Special schemes OSS and IOSS for imposing VAT on e-commerce and services

Short overview of changes in the EU VAT rules since 1 July 2021

Thorough reforms will be carried out in the European Union (EU) in the area of value added tax (VAT) obligations concerning cross-border services provided to a person who is not registered as a taxable person or taxable person with limited liability (hereinafter end user), distance selling of goods and e-commerce. The correspondent amendments in the EU VAT Directive 2006/112/EC are already introduced and enter into force on 1 July 2021, all EU Member States must change their domestic VAT acts for the same time. Necessary amendments in the Estonian Value Added Tax Act were passed by Parliament in 10 February 2021 and were published in the Estonian State Gazette on 23 February 2021. The purpose of the changes is to reduce VAT fraud and to guarantee the equal competition conditions for EU businesses in comparison with the businesses of so-called third countries (i.e. non-EU countries or non-Community countries).

According to the EU VAT package for e-commerce which enters into force on 01.07.2021:

  1. special scheme for imposing VAT on telecommunications, broadcasting and electronic services (hereinafter digital services) which is in force today (mini One Stop Shop, MOSS) is extended also to other services where the place of supply is in the other EU Member State, as well as to intra-Community distance selling of goods and in certain cases also to the transfer of goods through the electronic interface (hereinafter e-shop). The extended special scheme is called OSS (One Stop Shop).
  2. new special scheme called IOSS (Import One Stop Shop) is imposed on distance selling of goods imported from third country.

Distance selling of goods (both intra-Community distance selling and distance selling of goods imported from third country) is cross-border transfer of goods to the end user. Intra-Community distance selling is the transfer of such kind of goods, located in EU, which are transported in the course of transfer to the end user from the Member State of location to any other EU Member State. Distance selling of goods imported from third country is the transfer of such kind of goods, located in a third country, which are transported in the course of transfer to the end user from third country to EU Member State.

The implementation of the special schemes (both the OSS special scheme and the IOSS special scheme) is voluntary, not mandatory. If the seller of the goods does not wish to apply the special scheme, such person must register for VAT liability in all Member States where the end users are located (if he/she does not use the OSS special scheme) and must complete regular customs formalities for imported goods (if he/she does not use the IOSS special scheme).

The special schemes make possible to declare VAT for cross-border B2C (business to consumer) sales to all Member States in one single return and pay the whole VAT for these transactions in his/her own Member State without the obligation to register for VAT liability in the Member States where the end users are located.

The VAT return concerning the special scheme shall be submitted to the tax authority of the Member State of registration electronically. The information is possible to enter in the user interface or download from the file, in future the possibility to submit the declaration through X-tee (X-road) will be added. The return shall be submitted and VAT shall be paid according to the return by the end of the calendar month directly following the declared taxable period – even the due date is a day of rest or public holiday. The taxable period of the OSS special scheme is a quarter and the taxable period of the IOSS special scheme is a calendar month. The return shall be submitted even there were no transactions, covered by the special scheme, during the declared period. If a user of the special scheme doesn't create any transaction, covered by the special scheme, during the particular taxable period and has no corrections to make in respect of any previous return, a nil-VAT return shall be submitted. The amount of VAT shall be indicated in the return and shall be paid to the tax authority with one euro-cent accuracy, the amount shall not be rounded up or down to full euros to the nearest whole number. If the purchaser pays for the goods or services, covered by the special scheme, in any other currency but euro – the exchange rate of the euro as determined by the European Central Bank and applicable on the last date of the declared period applies.

The principles of amendments in the VAT returns concerning new special schemes are different from the principles of amendments in the MOSS VAT return which the taxpayers submitted until 30 June 2021. If the business who apply the OSS or IOSS special scheme has to amend the information in any previous OSS or IOSS VAT return, he/she must do it in the next submitted return – he/she does not amend the return which was submitted for the taxable period when the correspondent supply was created. It’s not possible to make amendments in a confirmed return – if the return is already confirmed, the taxpayer can amend the declared information only in the next return. Because of this we recommend to keep the return as “saved” until the due date of submission. If the taxpayer has to amend the declared information, he/she can do it in the running period. For example – if the IOSS VAT return for July 2021 was submitted on 21 August 2021 (although the due date is 31 August) and on 23 August the taxpayer finds out that some necessary information was not declared, he/she can make necessary amendments only in the return submitted for August 2021.

If the taxpayer or the intermediary who represents the taxpayer (if the taxpayer is a third country business who applies the IOSS special scheme) has not submitted the VAT return concerning the special scheme by the due date, the Member State of registration sends to the taxpayer or to the intermediary reminder about the submission of the return. The tax authority shall issue the reminder electronically on the tenth day after the due date of the submission of the return. Possible further reminders will be sent by Member States of consumption. The assessment of fines and other payments related to the belated submission of the return is in jurisdiction of the Member State of consumption according to its legislation and proceeding rules. If the tax authority has issued reminders to the taxpayer for three immediately preceding taxable periods, but the correspondent returns have not been submitted with regard to any relevant taxable period within ten days as of the sending of each reminder – the tax authority treats that non-compliance with the requirements established for the implementation of the special scheme is repeated, deletes the tax payer from the register of users of the special scheme and the taxpayer has no right to submit a new application for implementation of the special scheme within two years.

OSS (One Stop Shop) or special scheme for imposing VAT on services, intra-Community distance selling of goods and the transfer of goods through the electronic interface

Since 1 July 2021 current "Mini One Stop Shop" (MOSS), applicable until this date only for the taxation of digital services provided to the end users of other Member States, is extended. It is changed to "One Stop Shop" (OSS), applicable also for intra-Community distance selling of goods and for other services (in addition to digital services) provided to the end users of other Member States where the place of supply is in the Member State of the end user.

Hence the OSS special scheme is applicable if the taxpayer provides to the end users in the Member State of their place of residence, for example, services connected with an immovable (construction, valuation); cultural, artistic, sporting, educational or entertainment services (performances, concerts, exhibitions); rental services of means of transport, etc. – you can find the longer list of such services in subsection 10 (4) of the Value Added Tax Act.

A business of a third country whose registered office is outside EU and who has no permanent establishment in any EU Member State can also apply this special scheme – upon the transfer of the goods located in Estonia to the end user through e-shop.

The implementation of the special scheme simplifies the performance of VAT obligations which arise for a business in the other EU Member State. A business who has chosen the implementation of the special scheme, declares the supply created in the other Member State (a person who owns e-shop in certain cases also the supply created in Estonia) and pays VAT to the Estonian tax authority.

Thresholds for distance selling, valid in the EU Member States today, are abolished. The all-in threshold 10 000 euros is introduced for gross supply of intra-Community distance selling of goods (to all Member States together) and digital services provided to the end users of other Member States. If this threshold is not exceeded, the VAT rate of the country of the seller can be applied upon the taxation of these supplies. When the threshold has exceeded and the OSS special scheme has chosen, VAT rates of the Member States of the end users shall be applied for intra-Community distance selling of goods and digital services provided to the end users, but the correspondent VAT is paid through the Estonian tax authority.

