By Dick Molenaar
The EU VAT system for e-commerce has been changed per 1 July 2021. On sales to consumers, the VAT of the state of those consumers now has to be applied and paid, and for this purpose the threshold has been lowered from around € 100.000 per EU state to € 10.000 for the whole EU. This new system is more in line with the principle of the VAT as a consumption tax coming to its final levy when the consumer does the purchase.
To avoid too much administrative work with VAT registrations and returns in the EU states of the sales, the system of the One Stop Shop (OSS) has been improved. This means that companies with sales and services in other EU states can online register with the tax authorities in their own state for the OSS and meet the VAT obligations there, in their own language. These tax authorities will balance out the VAT amounts with the authorities in the other EU states, so that the consumer states will get their shares of the VAT payments.
The OSS is not only available for e-commerce, such as web shops and online services, but also for other services which are deemed to be rendered in the state of the consumers. This also applies to some sports services, such as can be seen with the following two examples:
These are situations in which the reverse charge system of Art. 44 EU VAT Directive does not apply, but local VAT is due in the EU state of the activities.
Since 1 July 2021, these foreign sports organizations or promoters can also choose for the extended One Stop Shop (OSS) system to meet with the VAT obligations in the EU state of their sports activities. Such OSS registration and filing in the own state and language is much easier than registration and filing abroad. This can be found on the EU website: https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce/oss_en.
But with this simple OSS VAT system, input tax cannot be deducted. Especially in the second example, the foreign sports promoter can have local expenses with VAT in the other EU state, which cannot be avoided with the reverse charge system. Then it depends on the amount of this input VAT whether it is worth the extra administrative expenses of registration and filing in the other EU state.
This dilemma can be solved with the special refund procedure for the foreign input VAT. Also for this procedure, the tax administration in the own state is responsible, who will take care that the tax authorities in the other EU state(s) will refund the input VAT. Advantage is that refund application can be done in the own language. Then, a combination of OSS for the payment of the foreign VAT, with the special refund procedure for the reclaim of the foreign input VAT can lead to the lowest administrative work and expenses.