VAT OSS – what is it?
VAT OSS (an extension of the OSS abbreviation to One Stop Shop) is a procedure that applies in EU countries. It allows VAT to be settled for vendors in EU countries. The vendor pays the tax due on sales covered by VAT OSS, and the funds are then distributed to the consuming countries.
In a nutshell, this means that if a business provides a service to contractors registered in EU member states, it will be able to pay VAT without having to register in each country of consumption.
Art. 130a pt. 3 of the Value Added Tax Law (also known as the VAT Law) explicitly states that the OSS procedure is used to settle VAT due to the Member State of consumption through the Member State of identification. So let’s start by looking at what the listed terms mean.
What is a consumption member state?
The term can be understood differently depending on what situation we are considering. Art. 130a, para. 2a of the VAT Law indicates that we can talk about the Member State of Consumption:
- in the case of distance intra-Community sales of goods, the Member State of completion of dispatch or transport of the goods to the buyer is the country of consumption,
- in the case of supplies of goods made by a taxpayer facilitating such supplies in accordance with Art. 7a para. 2, if the shipment or transport of the goods that are the subject of such supplies begins and ends on the territory of the same Member State – it is the Member State of consumption,
- in the case of the provision of services, the Member State of consumption is the country on the territory of which the provision of services takes place.
What is a member state of identification?
As was the case with the country of consumption, also when it comes to the country of identification, you need to make sure that it meets at least one of the conditions – and therefore, according to the VAT Law, Art. 130a pt. 2b member state of identification is the state:
- where the taxpayer has a place of business or
- where the taxpayer has a permanent place of business, if the taxpayer does not have a place of business within the European Union, or
- in which the taxpayer has a permanent place of business that he chooses to submit a notification informing of his intention to use the Union procedure, if he does not have a place of business in the territory of the European Union, but has more than one permanent place of business in the territory of the European Union, or
- commencement of shipment or transport of goods, and in the case of more than one such Member State, the Member State which the taxpayer chooses to submit the notification informing of his intention to use the Union procedure, provided that he does not have a registered place of business or a permanent place of business in the territory of the European Union.
Which transactions can be subject to the VAT OSS procedure?
Not every service is eligible for VAT OSS – check whether the procedure applies in your case.
Part of the services provided to non-taxpayers in the EU, in EU countries where the seller is not established, may be subject to VAT OSS – the procedure refers primarily to telecommunications, broadcasting and electronic services, but also to other cross-border services.
VAT OSS also applies to CTSO. That’s not the end of the list, however: CTSO and some domestic deliveries supported by electronic trading platform operators should also be included. They are then considered vendors in terms of the law.
Is it mandatory to use the VAT OSS?
No, a seller can register for VAT OSS voluntarily, but must keep in mind the applicable sales limit if he sells goods by mail order, makes a supply of goods or provides services to individuals operating in another EU country.
How to register for VAT OSS?
If you are an entrepreneur and wish to register for VAT OSS, you must submit a completed VIU-R form to the tax office.
The VAT Law in Art. 28k para. 7 points out that a vendor who is interested in the VAT OSS return must file the corresponding VAT OSS form by the 10th. day of the month following the month in which the delivery of goods in connection with which the sales limit was exceeded was made.
If you, as an entrepreneur, are doing business in Poland, enter Poland as your identification member state on the form. In turn, send the registration application to the Head of the Second Tax Office Warsaw-Śródmieście. Do not bother with the physical form of the shipment – the VIU-R form is sent only electronically.
Important!
You will need an electronic qualified signature to register for VAT OSS – this is currently one of two forms of authorization available. The second is the appointment of an attorney. In this case, it will be necessary to submit a PPS-1 form to the address of the Second Tax Office Warsaw-Śródmieście. The entrepreneur can send this form by regular mail or electronically.
Is it cost-effective to use the OSS procedure?
The VAT OSS procedure was created for entrepreneurs who sell by mail order over the Internet, i.e. for those doing business in the e-commerce sector. This is especially important for those sellers who conduct sales activities based on trading platforms and ship goods sold to various countries.
The limit mentioned in the previous chapter that falls under the OSS VAT procedure is €10,000. According to the current conversion rate for Polish entrepreneurs, it amounts to PLN 42,000.
However, the situation may change, so it is worth making sure that the conversion rate is up to date.
As long as the value of the sale does not exceed €10,000, the settlement of individual transactions follows the usual conditions – in such cases the Polish VAT rate applies. When the limit is exceeded, it is necessary to switch to the VAT rate of the buyer’s country.
The crux of the VAT OSS procedure is to simplify the settlement process – vendors using the new VAT procedure do not have to register as VAT taxpayers in the country where they have exceeded the limit. This saves them from having to record their income in the countries in question, and does not require detailed knowledge of their tax laws.
All of this adds up to a sizable savings – the greater the number of countries in which the seller can potentially exceed the sales limit. The EU OSS procedure means that a Polish entrepreneur does not have to devote resources to legal consultations abroad or hiring tax law specialists in the countries concerned – instead, he can settle all of his VAT at the tax office in Poland.