Abovementioned 10 000 euros threshold is not applied for other services (besides digital services) where the place of supply is the country of the place of residence of the end user. Additionally, it’s important to consider that even for distance selling of goods and provision of digital services to the end users of other Member States this 10 000 euros threshold is applied on certain conditions: the seller can’t use this 10 000 euros threhold if he/she has a seat or place of business also in any other Member State.

The data incorporated in current MOSS VAT return is followed up and the unified VAT return for EU cross-border transactions (so-called OSS VAT return) is validated. Taxpayers who transfer goods and provide services from their own Member State to the end users of other Member States can use the OSS special scheme to state such transactions and can declare and pay VAT according to the return which they submit quarterly. The transactions are stated in the OSS VAT returns by Member States, the amount of VAT payable and the VAT rate of correspondent country shall be denoted for each Member State.

The taxable period of the OSS special scheme is a quarter. As a rule, the special scheme shall be applied from the first day of the quarter following the quarter when the taxpayer submitted the application to the tax authority for the implementation of the special scheme. If the goods covered with the special scheme are transferred or the services covered by the special scheme are provided earlier, it is possible to apply the special scheme before the first day of the following quarter on condition that the application for the implementation of the special scheme is submitted by the 10th day of the month following the month when the goods were transferred or the services were provided.

The taxpayer whose business has a seat or permanent establishment in Estonia does not apply the special scheme upon the provision of the service where the place of supply is Estonia or the Member State where he/she has a permanent establishment. The services provided to the end users in the Member State where the person is registered for VAT liability shall be declared in the regular VAT return submitted in this Member State. Such services shall be not declared according to the special scheme.

Registration as a user of the OSS special scheme, termination of the implementation of the OSS special scheme and notification about changes

Registration as a user of the OSS special scheme


The implementation of the special scheme is voluntary. The alternative solution is to register a business for VAT liability in every EU Member State where the business has the VAT obligations related to sales to the end users.

An Estonian legal person (taxable person) can submit the application for registration in the e-services environment e-MTA by choosing there "Registers and inquiries" – "Registration" – "Registering as a user of special schemes for e-commerce and services (OSS/IOSS)". In order to submit an application, the person with the right to represent a legal person must grant the representative the necessary access permissions. Access permissions and packages of access permissions for using the e-service of special schemes OSS/IOSS »

A third country person who wishes to use the OSS special scheme in Estonia shall follow "Guidelines for registration to non-EU businesses" upon the registration as a user of the OSS special scheme.

It is possible to submit applications for implementation of the special scheme from 1 April 2021 but the business will be registered as the user of the special scheme as of 1 July 2021.

When a taxpayer begins to add the application, the selection with two possible types of application shall be open:

  1. Union scheme (OSS, goods and services);
  2. non-Union scheme (OSS, services, EU number).

The users of the MOSS special scheme, registered in Estonia, who wish to continue to apply the dilated special scheme (OSS), have no obligation to submit new application for registration. Their valid applications are automatically carried over. A person who becomes a deemed supplier from 1 July 2021 (e-shop, electronic interface or other electronic trading place) shall fill in the field "Electronic interface" in the application (shall make a checkmark in this field). By default, in the application this field is not filled in.

As a rule, the special scheme shall be applied from the first day of the quarter following the quarter when the taxpayer submitted the application to the tax authority for the implementation of the special scheme. For example, if the application was submitted on 5 July, the special scheme shall be applied automatically from 1 October.

If the goods covered with the special scheme are transferred or the services covered by the special scheme are provided earlier (already in the so-called "running" period, i.e. in the period when the application was submitted), it is possible to apply the special scheme before the first day of the following quarter on condition that the application for the implementation of the special scheme is submitted by the 10th day of the month following the month when the goods were transferred or the services were provided. In such case, "date of first transaction" shall always be filled in in the application and the person is registered as the user of the special scheme from the date of first transaction. For example, if the application was submitted on 10 July but the taxpayer wishes to apply the special scheme from 1 July, the field "date of first transaction" shall be filled in with the date of the so-called "running" period.

The OSS special scheme is divided to two parts:
  1. Union scheme – a person established in the EU Member State (in Estonia) can register as a user of the Union scheme with the VAT ID number (KMKR number) which he/she has received in the country of his/her place of residence. Intra-Community distance selling of goods and the provision of services both are declared according to the Union scheme. Prerequisite for the implementation of the Union scheme is that a taxpayer already has the VAT ID number and this VAT ID number also becomes his/her special scheme registration number.
     
  2. non-Union scheme – a third country business whose company has a registered office in a third country and who has no permanent place of business in the EU can register as a user of the non-Union scheme. The user receives the special non-Union scheme registration number (VOES, with the letter combination "EU") upon the registration. The user of the non-Union scheme can declare only the provision of services. If such person (i.e. the user of the non-Union scheme) also has goods in the EU and he/she creates intra-Community distance selling of goods – such person shall register for VAT liability in the Member State where his/her goods are located and can declare the distance selling of the goods according to the Union scheme (OSS). The user of the non-Union scheme (i.e. the person who has the EU number) cannot use his/her KMKR number, received for the distance selling of goods, when declares the provision of services to the end users whose place of residence is in the EU – because of this he/she shall submit two declarations, implementing the non-Union scheme for the services and the Union scheme for the distance selling of goods.
     
The termination of the implementation of the OSS special scheme and notification about changes


If a taxpayer no longer provides the services covered with the special scheme and no longer creates the distance selling of goods, or if his/her business acitvity and/or registration data has amended (the place of registered office or the permanent place of business has changed, the KMKR number is no longer valid, etc.), the taxpayer shall notify about it by the 10th day of the month following the month when the changes took place.

If a taxpayer continually transfers the goods covered with the special scheme or provides the services covered with the special scheme, but wishes to terminate the implementation of the special scheme, he/she must notify about it at least 15 days before the end of the quarter when he/she is about to terminate the implementation of the special scheme.

All changes and notifications the user of the special scheme can make in the e-services environment e-MTA through the addition or alteration of the data in his/her application. Also a taxpayer can apply for the termination of the special scheme in his/her application – when he/she presses "Apply for termination" in the application, the selection of grounds for the termination is open and the taxpayer shall choose the proper ground.
 

The termination of the implementation of the OSS special scheme by the tax authority


The tax authority has the right to terminate the implementation of the special scheme with regard to the taxpayer if:

  1. the person has notified that the person no longer supplies goods and services covered with the special scheme;
  2. the person has not provided services covered with the special scheme and has not transferred goods covered with the special scheme during two (2) years;
  3. the person no longer fulfils the requirements for the implementation of the special scheme;
  4. the person has repeatedly failed to comply with the requirements for the implementation of the special scheme.

