Single VAT registration in the UE: a crucial reform

EU VAT in the Digital Age: which news?

The rise of the digital economy significantly impacted on the operation of the Union VAT system, as it poses challenges to the new digital business models, and does not allow for the full use of the data generated by digitalisation. Council Directive 2006/112/EC should be amended to take account of this evolution.

Based on this, in July 2023 the European Parliament has proposed over 250 changes to the European Commission (EC) VAT in the reforms of the Digital Age, to improve efficiency of VAT for all and reduce fraud. The reforms are to be included in three groups:

• Single VAT registration in the EU – extension of OSS to B2C own stock movements;
• Digital Reporting Requirements & e-invoicing;
• VAT treatment of the platform economy.

Single VAT registration in the EU

The introduction of an EU single VAT registration will lead to targeted interventions in various sectors, such as:

• Extension of OSS for B2C and B2C own stocks;
• Marketplaces deemed supplier extended to EU sellers;
• EU IOSS mandated for marketplaces;
• EU tackles misuse of IOSS numbers;
• Quick fixes to existing e-commerce VAT rules;
• Call-off stock VAT simplification ends;
• Harmonisation of B2B Reverse Charge rules.

Extension of OSS for B2C and B2C own stocks

The success of the One-Stop-Shop VAT reporting e-commerce package for distance selling will extend to the movements of their stock by e-commerce sellers before the B2C e-commerce sale (B2B2C transactions).

In addition, Single VAT Registration (SVR) will allow businesses to charge, report and manage the full EU VAT through national tax authorities, possibly including the entire audit process.

As for the movement of inventories, it will remain taxable with two transactions: arrival and sale. Both would be reported in the OSS, which would require adding additional information to be reported to the member state of identification (where the OSS is registered).

This will eliminate the need for hundreds of thousands of foreign VAT registrations for e-commerce sellers. The EU Commission estimates that managing a single foreign registration costs businesses €5,000 a year. This change in the total will reduce the cost of sellers by €800 million annually or €8.7 billion between 2023 and 2032, according to EC estimates.

The current pan-European distance selling threshold of €10,000 will be limited to where the seller is established. So they might not use it more than a second time if they hold shares in the territories of other member states.

Other B2B transactions where excluded for the 2025 implementation were excluded due to deductibility issues. But that could change in the future.

Marketplaces deemed supplier extended to EU sellers

For EU sellers, where cross-border e-commerce sales are facilitated by a marketplace, the VAT on the local domestic sale to the consumer will flip to the marketplace as the deemed supplier. The exception is sales in the country where the seller is resident.

This is irrespective of where the seller is established, meaning an extension from the 2021 e-commerce package for just non-EU to include EU sellers. This will level the playing field.

The seller will use OSS to report the zero-rated taxable acquisition to the marketplace.

B2B transactions under the scenario would be zero-rated for VAT.

The disadvantage of this decision is that it would favor sellers using marketplaces and penalize own website sales which would still be responsible for the domestic VAT reporting.

EU IOSS mandated for marketplaces

The VAT Digital Age Reform Package (ViDA) includes an obligation starting January 1, 2025 to make it easier for marketplaces to accept their sellers' B2C import reports via Import One-Stop Shop (IOSS) return. This was introduced as optional for marketplaces in the July 2021 EU e-commerce VAT package.

The measure connects to one of the pillars of ViDA, the extension of the reforms of the single VAT registration of the OSS. This includes marketplaces that are considered suppliers for EU sellers' VAT obligations as of 1 January 2025.

The EU is proposing to lift the EUR 150 threshold for using the IOSS as of 1 March 2028.

The key points are:

• IOSS return simplifies €150 consignment EU import VAT reporting;
• Ending the €22 import VAT exemption on low-value imports;
• Charging sales VAT consignments not exceeding €150 in the checkout;
• IOSS – single EU registration for all import €150;
• Monthly IOSS returns;
• Deemed Supplier marketplace IOSS;
• IOSS VAT compliance obligations for marketplaces.