IOSS vs. OSS – similarities and differences
VAT OSS (One Stop Shop) is a replacement VAT settlement method for VAT MOSS (Mini One Stop Shop). Since July 2021 online shops owners can settle VAT easier with the help of VAT OSS or VAT IOSS.
One of the options available is OSS – a tax settlement method which allows European companies operating in e-commerce to settle VAT via one declaration while applying VAT rates of the country of the consumer – without the need to register their business in each country separately. Another VAT settlement method is IOSS. What are the differences between the two, and which option is more beneficial to entrepreneurs?
IOSS vs. OSS – similarities and differences
The main difference between OSS and IOSS lies in the rules of international trade. OSS is a list of services dedicated to businesses conducting intra-community distance sales who exceeded sales threshold of EUR 10,000 per year. The threshold includes all sales to all EU countries except for the country of incorporation, contrary to previous rules, according to which, each Member State had their own thresholds for e-commerce trade. In other words, businesses now operate as a part of the EU and sell their goods to clients inside the EU. For entrepreneurs conducting business outside the EU, IOSS scheme has been created. According to the current definition, it applies to sales of goods imported from third countries or territories, which do not exceed the net value of EUR 150. This solution is to facilitate entrepreneurs obtaining goods from abroad cheaper for later sales inside the country of incorporation.
The entire IOSS procedure has been standardized and simplified as with OSS. Now, one can register online in one of Member States and submit your tax declaration in a single service point. For VAT OSS, it must be the country of incorporation, whereas for VAT IOSS, the seller chooses the country in which they want to report on their sales to EU consumers.
VAT IOSS or VAT OSS – which one should you choose?
Registering for VAT OSS is entirely voluntary, and it is up to the seller to make this decision. It is worth mentioning that registering for VAT OSS does not interfere with registering for VAT EU, and it does not exclude VAT exemption, as sales settled via VAT OSS are not considered in the sales threshold verification for VAT exemption.
If you run an online shop and wish to use a simpler and more accessible VAT settlement procedure, while conducting B2C (Business-to-Customer) transactions, you should consider registering for a simplified settlement method. This choice depends mainly on the type of goods sold and the country in which e-commerce operations take place. The differences and similarities between OSS and IOSS are clear – all that is left is to choose the right solution for the type of business. It is worth remembering that choosing the aforementioned simplifications is optional, and the alternative remains a standard registration for VAT in Member States where the final sale is made. You can find out more about this here.