Failure to comply with the requirements for implementation of the special scheme is repeated if at least one of following circumstances takes place:

  1. the tax authority has issued the reminders of the obligation to submit tax returns for three quarters but these returns have not been submitted;
  2. the tax authority has issued the reminders of value added tax arrears but the person has not settled the value added tax debt (except for in the case when the outstanding amount is less than 100 euros per each quarter);
  3. after the request of the tax authority and one month after the tax authority has sent the reminder, the person implementing the special scheme has not made the data provided for in subsection 43 (15) of the Estonian Value Added Tax Act electronically available (the information which shall be preserved).
     
The decision on termination of the implementation of the OSS special scheme


Upon the termination of the implementation of the special scheme, the person receives electronically the correspondent decision which shall enter into force on the first day of the quarter following the quarter of sending the decision.

If the termination of the implementation of the special scheme is related to the change of the registered office or permanent place of business of the taxpayer, the decision shall enter into force on the date of this change.

If the termination of the implementation of the special scheme is related to repeated failure to comply with the requirements established for the implementation of the special scheme, the decision shall enter into force on the day following the day when the decision was sent electronically to the person. In such case the person shall have no right to implement the special scheme during two years since the quarter following the quarter when the decision entered into force.

NEW! OSS VAT return

Submitting a VAT return


A taxable person who makes use of the OSS special scheme is required to submit the OSS special scheme VAT return (‘the OSS VAT return’) electronically for each tax period. The OSS VAT return cannot be submitted on a paper form. The tax period of the OSS special scheme is quarterly and the OSS VAT return is submitted by the last day of the month following the quarter.

Deadlines for the submission of the OSS VAT return:

Quarter 1 (1 January to 31 March) – 30 April
Quarter 2 (1 April to 30 June) – 31 July
Quarter 3 (1 July to 30 September) – 31 October
Quarter 4 (1 October to 31 December) – 31 January of the following year

The tax returns of special schemes can be submitted only if a valid application for the use of the special scheme has been submitted to a tax authority. Each tax return is related to a specific application. To submit a tax return, go to the online services environment e-MTA and select: Taxes – VAT returns of special schemes for e-commerce and services (OSS/IOSS) The types of tax returns for which an application for special scheme has been submitted will appear in the selection. The system will pre-fill the type of tax return if the user has applied for only one special scheme.

The OSS special scheme user can select only the ‘OSS VAT return’ as the type of tax return.

Each VAT return is assigned a unique reference number that can be used for the payment of the tax, in which case the claim will be paid immediately after the receipt of the money into the prepayment account. You can also use the reference number of the prepayment account, and then the payment will be made automatically after the payment deadline has expired.
 

Information to be included in the OSS VAT return


The list of data to be included in the OSS VAT returns is set out in Annex III to Commission Implementing Regulation (EU) 2020/194.

The OSS VAT returns must include, inter alia, the following information, which will be transmitted by the Member State of identification to all Member States of consumption indicated in the return:

  1. identification of the taxable person implementing the special scheme;
  2. Member States in which the goods covered by the special scheme were sold or the services covered by the special scheme were provided;
  3. tax rates per Member States;
  4. the taxable value of goods transferred from Estonia to another Member State in the context of intra-Community distance sales and the amount of VAT due on those goods in euro per Member State;
  5. the taxable value of goods transferred from another Member State in the context of intra-Community distance sales and the amount of VAT due on those goods in euro per Member State;
  6. the taxable value of goods of a person of a third country sold through an online marketplace (if the delivery of goods to a purchaser begins and ends in the same Member State (subsection 4 (13) of the VAT Act)) and the amount of VAT payable in euro per Member State;
  7. the taxable value of the services provided and the amount of VAT due on those services in euro per Member State;
  8. the taxable value of goods and services and the total amount of VAT due on them in euro per Member State;
  9. total amount of VAT due in euro.

The specific transactions that a taxable person who implements the OSS scheme must include in the OSS VAT return depend on whether the person makes use of the Union scheme or the non-Union scheme. As a general principle, the OSS VAT return contains data about intra-Community distance sales covered by the OSS special scheme and about services supplied to non-taxable persons in other Member States, the place of supply of which is not the Member State in which the supplier has established its business or has a fixed establishment. The OSS VAT return lists services provided from the country where the user of special scheme is established (Member State of identification) separately from services provided from fixed establishments located in other Member States. Also, the intra-Community distance sales from the Member State of identification is declared separately from the intra-Community distance sales from other Member States from which dispatch and transport of goods start.

Transactions taken place in a tax period are recorded in the OSS VAT return. If no goods or services have been transferred to a Member State in a given tax period, that Member State will not be indicated in the VAT return as the Member State of consumption (i.e. the so-called zero supply for that period is not declared in the row of the Member State in question) even if sales were declared to that Member State during the previous period. A nil VAT return must be submitted only if no transactions covered by the OSS scheme were carried out during the tax period and no corrections must be made to previous returns.

The OSS VAT return provides the information to be declared (taxable value, tax rate, VAT) by Member State of consumption, and supply that is exempt from tax is not included in the return. On the basis of the chosen Member State of consumption, the electronic system provides the user with possible types of VAT rates (standard, reduced) and VAT rates (%), but the user can also enter a different VAT rate. The amount of VAT is calculated automatically on the basis of taxable supply. VAT rates of other EU Member States

It is important to note that distance sales of goods from a Member State other than the Member State of identification can be declared only if the relevant data (fixed establishment, VAT ID in the other Member State, Member State of dispatch of the goods) have been previously indicated in the application for the special scheme. In contrast to the declaration of services, the Member State of identification can also be indicated as the Member State of consumption, provided that the transport of the goods starts outside the Member State of identification. For example, if an Estonian taxable person has stocks of goods in Latvia and the goods are transported from there to a non-taxable buyer in Estonia, this transaction must be declared in the OSS VAT return as well.

If the Member State of identification is Estonia, the goods sold and services provided to an Estonian non-taxable person in Estonia must be declared in the national VAT return (form KMD). These transactions are not declared in the OSS VAT return.
 

Union scheme and non-Union scheme


The Union scheme is for:

  1. declaring intra-Community distance sales of goods and services covered by the special scheme provided to non-taxable persons in the European Union by economic operators in the European Union;
     
  2. declaring intra-Community distance sales of goods by persons from third countries.

NEW! If the table "Valid VAT ID numbers in other EU Member States" in the application for the Union scheme is filled in, the Member States listed there must also be indicated in the table "Goods sold through a permanent establishment outside the Member State of identification and/or a country of dispatch" in the case of cross-border dispatch of goods from those countries. It is important to choose the country type "Country of dispatch" and fill in the remaining fields.

