Changes to e-commerce VAT in the European Union (EU)

VAT and legislation changes can seem daunting, to help you understand the changes we highlight the key changes and who it affects.

NOTE: If your business is in Great Britain and you only sell in Great Britain, these changes don't apply to you.

Rather watch a video?

This 12 minute video brings you up to speed on all the key changes.

Who's affected?

The changes affect you if your business:

• Sells or supplies goods from Northern Ireland to non-VAT registered customers in the European Union (EU).
• Makes supplies of goods from the EU to non-VAT registered customers in Northern Ireland.
• Sends low value goods to Northern Ireland (or the EU) from outside the EU and Northern Ireland, including from Great Britain - England, Scotland and Wales.
• Is a non-EU business with goods located in Northern Ireland at the point of sale.

It also affects online marketplaces that facilitate the sale of goods:

• Located in Northern Ireland (or the EU) by non-EU businesses to non-VAT registered customers in EU and Northern Ireland consumers.
• From Great Britain to consumers in Northern Ireland and the EU.

Background

From 1 July 2021, the European Union (EU) introduced two new optional VAT schemes for sales to EU consumers (B2C). Instead of registering and paying VAT in each country you sell to, you can choose to report and pay all EU VAT through a single return using:

• One Stop Shop (OSS) 
• Import One Stop Shop (IOSS)

It's designed to support smaller businesses and remove barriers to trade with EU consumers. It's relevant to any business, based in or outside the EU, that sells goods or services to EU consumers, other than their own country.

Sage 50 Accounts 

If you want to process under these schemes then great news, v27.2 the latest version of Sage 50 Account includes the functionality to support these.

For help to download and install the latest version, take a look at our install guide >

Once you install the latest update, you can enable OSS/IOSS reporting and set up any new tax codes, if needed. To help you we've created a dedicated Help Centre or why not watch our video.

What's changing?

The changes can be broken down into two areas:

• Changes to where transactions are taxed. These are mandatory changes.
• Changes to how transactions are reported. This is where the OSS and IOSS returns come in. These changes are optional but help to simply EU VAT.

One Stop Shop (OSS)

Using the OSS means you don't need to register for VAT in each individual EU country you sell to, in relation to B2C sales of services and intra-community distance sales.

An intra-community distance sale is one where a VATable supply of goods is made from one EU country to a consumer in a different EU country.

The tax authorities in the country where the OSS Return is filed and paid, then distributes the VAT to each tax authority in each EU country.

There are two versions of OSS: 

• The non-Union OSS can be used by businesses that are established outside the EU and can be used to report VAT on sales of services to EU consumers only.

• The Union OSS can be used by businesses that are established in the EU and can be used to report VAT on both intra-community distance sales of goods and non-domestic sales of services to EU consumers. The Union OSS can also be used by businesses established outside the EU but only for the purpose of reporting intra-community distance sales of goods.

Import One Stop Shop (IOSS)

The Import One Stop Shop (IOSS) is a new scheme that facilitates B2C imports of goods into the EU, from outside the EU, and is optional.

Now the UK has left the EU, UK businesses could use the IOSS scheme for exports and goods destined for EU consumers.

Where the IOSS scheme is used, instead of import VAT being payable upon importation into the EU, the seller would charge 'destination VAT' at the point of sale.

The EU VAT would then be reported and paid through a single EU VAT Return.

Northern Ireland and the OSS/IOSS

If your business is in Northern Ireland you may find yourself observing different rules. This is because, under the Northern Ireland Protocol, they're effectively part of the EU VAT regime in respect of goods but not in respect of services. 

This suggests that businesses in Northern Ireland, who choose to, may have to report all distance sales of goods through the Union OSS, but use the non-union OSS for services. 

NOTE: The UK government has yet to provide guidance on how UK businesses including those in Northern Ireland should approach the OSS and IOSS should they wish to use them. We’ll update this article with more information as it’s made available. 

Further information

If you've read this far down the article, you may want to know more or have questions. You can find further detailed information on GOV.UK > 

Or, you can find useful questions and answers from our Sage Advice blog >

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