How to handle IOSS double taxation?
February 16, 2023
Non-Union Scheme: what kind of animal is it?
Benevolent would be the word for a non-Union scheme. Non-union scheme handles the VAT on the sale of digital services and goods to EU consumers from outside of the EU.
It is actually not a new invention, it had a predecessor, MOSS, the Mini-One-Stop-Shop, to handle all digital sales VAT to the EU. MOSS’s success is debatable, but it did create the framework for the whole OSS regulation, including the new MOSS, the non-Union scheme.
EU annual VAT loss is estimated to be 160B EUR according to Bloomberg Tax. It is clear that something was about to happen such figures and something did: now VAT is to be paid on all sales to EU consumers. Due to the evasive nature of digital goods and services, the non-Union scheme is, in our opinion, the least cumbersome with some reservations.
As you guessed it, it is also the least used of the schemes and therefore has the least standard operating models. There are EU countries without a single registration to date. The merchant can handle the registration themselves, there is no need for a fiscal representative/intermediary in a non-Union scheme. This reduces the costs of compliance significantly as the mentioned roles always assume joint and separate liability for VAT and liabilities always have a price.
VAT registration for non-Union scheme
VAT registration is a bit more complicated but again nothing to worry about. VAT registration has to happen if you store goods in another country of your company registration. The most common occurrence of this is obvious when one uses Fulfillment centres like FBA (Fulfillment by Amazon). So contrary to the previous situation, the registration has nothing to do with the sales threshold. Once you go over the sales threshold in one country you are liable for VAT everywhere in the EU. Reporting period varies from one country to another, but as it contains only domestic sales VAT reports it is not as excessive as in the country of incorporation. Some countries require you to appoint a Fiscal Representative if you are not incorporated or don’t have a fixed establishment in the EU.
The fixed establishment is between VAT and incorporation. You are liable for full accounting, unlike with VAT registration. You are required to register and pay income tax in that country. You will be considered to have a fixed establishment for example when you directly rent or own your own warehouse or other premises, or employ staff in the country.
IOSS is needed if you deliver goods valued below 150€, to customers in the EU from outside the EU. This is regardless of where you are registered, in the EU or outside of the EU.
Sales thresholds do not apply as VAT must be collected on all EU sales, IOSS is just the most customer-friendly and efficient way to do it. If you are incorporated or have a fixed establishment in the EU, the registration is simple: just register at your national tax office. If you are not incorporated in the EU or only have VAT registration, you have to appoint an Intermediary for IOSS.
Ok, it is a jungle, no denying it.
EAS helps you with all registrations and can act as an intermediary for IOSS users.
EAS also automates the tax reporting for your EU sales.
Get in touch with us, you’ll be fine!
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