VAT OSS and goods and services covered by the EU procedure

From July 1, 2021, taxpayers selling goods and services can make their settlements in one country under the OSS VAT procedure. The above change will facilitate this process. Taxpayers will not have to register in several countries and settle VAT there.

VAT OSS procedure - services covered by the procedure

At the outset, it should be recalled that the tax settlement procedure in one country concerned electronic, telecommunications and broadcasting services. Currently, their catalog has been expanded.

Importantly, this procedure can be used by taxpayers who provide services whose place of supply is the territory of the Member State of consumption to non-taxable persons.

The above procedure cannot be used when the basis for determining the place of performance is Art. 28c of the VAT Act, i.e. the tax is settled in the country where the service provider has its seat or permanent place of business.

Services provided to a non-taxable person, whose place of supply is in the country of consumption, may therefore be accounted for under the VAT OSS procedure.

Thus, the procedure applies to those services, the place of provision of which is determined on special terms and is located in a different EU country than Poland.

In summary, the above procedure can be used when:

• the place of service provision is in a different EU country than Poland;

• the purchasers of the services are consumers, i.e. non-taxable persons (not conducting business activity).

What new services are subject to VAT OSS?

As we have already discussed, not all services can benefit from the new tax preferences.

The above services are:

• broker services;

• real estate services, including services provided by appraisers, real estate agents, accommodation services in hotels or similar functions, such as holiday centers or places intended for camping, use and use of real estate, and services for the preparation and coordination of construction work such as architects and construction supervision services;

• transportation services;

• services in the field of culture, art, sports, science, education, entertainment and similar services, such as fairs and exhibitions, and services ancillary to these services, including the provision of services by service providers in the fields;

• services auxiliary to transportation services, movable tangible property valuation services and movable tangible property services;

• restaurant and catering services;

• transport equipment rental services;

• telecommunications, broadcasting and electronic services.

In the VAT OSS procedure, we only settle services provided in the European Union.

Example 1.

The taxpayer provided real estate brokerage services in the United States. Can it benefit from its settlement in the VAT OSS procedure?

The taxpayer cannot settle this service under the new rules because it was performed outside the territory of the European Union.

Sales volume and VAT OSS

The act introduces a limit of EUR 10,000. After it is exceeded, the taxpayer can register for VAT in each country or use the VAT-OSS procedure.

However, the above applies to electronic, broadcasting and telecommunications services provided to consumers from other EU countries.

The above rule does not apply to services other than telecommunications, broadcasting and electronic services.

Thus, for other services, the place of supply does not depend on the amount of turnover, even though the VAT OSS procedure may be used.

Example 2.

An entrepreneur from Poland runs a construction company in Kalisz. In July, the company was commissioned to provide a construction service in Germany. Its value is EUR 9,000. In this case, does the entrepreneur have to register in Germany?

In the current legal state, the taxpayer does not have to register in Germany. He may use the VAT OSS procedure. Even though the value of the service does not exceed EUR 10,000, the taxpayer may use the VAT OSS procedure.

ESTO definition

Intra-Community distance sales of goods are the supply of goods that are dispatched or transported by or on behalf of the supplier, including where the supplier is involved indirectly in the dispatch or transport of goods from one Member State to another Member State, provided that the following are met cumulatively conditions:

• the supply is made to a taxpayer or a non-taxable legal person who is not obliged to settle intra-Community acquisition of goods, or to another non-taxable person (B2C supply);

• the delivered goods are not new means of transport or goods that are installed or assembled, with or without a trial run.

The ESPO definition basically corresponds to the repealed definitions of distance selling from and to the territory of the country. The catalog of entities that can be buyers in ESPO transactions has not changed compared to mail order sales.

Importantly, the above-mentioned limit of EUR 10,000 applies to the delivery of goods. Only after this limit is exceeded, we can use the VAT OSS procedure.

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Example 3.

The taxpayer sells T-shirts in the country. So far, it has been selling in Poland. In July, he sold T-shirts to Germany. The value of sales to individuals from another country amounted to EUR 8,700. Can the taxpayer use the VAT OSS procedure?

In this case, the taxpayer cannot use this procedure. The sale did not exceed EUR 10,000.

To sum up, the new tax settlement possibilities for the sale of goods and the provision of services to entities from the European Union are extremely beneficial. Of course, it is not always possible to use the VAT OSS procedure. There are many exceptions to services and taxpayers must pay attention to them. For goods, the taxpayer must bear in mind the limit of EUR 10,000. Exceeding this limit entitles you to register for the VAT OSS procedure.