If the user of the Union scheme dispatches goods from Member States where he does not have a valid VAT ID number, those Member States must also be included in the table "Goods sold through a permanent establishment outside the Member State of identification and/or a country of dispatch".

If the countries of dispatch are not indicated in the application, transactions from those countries cannot be declared in the Union scheme VAT return.
 

The non-Union scheme is intended for declaring services supplied by persons who do not have a place of business/fixed establishment in the Community to non-taxable persons in the Member States of the EU (intra-Community distance sales of goods cannot be declared under the non-Union scheme).
 

Union scheme

Declaration of services

Under the Union scheme, services supplied to non-taxable persons (B2C) the place of supply of which is in a Member State where the supplier has neither a place of business nor a fixed establishment shall be declared.

The user of the Union scheme must not declare in the OSS VAT return the services supplied to the final consumer either in the Member State of establishment or in the Member State of the fixed establishment, but must declare them in the national VAT return submitted in that Member State. The Member State of the fixed establishment cannot be the Member State of consumption for the supply of services.

However, if the taxable person supplying the services covered by the special scheme also has fixed establishments in other Member States and has supplied services from those Member States with a place of supply in a Member State other than that of the fixed establishment, those services must be declared in the OSS VAT return. When services are supplied in a Member State where the taxable person does not have a fixed establishment but is identified for VAT purposes, those services must also be declared in the OSS VAT return.

Example 1

An economic operator using the special scheme in Estonia has a fixed establishment in Finland, i.e. the services supplied to non-taxable persons established in Finland are declared in and VAT is paid according to the standard VAT return submitted in Finland. If the fixed establishment in Finland supplies services covered by the special scheme to a non-taxable person in Sweden, those services are declared in the OSS VAT return in Estonia.

Example 2

An economic operator established in Estonia has fixed establishments in Finland and Latvia and is also identified in Sweden for VAT purposes. The economic operator supplies services covered by the special scheme to private individuals in Finland, Germany and Sweden. The economic operator also supplies services covered by the special scheme from a fixed establishment located in Latvia to private individuals in Finland and Germany.
The Estonian economic operator declares its supply of services from Estonia and Latvia to customers in Germany and Sweden through the OSS scheme, but the services supplied to customers located in Finland are declared in the Finnish national VAT return.

 

Declaration of sales of goods (intra-Community distance sales)

Intra-Community distance sales, i.e. the transfer and delivery of goods (other than a new means of transport or goods to be installed or assembled, but including excise goods) by or on behalf of a transferor to a non-taxable person in another Member State, is declared under the Union scheme.

Under the Union scheme, any taxable person, irrespective of whether the person is from a Member State or a third country, can declare intra-Community distance sales. The goods sold to the persons of the Member State of identification and the Member State of fixed establishment must be declared in the national VAT return of that Member State.

Example 3

An Estonian economic operator has a fixed establishment in Lithuania. The economic operator is identified as a user of the Union scheme in Estonia. The economic operator supplies goods located in Estonia to non-taxable persons in Latvia and Estonia. The economic operator also supplies goods located in Lithuania to non-taxable persons in Estonia and Lithuania.

Information to be included in the OSS VAT return:

  • supplies of goods from Estonia to Latvia,
  • supplies of goods from Lithuania to Estonia.

Domestic supplies of goods from Estonia and Lithuania must be declared in the respective national VAT returns of Estonia and Lithuania, as they do not constitute intra-Community distance sales of goods.


Deemed supplier

A taxable person who is not the actual seller of the goods, but who facilitates a transaction concluded between the original seller and the customer via an electronic interface (e.g. a market place, platform, portal) is considered to be the deemed supplier. The deemed supplier is liable for the declaration and payment of VAT.

Under the Union scheme, a taxable person established within or outside the European Union becomes the deemed supplier if the following conditions apply to the sales transaction:

  1. the supply of goods is facilitated via an electronic interface,
  2. the supply of goods is carried out within the European Union (i.e. intra-Community distance sales of goods and domestic supplies of goods),
  3. supply of goods is made to a non-taxable person,
  4. the original seller is established outside the European Union.

Thus, a platform, e-shop, etc. will become a deemed supplier if it allows a person from a third country to sell goods located in the European Union to the final consumer via its electronic interface.

As an exception from the general principles, a taxable person must also declare in the OSS VAT return those domestic supplies of goods for which the taxable person is the deemed supplier.

Example 4

A company established in China sells a tablet (goods) to a non-taxable person in Belgium via an electronic interface. The electronic interface facilitates the supply of goods and becomes the deemed supplier for the supply in question. The tablet is located in Belgium and is dispatched to a customer in Belgium (domestic delivery, transport starts and ends in Belgium). Normally, such a domestic supply must be declared in the national VAT return – but the deemed supplier using the Union scheme must declare such a supply in the OSS VAT return, provided that the platform is identified in the EU as a user of the OSS scheme.

The deemed supplier can declare all sales within a Member State (i.e. the transport of goods begins and ends in the same Member State) irrespective of whether his place of business is in that Member State. This means that if the deemed supplier is identified in Estonia, the deemed supplier can include not only sales from Estonia to Estonia, but also sales from Germany to Germany, Poland to Poland, etc. in the OSS VAT return. If the deemed supplier is not identified for VAT purposes in the Member State from which the goods are dispatched or transported, he must indicate the country code of that Member State instead of the VAT identification number in the VAT return. The Member State from which transport of goods began must be indicated in the application first.

The deemed supplier can also use the special scheme to declare his own goods and services. If the deemed supplier is registered as a user of the special scheme, the deemed supplier declares in its VAT return of special scheme both its own transactions and those for which it is the deemed supplier. The deemed supplier does not register as a user of the same special scheme twice.

The deemed supplier does not declare the transactions of taxable persons with a place of business in the European Union, i.e. a person does not become a deemed supplier if the original seller is a person of the European Union. Taxable persons in EU Member States declare their own transactions covered by the special scheme, either by opting for the use of the special scheme or by registering for VAT purposes in the Member State of consumption.
 

Non-Union scheme


The non-Union special scheme is used by economic operators from third countries who do not have a fixed establishment in the European Union. Users of the non-Union scheme declare in the OSS VAT return only the services covered by the special scheme provided to non-taxable persons in the European Union, including the services provided in the Member State of identification.

Example 5

An economic operator established in the United States identifies in Estonia as a user of the non-Union scheme.
It provides electronic services to non-taxable persons in Finland, Sweden and Estonia.
It declares all services supplied to non-taxable persons (B2C) in the Estonian OSS (non-Union special scheme) VAT return, including services supplied to Estonia.

