An online retailer established in Italy sells goods by distance selling to private consumers in several other EU member states, with its combined cross-border sales exceeding the EUR 10,000 EU-wide threshold in Article 59c. Since 1 July 2021, if the retailer registers for the Union scheme of the One Stop Shop (OSS), how does it discharge its VAT obligations on these distance sales?
- It charges VAT at the Italian rate on every sale, since OSS lets a business apply only its home member state's VAT rate to all its EU customers
- It must still register for VAT separately in each member state where its consumers are located, and OSS merely provides a shared login portal for managing those separate registrations
- It charges VAT at the rate of each customer's member state of consumption but reports and pays all of that VAT through a single quarterly return filed with the tax authority of its member state of identification, which then redistributes the VAT to the other member states
- It stops charging VAT on these cross-border sales altogether and instead remits a flat EU-wide digital services levy through OSS
Why C? And why not the others?
Correct answer: C. It charges VAT at the rate of each customer's member state of consumption but reports and pays all of that VAT through a single quarterly return filed with the tax authority of its member state of identification, which then redistributes the VAT to the other member states
Once the EUR 10,000 threshold is exceeded, intra-EU distance sales of goods are taxed in the customer's member state of consumption at that state's own VAT rate; the Union OSS scheme does not change which rate applies, but it lets the retailer avoid registering in every consumer's member state by filing a single quarterly return with its member state of identification, which collects the VAT and passes it on to the member states where it is actually due. The option applying only the home-country rate to every sale misunderstands OSS as a rate simplification rather than a filing simplification: the destination rate still governs the tax charged, only the reporting is centralised. The option describing OSS as merely a shared login for separate registrations gets the mechanism backwards, since eliminating the need for multiple member-state VAT registrations is the entire purpose of the scheme. The option describing a flat EU-wide digital services levy invents a charge that does not exist in this regime; OSS is a reporting and remittance mechanism for ordinary VAT on distance sales, not a substitute tax.
Source: EU VAT Directive (2006/112/EC), Title XII Chapter 6 (Union scheme of the One Stop Shop), as introduced by Council Directive (EU) 2017/2455 and Council Directive (EU) 2019/1995, effective 1 July 2021