Taking care of your VAT duties is one of the most important tasks in the
If you don’t fulfill your obligations the right way or, often worse, too late, you will be subject to penalties that can seriously harm your bottom line and your entire business. Therefore, you should always keep
Moreover, with globalization and integrated marketplaces, the number of VAT duties to take care of increases. If you sell to customers in a variety of countries, you will have to fulfill VAT obligations in each of them. The whole process is complicated by the fact that each country follows its own regulations, formats, and deadlines and, of course, implements its own changes.
For example, the upcoming year 2022 is characterized by a lot of changes in VAT regulations in the United Kingdom.
VAT Changes in the UK in 2022
Even though the United Kingdom is no longer part of the European Union, it remains a prime marketplace for online sellers. As such, changes in its VAT regulation impact not only UK businesses but also EU sellers and ecommerce entrepreneurs which sell and ship products to customers across the canal. Upcoming VAT changes in the UK are mainly due to Brexit and a continuous effort to simplify the processes for sellers active on integrated marketplaces such as Amazon.
UK VAT changes due to Brexit
Since Brexit, customs declarations for goods imported from Europe to the United Kingdom could be delayed. This applied to imports into all parts of the UK, with the exception of Northern Ireland which continues to be part of the European Customs Union. Starting January 1st, 2022, this is no longer possible and businesses should prepare for this change by building
But this is not the only change concerning imports into the UK. The Postponed VAT Accounting scheme was introduced in January 2021. The scheme allows businesses to declare and immediately recover import VAT in their regular VAT returns, instead of paying it upon arrival in the UK and reclaiming it later. The Postponed VAT Accounting scheme was conceived to prevent businesses from suffering negative cash flows by suddenly having to pay import VAT before using or reselling products in absence of the EU Reverse Charge Mechanism.
UK Making Tax Digital for VAT procedure
Another big impact on VAT regulations has been the new Making Tax Digital procedure, part of a plan by the UK government to become the most digitally advanced tax administration in the world.
Businesses with a turnover above the UK VAT threshold of £85,000 are required to register for VAT in the UK and are also required to follow the Making Tax Digital rules. This means that they have to keep digital records of everything, ensure their data is digitally linked, and have to use the new software to submit their VAT returns.
Businesses with a turnover below the UK VAT threshold of £85,000, in general, don’t have to register for VAT in the UK. If they are not registered, they can join the Making Tax Digital service on a voluntary basis. If they are registered on a voluntary basis they will be required to follow Making Tax digital rules starting in April 2022.
Other VAT changes in the UK
But that is not all! More VAT changes are coming up in the UK toward the end of the year. The currently valid regime for penalizing taxpayers who file VAT returns or pay UK VAT debts late has long been criticized for being unfair and ineffective. On the 31st of December 2022, a new regime will be introduced. While not many details about the new fines and penalties are known yet, the new system is expected to be fairer, easier to navigate, and more consistent.
Lastly, a change in VAT regulations due to
Of course, similar
Relevant Recent VAT Changes in the EU
EU-wide VAT Return Procedure with OSS
The VAT duties that you as an online seller have to fulfill stay the same with the
If you want to use the
The advantage of OSS becomes clear when it’s time to file VAT returns. Instead of compiling and filing returns in each country to which you distance sold and delivered products, you can list all transactions in a unified OSS return. This return, also called OSS report, is then submitted in the country of OSS registration, usually your home country. You will also pay all VAT payments to your home country’s tax authorities, which then redistribute the correct amounts to foreign tax offices based on your OSS report.
Although all transaction files need to be sorted based on country of origin and destination as well as applied VAT rate — an often tedious process — you will no longer need to monitor different deadlines or submit reports in foreign languages. Since you are not filing returns, VAT registrations in various countries are also no longer necessary.
If you are an Amazon seller using
Sales of products delivered from foreign warehouses to customers in that same country, for example through an FBA program, need to be declared in a local foreign VAT return, as the deliveries do not cross borders. Sales of products delivered from foreign warehouses to customers in your home country need to be declared in a domestic VAT return because it is the country in which your business is registered.
Lastly, only the sales of products delivered from your home country across the border to foreign customers and delivered from foreign storage facilities to customers in third EU countries can be declared in the OSS reports. All of these deliveries cross borders and are subject to varying VAT rates and all of these VAT debts can be paid in your home country.
The advantageousness of the
A solution comes in the form of hellotax’s
Changes in EU Delivery Thresholds
So why jump on the OSS train if the new procedure might complicate matters for you and the compiling of OSS reports is such a tedious task? The answer comes in the form of the new
Prior to the introduction of the
A lot of sellers never actually crossed the thresholds and, therefore, only had to worry about VAT compliance in their home country. However, on July 1st, 2021 the
While sellers now no longer have to monitor several thresholds at once, they are in danger of crossing the new one much quicker and becoming subject to the VAT rates in a variety of countries at once. Therefore, the new
New Options for Online Sellers
It’s important to always keep an eye on upcoming VAT regulation changes and take advantage of recent VAT changes that decrease the bureaucratic burden. Across the EU, sellers now have the option to either continue with the status quo reporting, although they need to start worrying about VAT compliance much sooner thanks to the new
Of course, the OSS is not only good news for multinationally storing ecommerce entrepreneurs such as Amazon sellers. However, the fact that the
On the other hand, Amazon is starting to improve its services by itself to combat difficulties caused by regulation changes. For example, they have recently updated one of their FBA programs to enable easy selling across the UK EU border once again. Here is hoping that they will improve the OSS situation for their FBA sellers as well.