Sales of goods cannot be declared under the non-Union scheme. If the user of non-Union scheme also engages in distance sales of goods located in the European Union, the user must register as a user of the Union scheme in order to declare the distance sales of goods. It must be kept in mind that services cannot be declared under the Union scheme by that person, that is to say, in such a case, the person must submit two OSS VAT returns, the VAT return of the non-Union scheme for the declaration of services and the VAT return of the Union scheme for goods.
 

Correcting a VAT return


While MOSS VAT returns (tax periods until 30 June 2021) can be corrected by amending the return already submitted, the OSS VAT returns (tax periods from 1 July 2021 onwards) can only be corrected by submitting a VAT return for the current period.

It is important to note that once the OSS VAT return has been confirmed, it cannot be amended/corrected until the OSS VAT return for the next period is submitted. It is possible to amend/correct the return form before confirmation. It is therefore necessary to verify the accuracy of the data before the VAT return is confirmed. It is recommended to keep the VAT return saved until then.

OSS VAT returns that are submitted from 1 July 2021 can be corrected within three years from the date on which the initial VAT return was due. The corrections must include the tax period, the Member State of consumption concerned and the amount of VAT resulting from the corrections. No distinction is made between standard or reduced VAT rates and goods and services in the corrections.

If a Member State of consumption allows, in accordance with its national rules, corrections even after the end of the three-year period, such corrections will no longer be made through the OSS application, but the taxable person must communicate directly with the Member State of consumption.

Corrections to previous periods must be made in a separate section named “Adding corrections to VAT amounts for previous taxable periods”.

The VAT due for transactions declared for the Member State of consumption and any corrections to previous VAT return(s) made for the same Member State of consumption will be set off. If the country-specific balance is zero, the taxable person will not be required to pay VAT for that Member State of consumption in respect of the VAT return. If the country-specific balance is positive (i.e. VAT is due), the amount due is the balance of VAT due for transactions and corrections to previous tax periods. Where the country-specific balance is negative, i.e. the taxable person has paid more VAT than necessary, the Member State of consumption must refund the overpaid amount to the taxable person. The negative country-specific total amount is not taken into account in the calculation of the amount of VAT due. This means that in the event of a negative balance (advance payment) in the case of one Member State, the advance payment for that Member State does not reduce the VAT due in other Member States. The amount indicated in the VAT return under ‘VAT due’ must be paid.

Example 6

A taxable person uses the non-Union scheme in Germany (Member State of identification).

In the first quarter of 2023 (on-going quarter), the person declares 200 euros in Poland (Member State of consumption). The person also makes a negative correction in the amount of 50 euros regarding Poland and the fourth quarter of 2022. The VAT balance for the on-going quarter, taking into account the correction made to the previous quarter, amounts to 200 euros – 50 euros = 150 euros. In Poland, the taxable person must pay 150 euros.

The VAT return for the first quarter of 2023:

  • supplies to the Member State of consumption, Poland, 200 euros
  • corrections for Poland, the Member State of consumption (Q4 2022) –50 euros
  • balance of VAT due in Poland, the Member State of consumption, is 150 euros

Example 7

A taxable person uses the non-Union scheme in Germany (Member State of identification).

In the first quarter of 2023 (on-going quarter), the person declares 100 euros in Poland (Member State of consumption). The person also makes a negative correction in the amount of 150 euros regarding Poland and the fourth quarter of 2022. The VAT balance for the on-going quarter, taking into account the correction made to the previous quarter, amounts to 100 euros – 150 euros = –50 euros. In Poland, the taxable person does not have to pay anything. Poland must repay the amount of 50 euros directly to the taxable person.

The VAT return for the first quarter of 2023:

  • supplies to the Member State of consumption, Poland, 100 euros
  • corrections for Poland, the Member State of consumption (Q4 2022) –150 euros
  • balance of VAT due in Poland, the Member State of consumption, is 0 euros
  • Poland repays 50 euros

Example 8

A taxable person uses the non-Union scheme in Germany (Member State of identification).

In the first quarter of 2023 (on-going quarter), the person declares 100 euros in Poland (Member State of consumption). The person also makes a negative correction in the amount of 100 euros regarding Poland and the fourth quarter of 2022. The VAT balance for the on-going quarter, taking into account the correction made to the previous quarter, amounts to 100 euros – 100 euros = 0 euros. In Poland, the taxable person does not have to pay anything.

The VAT return for the first quarter of 2023:

  • supplies to the Member State of consumption, Poland, 100 euros
  • corrections for Poland, the Member State of consumption (Q4 2022) –100 euros
  • balance of VAT due in Poland, the Member State of consumption, is 0 euros

Example 9

A taxable person uses the non-Union scheme in Germany (Member State of identification).

In the first quarter of 2023 (on-going quarter), the person declares 200 euros to Lithuania (Member State of consumption) and 100 euros to Poland (another Member State of consumption). The person also makes a negative correction in the amount of 150 euros regarding Poland and the fourth quarter of 2022. The balance of VAT due in Poland for the on-going quarter, taking into account the correction made to the previous quarter, amounts to 100 euros – 150 euros = –50 euros. In Poland, the taxable person does not have to pay anything. Poland must repay the amount of 50 euros directly to the taxable person.

The VAT return for the first quarter of 2023:

  • supplies to the Member State of consumption, Poland, 100 euros
  • corrections for Poland, the Member State of consumption (Q4 2022) –150 euros
  • balance of VAT due in Poland, the Member State of consumption, is 0 euros
  • Poland repays 50 euros
  • supplies to the Member State of consumption, Lithuania, 200 euros
  • the total amount to be paid 200 euros (to Lithuania)

IOSS (Import One Stop Shop) or special scheme for imposing VAT on distance selling of goods imported from third country

Since 1 July 2021, the exemption from VAT on the import of consignments with a value of up to 22 euros is abolished and a customs declaration has to be submitted. To simplify the declaration of import VAT for consignments with a small value, the special scheme for imposing VAT on distance selling of goods imported from third country (the IOSS special scheme) is introduced.

For more expeditious transport of consignments from a third country to the end user who subscribed the goods, the special scheme is introduced for the declaration and payment of VAT upon the import of such goods. The sellers of the goods get the possibility to implement the IOSS special scheme, collecting also the amount of VAT from the purchaser (when the purchaser pays for the goods) and declaring this VAT to the tax authority itself instead of the purchaser in the monthly IOSS VAT return.

The taxpayer can apply the IOSS special scheme for such consignments, imported for the end users whose place of residence is in the EU, which at the moment of the conclusion of the sale and purchase contract are located in a third country, intrinsic value of which does not exceed 150 euros and which are not taxable with the excise tax. Intrinsic value means the price of the goods themselves when sold for export to the customs territory of the EU, excluding transport and insurance costs (unless such costs are included in the price and not separately indicated on the invoice) and any other taxes and charges as ascertainable by the customs authorities from any relevant documents.

