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 taxpayers can commence to submit applications for implementation of both special schemes three months before the special scheme enters into force, i.e. from 1 April 2021. The business will be registered as the user of the special scheme as of 1 July 2021.

The taxpayer shall submit the return concerning special scheme and shall pay VAT according to the return by the end of the calendar month directly following the declared taxable period. 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 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 submit today. 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.

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.

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. 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. To avoid the obligation of the end user to submit the customs declaration and pay VAT when the goods arrive in EU, 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.

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.

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.

Additional information

 

13.04.2021