As of the 1st of July, the new One-Stop Shop tax scheme for distance sale of goods or B2C services within the EU became effective. The scheme itself will enable companies to register for VAT in one, mainly in their own Member State of the EU, and resolve all tax related issues in the same country. This change in the legislation is a significant improvement to the current method where in case of reaching the distance sales threshold you must register for VAT and declare it in that state.
It is important to state that registering for the new scheme once it if effective is entirely voluntary and by no means mandatory, however, it significantly improves business transactions.
Also, another change will be made to the distance sales threshold which currently is different from one country to another, and the amounts must be researched beforehand. When the new law is in place, the annual distance sales threshold will be €10,000 across the EU which also means that the VAT registration must be made once the distance sales threshold is met.
Now there are two ways you could go about this.
The first option is to register individually as a VAT payer in the country where you meet the new threshold to pay and declare your VAT due there, which is like the current legislation, except the amount for the threshold.
The second option is to sign-up for the OSS scheme. As mentioned before, it enables to declare and pay the VAT amount due in one Member State. Where it makes sense for your company to register in Estonia, you can do it even before you meet the local annual revenue threshold of €40,000 from which VAT registration is mandatory. Once you declare and pay your VAT because of other states in Estonia, the Estonian tax agency will deal with the other state and pay the taxes due to them.
To register for the OSS scheme, each EU state has an online portal dedicated to the One-Stop shop and you can already register since the 1st of April 2021 while transactions based on the legislations be done from the 1st of July 2021.
The registration for the OSS scheme itself happens through the Estonian Tax and Customs Board’s self-service by logging in with your local ID or e-Residency card. Once logged in, you must select “Registers and inquiries” -> “Registration” -> “OSS/IOSS” from the left-side menu (IOSS applies on distance selling of goods imported from a third country). To successfully submit your sign-up application, you must have the company’s representation rights and fill in the required information.
The OSS VAT declarations must be made every quarter.
In conclusion, the new EU One-Stop Shop scheme is a huge benefit to many business owners who have had to register and declare to pay their VAT in every single EU member state as now this aspect becomes more streamlined and friction-free. If you are just starting out and wish to apply for a VAT number in Estonia or would like to get some help regarding the registration for the OSS scheme and discuss your possibilities, please feel free to reach out to us!
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