If the seller applies the IOSS special scheme, he/she can add the VAT payable upon the import to the sales price of the goods already at the moment when the sales transaction takes place. Because of this, as a rule, the purchaser has no additional tax obligations when he/she receives the goods.

The implementation of the IOSS special scheme simplifies the performance of VAT obligations of a business. The business who has chosen the implementation of the special scheme, registers for the special scheme and declares and pays VAT upon the import of the goods, covered by the special scheme, only in one Member State (in the Member State of registration) and has no obligation to pay VAT at the moment of the import of goods in every Member State where the import takes place.

The IOSS special scheme is targeted to the taxpayers who perform distance selling of goods, imported from third countries, to the end users whose place of residence is in the EU. If a third country business who has neither seat nor place of business in the EU wishes to apply the IOSS special scheme, he/she can apply this special scheme through the intermediary who must fulfill the obligations related to the special scheme on behalf and in the name of such third country business. As the exception, a third country person engaged in distance selling whose country of residence has contract with the EU about reciprocal aid concerning administrative cooperation, anti-fraud fight and collection of tax arrears in the area of value added tax must not appoint an intermediary. Today the EU has concluded such kind of contract only with Norway. In Estonia, a person who is able to pay, has unexceptionable reputation and has no tax arrears can act as the intermediary of the IOSS special scheme.

In conclusion, the declaration and payment of VAT upon the import of goods for the end users whose country of residence is in the EU by a third country person who applies the IOSS special scheme should take place as follows:

  1. a third country business (e-shop) chooses the intermediary in any EU country and this intermediary submits on behalf and in the name of the third country business the IOSS declarations where the supplies of goods transferred to all countries of consumption shall be declared;
  2. e-shop imparts the information concerning VAT paid by the purchasers at the moment of the transfer of goods;
  3. according to the data, received from the e-shop, the intermediary shall fulfill the VAT return of the distance selling of imported goods (the IOSS VAT return) by the end of the month following the month when the supplies were created, and shall pay VAT to the tax authority of his/her country of registration (the intermediary registered in Estonia – to the Estonian tax authority) by the date of the submission of the return.

The completion of customs formalities can take place in any EU country (not necessarily in the country where the IOSS VAT return was submitted), these acts are not linked. A third country e-shop has no obligation to register separately for VAT liability and has no obligation to deliver the EORI number.

The import (release for free circulation) of goods is exempt from VAT on condition that the valid IOSS number (IM, the IOSS number of importer) is presented in the customs declaration. You can find in-depth explanations, how to implement the IOSS special scheme, on the webpage of the European Commission. Inter alia, there is the explanation (as answer to question "What you need to do if you use the IOSS") that a user of the special scheme (an importer or electronic interface) must provide all information required for customs clearance in the EU, including the IOSS VAT identification number, to the person declaring the goods at the EU border. The same explanation you find also on the webpage of the Publications Office of the European Union, in the article composed by the European Commission "All you need to know about the Import One-Stop Shop (IOSS)".

The database of the IOSS numbers is not public, it is available only for customs authorities who authomatically check the validity of the number according to this database. If the number set out in the customs declaration is valid, customs releases the goods for free circulation without the payment of VAT. The person who declares goods in customs (postal operator, express company, customs agency etc.) cannot check the validity of the IOSS number itself

Registration as a user of the IOSS special scheme, termination of the implementation of the IOSS special scheme and notification about changes

Registration as a user of the IOSS special scheme


The service of the submission of application for registration as a user of the IOSS special scheme was open on 1 April 2021.

The implementation of the IOSS special scheme is voluntary. The alternative solution is to use regular customs procedures.

An Estonian legal person (taxable person) can submit the application for registration in the e-services environment e-MTA by choosing there "Registers and inquiries" – "Registration" – "Registering as a user of special schemes for e-commerce and services (OSS/IOSS)". In order to submit an application, the person with the right to represent a legal person must grant the representative the necessary access permissions. Access permissions and packages of access permissions for using the e-service of special schemes OSS/IOSS »

When a taxpayer begins to add the application, the selection with three possible types of application shall be open:

  1. application for import scheme (IOSS, goods, IM number);
  2. application of an intermediary (IOSS, goods, IN number);
  3. application of a taxable person intermediated (IOSS, goods, IM number, the intemediary shall submit the application in the name of the person intermediated).

The taxable persons who are engaged in distance selling of goods, imported from third countries to end users whose place of residence is in the EU, can use the IOSS special scheme.

A third country business, who has neither seat nor place of business in the EU, can use the special scheme through the intermediary. The intermediary must fulfill the obligations, stipulated in the special scheme, in the name and on behalf of the person to be intermediated. As the exception, a third country person engaged in distance selling whose country of residence has contract with the EU about reciprocal aid concerning administrative cooperation, anti-fraud fight and collection of tax arrears in the area of value added tax must not appoint an intermediary. Today the EU has concluded such kind of contract only with Norway. In Estonia a person can act as the intermediary of the IOSS special scheme if he/she is registered in the Estonian Commercial Register, is registered in Estonia for VAT liability, is able to pay, has unexceptionable reputation and has no tax arrears. A user of the special scheme can choose only one intermediary.

For the implementation of the special scheme a business submits the application (chooses "Application for import scheme" as the type of application) and he/she receives the registration number (number of the IOSS importer, with the letter combination "IM") which can be used only for the implementation of the IOSS special scheme.

The special scheme shall be applied from the day when the user of the special scheme receives the registration number for the IOSS special scheme.

If a person wishes to act as the intermediary for the purposes of the IOSS special scheme, he/she must fulfill the application of an intermediary as the type of application at first and receives the number of the IOSS intermediary upon the registration (with the letter combination "IN" which originates from the word intermediary). After that the intermediary can submit the applications to add the persons intermediated. The intermediary receives the abovementioned number of IOSS importer (with the letter combination "IM") for each person intermediated – this number will be also set out in the customs declaration. If the intermediary also creates his/her own supplies which shall be declared according to the special scheme – for the presentation of these transactions, the intermediary shall submit the application for registration as a user of the IOSS special scheme in his/her own name and receives the IM registration number.

The country of registration forwards the registration number of the business to the tax authorities of all EU Member States and this number is valid all over the EU.

The database of the IOSS registration numbers is not public, it is available only for customs authorities who authomatically check the validity of the number according to this database. If the registration number set out in the customs declaration is valid, customs releases the goods for free circulation without demand for payment of VAT. The person who declares goods in customs (postal operator, express company, customs agency etc.) cannot check the validity of the IOSS registration number itself.

 
The termination of the implementation of the IOSS special scheme and notification about changes


The user of the IOSS special scheme or the intermediary shall inform the Estonian Tax and Customs Board if:

  1. he/she is no longer engaged in business covered with the special scheme;
  2. his/her business activity has amended in such a manner that he/she no longer fulfils the requirements for the implementation of the special scheme, for example, the Member State of registration has amended because the permanent place of business has changed (subsections 431 (1) and (2) of the Estonian Value Added Tax Act (hereinafter VATA));
  3. he/she amends the data submitted in the application for registration.

