The VAT rules are changing from 1 July 2021, especially for sales of goods to end customers in the EU. Are you ready?
If you send goods to other EU Member States ("EU MS") to end customers (B2C), you can look forward to the fact that from 1 July 2021 you will most likely no longer need to register for VAT there.
You will now only be able to report all VAT in the Czech Republic in One-Stop-Shop ("OSS") or Import-One-Stop-Shop ("IOSS"). Probably no one knows why the Czech tax administration sometimes calls it the "special one-stop shop regime".
Reporting in both the OSS and IOSS is voluntary. You can still be registered for VAT in all EU MS and file VAT returns there and pay VAT according to the rules of that EU MS. However, if you do not register in the OSS, the limits for mandatory registration in EU MS that we are accustomed to will no longer apply. There will now be only one limit, namely EUR 10,000. In practice, this will mean that if you start selling goods to a new EU MS in July, you will likely have to register for VAT in that EU MS and pay VAT there from the first transaction. You will not be able to combine the VAT on these sales in the EU MS and through the OSS. Either you will pay VAT on all sales via the OSS, or you will pay VAT individually in each EU MS where you send goods to end customers.
From July this year, new European rules on distance selling (sending goods) and the provision of selected services to end customers will come into force. These rules will apply even under the realistic assumption that the implementing legislation will not be implemented into the Czech VAT Act in time. From 1 April 2021, you can register electronically for the OSS (Union scheme) or IOSS via the tax administration's tax portal.
The OSS will be used if you sell goods that are already in the EU. The IOSS will only apply to goods up to EUR 150 sold directly to European end customers from third countries (e.g. China).
The tax period for OSS will be quarterly, for IOSS monthly. The VAT on all sales to EU MS will be reported for the period in one return, which will be submitted to the tax office for the South Moravian Region. The resulting VAT will be paid in EUR. The Czech Republic will then distribute the VAT to the EU MS concerned.
If you sell goods up to EUR 150 to EU end customers, e.g. from China via an electronic interface ("ER", e.g. Amazon), the obligation to report sales in IOSS passes to the ER. If the ER is not registered with IOSS, the VAT will in most cases be paid by the end customer in the EU MS.
Finally, we would like to point out that as of 1 July 2021 the exemption for imports of so-called small consignments from third countries will no longer apply. In the Czech Republic, this limit was EUR 22. In practice, this means that VAT will have to be paid on each shipment from third countries. For shipments up to EUR 150, this VAT will be paid by your company or ER via IOSS. If VAT is not paid via IOSS, it will be charged mostly to the end customer.
If you are interested in this topic and want to know more details, we invite you to a seminar on 4 June 2021. More information here.