers, they need to use IOSS to declare.

The changes in this new policy are far-reaching and will affect both self-delivery sellers and FBA sellers. Below I will explain in detail several important changes.

1. Europe will abolish the welfare policy of exempting import VAT for goods below 22 euros. After July 1, all goods with a value below 150 euros must be declared VAT through IOSS. Sellers need to affix the IOSS number on the parcels they ship.

2. E-commerce platforms are regarded as sellers and need to bear tax obligations. Therefore, in order to reduce their own risks, e-commerce platforms will implement a withholding system for sales VAT starting from July 1, 2021. According to regulations, sellers are still the owners of the goods. Although they do not need to pay taxes themselves, they still need to make normal VAT declarations.

3. The VAT declaration process is simplified, and there is no need to record the remote sales limit. Chinese sellers only need to register the VAT number of the country where the goods are stored.

One exception is that sellers whose companies are registered in the EU can still enjoy a remote sales tax exemption of 10,000 euros. If the amount exceeds this, they will need to apply for the OSS system at the place of registration to file tax returns.

Previously, many self-delivery sellers believed that there were thresholds for distance sales and tax-free amounts. European sites did not have strict requirements for the VAT tax numbers for self-delivery, and they could sell quietly without a registered tax number. However, the new tax law now directly cuts off the threshold for distance sales and tax-free policies. For self-delivered goods with a value of less than 150 euros and FBA, the platform will pay VAT on their behalf.

Nowadays, taxation on the European site is becoming more and more unavoidable. This tax reform has completely plugged the small loopholes that some sellers use to evade taxes, making the tax compliance of the European site close to perfection. Although the cost of VAT is here, the European site still has a large market with high consumption, and there are some tough policies on Amazon, which are advantages that attract sellers to enter the European site. Now that taxation is becoming more and more compliant, it is necessary to consider how to solve tax issues when deploying in Europe.

The above content is the first-hand analysis of the new European VAT regulations from different angles by Shazhixing Cross-border, which focuses on cross-border e-commerce tax compliance. We hope it can help more Chinese brands set sail overseas.