The taxpayer shall notify about the amendment of the data and about the termination of the business activity covered with the special scheme by the 10th day of the month following the month when the changes took place.

If a taxpayer continues the business activity covered with the special scheme but wishes to terminate the implementation of the special scheme – he/she must notify about it at least 15 days before the end of the month when he/she is about to terminate the implementation of the special scheme.

All notifications about the changes the user of the special scheme can make in the e-MTA through the addition or alteration of the data in his/her IOSS application.

Also a taxpayer can apply for the termination of the special scheme in the same application – when he/she presses "Apply for the termination" in the application, the selection of grounds for the termination is open and the taxpayer shall choose the proper ground.
 

The termination of the implementation of the IOSS special scheme by the tax authority


The cases when the Estonian Tax and Customs Board deletes the user of the special scheme from the register are stipulated in subsection 431 (18) of VATA.

  • The user of the special scheme shall be deleted from the register if at least one of following circumstances takes place:
  1. the person has notified the tax authority that the person is no longer engaged in distance selling of goods imported from third countries;
  2. the person has not created distance selling of goods imported from third countries during two years;
  3. the person no longer fulfils the requirements for the implementation of the special scheme (subsections 431 (1) and (2) of VATA);
  4. the person has repeatedly failed to comply with the requirements for the implementation of the special scheme. When failure to comply with the requirements for implementation of the special scheme is repeated, is stipulated in subsection 431 (24) of VATA.
  • The intermediary and the person, represented by him/her (the person intermediated), shall be deleted from the register if at least one of following circumstances takes place:
  1. the intermediary has not acted as intermediary during two consecutive quarters;
  2. the intermediary no longer fulfils the requirements imposed on intermediary (subsections 431 (1) and (2) of VATA);
  3. the intermediary has repeatedly failed to comply with the requirements imposed on intermediary.

If the intermediary is deleted from the register, the taxable persons represented (intermediated) by this intermediary have no right to use the special scheme longer.
 

  • The person intermediated shall be deleted from the register, if at least one of following circumstances takes place:
  1. the intermediary has notified the tax authority that the person represented by him/her is no longer engaged in distance selling of goods imported from third countries;
  2. the person has not created distance selling of goods imported from third countries according to the special scheme during two years;
  3. the person no longer fulfils the requirements for the implementation of the special scheme (subsections 431 (1) and (2) of VATA);
  4. the person has repeatedly failed to comply with the requirements for the implementation of the special scheme;
  5. the intermediary has notified the tax authority that he/she no longer represents the correspondent person.
     
The decision on termination of the implementation of the IOSS special scheme


Upon the termination of the implementation of the special scheme, the intermediary and the user of the special scheme both receive the correspondent decision electronically.

  • The decision shall enter into force on the first day of the month following the month of sending the decision.
  • If the termination of the implementation of the special scheme is related to the change of the registered office or permanent place of business of the user of the special scheme or the intermediary, the decision shall enter into force on the date of this change.
  • If the termination of the implementation of the special scheme is related to repeated failure to comply with the requirements established for the implementation of the special scheme, the decision shall enter into force on the day following the day when the decision was sent electronically to the person.

If the termination of the implementation of the special scheme is related to repeated failure to comply with the requirements established for the implementation of the special scheme, the person shall have no right to implement the IOSS special scheme and also the OSS special scheme, stipulated in Article 43 of VATA, in any EU Member State during two years since the month following the month when the decision on termination of the implementation of the special scheme entered into force. The same principle shall apply to the intermediary and in such case the person has no right to act as intermediary during two years since the month when the intermediary was deleted from the register.

The registration number, received for the implementation of the IOSS special scheme, is still valid up to two months after the day when the decision concerning the termination of the implementation of the special scheme or the deletion of the person from the register entered into force. This provision is necessary to ensure that when the customer receives the goods, subscribed by him/her from a third country during the time when the special scheme was applied, the import VAT for these goods is already paid and the consignee has no obligation to complete the customs formalities him/herself. This two month period is not applicable for the persons who were deleted from the register because they repeatedly failed to comply with the requirements for the implementation of the special scheme.

Intermediaries of the IOSS special scheme, registered in Estonia

The table below lists only those intermediaries who have given written permission to the Estonian Tax and Customs Board to disclose their permission.

Name Registration code Date of issue of the permit E-mail address
Eurora FR Services OÜ 16192059 01.04.2021 ioss@eurora.com
ProLox OÜ 14848120 01.07.2021 info@prolox.eu

NEW! IOSS VAT return

Submitting a VAT return


A taxable person who makes use of the IOSS special scheme is required to submit an IOSS special scheme VAT return (‘the IOSS VAT return’) electronically for each tax period. The tax period of the IOSS special scheme is a calendar month and the IOSS VAT return is submitted by the last day of the month following each month.

The tax returns of special schemes can be submitted only if a valid application for the use of the special scheme has been submitted to a tax authority. Each tax return is related to a specific application. To submit a tax return, go to the online services environment e-MTA and select: Taxes VAT returns of special schemes for e-commerce and services (OSS/IOSS). The types of tax returns for which an application for special scheme has been submitted will appear in the selection.

The IOSS VAT return types are:

  1. IOSS VAT return
  2. intermediary’s VAT return
  3. intermediated person’s VAT return

When submitting the application, the taxpayer must take into account that the IOSS special scheme can only be used for distance sales of goods imported from non-EU countries with a value not exceeding 150 euros and which are not excise goods. In addition, another factor should be taken into account: in order to qualify as a distance sale of imported goods, the goods must be physically dispatched from outside the EU (from a so-called ‘third country’ or ‘third territory’) directly to the buyer. If goods coming from outside the EU are first placed in a customs warehouse in a Member State of the EU from which they are later delivered to non-taxable customers, such transactions are not covered by the IOSS special scheme, since the goods in stock are already in the territory of the EU.

Each VAT return is assigned a unique reference number which can be used for the payment of the tax, in which case the claim will be paid immediately after the receipt of the money into the prepayment account. You can also use the reference number of the prepayment account, and then the payment will be made automatically after the payment deadline has expired.
 

Information to be included in IOSS VAT returns


Similarly to the list of data to be provided in an OSS VAT return, the list of data to be included in an IOSS VAT return is set out in Annex III to Commission Implementing Regulation (EU) 2020/194.

An IOSS VAT return must contain the following information:

  1. identification number given to a person to implement the special scheme;
  2. Member State where the goods are delivered;
  3. the total taxable value of goods in euro per Member State;
  4. tax rates per Member State;
  5. the total amount of goods in euro per Member State;
  6. the amount of VAT payable in euro per Member State;
  7. the total amount of VAT due in euro.

The IOSS VAT return provides the information to be declared (taxable value of the goods, tax rate, VAT) by Member State of consumption, plus the total amount of VAT due.

On the basis of the chosen Member State of consumption, the electronic system provides the user with possible types of VAT rates (standard, reduced) and VAT rates (%), but the user can also enter a different VAT rate. The amount of VAT is calculated automatically on the basis of taxable supply. VAT rates of other EU Member States

VAT is collected by the IOSS user from the buyer at the time of sale.
 

Deemed supplier


A taxable person who is not the actual seller of the goods, but who facilitates a transaction concluded between the original seller and the customer via an electronic interface (e.g. a market place, platform, portal) is considered to be the deemed supplier. Regarding the transactions made in the role of deemed supplier, the deemed supplier is liable for the declaration and payment of VAT.

Under the IOSS scheme, a taxable person established within or outside the European Union becomes the deemed supplier if the following conditions apply to the sales transaction:

  1. the goods have been imported from a third territory or third country,
  2. the value of the consignment does not exceed 150 euros,
  3. supply of goods is made to a non-taxable person,
  4. the sales transaction is facilitated via an electronic interface.

The taxable person acting as the deemed supplier declares in the IOSS VAT return all distance sales of imported goods made in the role of deemed supplier. In addition, the deemed supplier must indicate all the so-called ‘his own’ transactions covered by the IOSS special scheme in the same IOSS VAT return. This means that a person acting as a deemed supplier does not register as a user of the special scheme twice, but includes all transactions covered by the special scheme in the IOSS VAT return.
 

Intermediary


The term ‘intermediary’ is used only under the IOSS special scheme and is not linked to the OSS special scheme.

A taxable person not established in the European Union who wishes to use the IOSS special scheme must appoint an intermediary. Taxable persons established in the European Union can also appoint an intermediary to use the IOSS special scheme, but are not required to do so.

An intermediary is a taxable person who fulfils the VAT obligations laid down in the IOSS scheme (submission of a VAT return, payment of VAT, etc.) in the name and on behalf of the taxable person who has appointed him as intermediary.

In order to act as an intermediary, the economic operator must first register as an intermediary. It is only thereafter that the intermediary can register one or more taxable persons who have appointed the economic operator as an intermediary for the purposes of the special scheme. For each taxable person represented, the intermediary receives a separate IOSS VAT identification number.

The person registered as an intermediary submits the IOSS VAT return for each person it represents and pays the amount of VAT indicated in the return to a tax authority in due time.

When adding a VAT return, the intermediary must select the “VAT return of intermediary” as the VAT return type, then select the period and the name of the person intermediated.

 

Correcting a VAT return


The principles for correcting an IOSS VAT return are not different from those of an OSS VAT return. The general principles for correcting VAT returns under the special scheme are set out under “Short overview of changes in the EU VAT rules since 1 July 2021” and more detailed explanations for the correction of OSS VAT returns with examples under “OSS VAT returns”.

Electronic interface (e-shop) as deemed supplier and the person who collects VAT

It is stipulated according to changes that the persons who own e-shop and facilitate the cross-border transfer of goods to the end users through it, are roped in collecting VAT payable from certain sales transactions and the activities of these persons are treated as if such persons have purchased the goods and resold to the end users themselves (such e-shop is called deemed supplier). According to this order, e-shop has the obligation to calculate and pay VAT instead of the third country person who actually is the seller of the goods.

Hence, the distance selling is divided to two transactions: the transfer of the goods from the actual seller to the person who owns e-shop (B2B) and the resale of the same goods from the person who owns e-shop to the end user (B2C).

A business who facilitates the transfer of goods through e-shop is treated as deemed supplier if:

  • he/she makes possible the distance selling of goods imported from a third country in consignments intrinsic value of which does not exceed 150 euros (e-shop can use the IOSS special scheme);
  • irrespective of the value of the goods, he/she makes possible for a third country business whose company has a registered office in a third country and who has no permanent establishment in EU, to transfer to the end user the goods which are already located in EU (e-shop can use the OSS special scheme).

If intrinsic value of the goods, imported from a third country and resold to the end user whose place of residence is in the EU, exceeds 150 euros or if the actual seller of the goods is a person located in the EU – in such case e-shop is not responsible for the taxation of the goods with VAT.

The obligation to register in Estonia for VAT liability (and also the right to get back from the tax authority the amount of VAT paid upon the import of goods) shall arise for a third country business whose company has a registered office in a third country and who has no permanent establishment in the EU if:

  1. he/she transfers through e-shop, owned by any other business, to the end user his/her goods which are located in Estonia and this e-shop, according to new rules, is treated as the purchaser and reseller of the goods (although the transfer of the goods to e-shop is the supply taxable at 0% VAT rate in such case);
  2. he/she owns e-shop him/herself, sells as deemed supplier through his/her e-shop to the end user the goods located in Estonia of the other third country business and has not registered for the OSS special scheme.

The special scheme for declaration and payment of VAT in the case when the seller does not apply the IOSS special scheme

This special scheme, like the IOSS special scheme, is established because since 1 July 2021 the exemption from VAT on the import of consignments with a value of up to 22 euros is abolished. This special scheme is applicable only if the goods are released for free circulation in the same Member State where the end user (the purchaser) has the place of residence. If the goods are subscribed from a third country, by and large, the end user who subscribed and imported the goods also must pay VAT. Upon the implementation of this special scheme, the end user pays VAT to the person who presents goods in customs (usually to the provider of the postal service, to the express company or to the customs agency) – therefore, in contradistinction to the IOSS special scheme, the end user does not pay VAT in e-shop at the moment of the sales transaction.

This special scheme is applicable upon the import of consignments, intrinsic value of which does not exceed 150 euros, which are not taxable with the excise tax and for which the special scheme for imposing VAT on distance selling of goods imported from a third country (the IOSS special scheme) is applied neither in Estonia nor in any other Member State. The implementation of this special scheme is also voluntary.

This special scheme can apply a business who:

  1. presents in customs the import declaration of the goods on behalf of the actual purchaser as indirect representative,
  2. is the holder of the goods and
  3. transports the goods to the consignee whose place of residence is in Estonia.

This special scheme is targeted, first of all, to postal operators and providers of express services who usually declare the import of goods with a small value on behalf of the consignee and are the holders of the goods within the meaning of the Customs Code (holder of the goods is the person who is the owner of the goods or who has a similar right of disposal over the goods as the owner; or who has physical control over the goods).

Upon the implementation of this special scheme, the imported goods are always taxable at the standard VAT rate (20% in Estonia).

A business applying this special scheme who presents the goods in customs pays VAT collected from the end users to the tax authority once a month. VAT shall be paid by the 16th day of the month following the month when VAT was collected.

29.09.2021