The most important sales tax topics for online retailers

The world of VAT is complex and constantly evolving. Various topics and concepts have played an important role in the past, influence us in the present and will continue to do so in the future. In this blog post, we take a look at some of these important VAT topics and explain why they are relevant to you.

Consignment warehouse

A consignment warehouse allows you to store goods in another country without immediately incurring VAT. Taxation only takes place when the goods are removed from stock and sold to the customer.

Consignment warehouses were used in Amazon’s call-off stock program (COS). However, Amazon will now end this process from August 2024. There is an urgent need for action for online retailers who have used such a warehouse. Anyone wishing to continue using it should organize a valid VAT ID for the respective countries from August 2024. You can find out what to look out for in the countX blog.

EU quick fixes for tax simplification

The so-called “quick fixes” were introduced in 2020 to simplify intra-Community trade within the EU and reduce tax uncertainties. They comprise four measures designed to make cross-border trade more transparent and secure:

1. Consignment stock regulation: Facilitates inventory management in warehouses in another EU country.
2. Chain transactions: Simplifies the determination of the place of delivery for transactions involving several parties.
3. Obligation to provide evidence: Introduces new documentation requirements for intra-community deliveries.
4. VAT ID check: Establishes the VAT ID of the purchaser as a mandatory requirement for tax exemptions for intra-community deliveries.

Please note: The most important thing here is the impact on traders who do not meet their VAT obligations correctly. For example, if goods are stored via Amazon FBA in a country where the retailer does not have an active VAT ID, tax must be paid on the transfer of goods. Taxes are therefore incurred without generating revenue.

You can find out more in the detailed guide to quick fixes from the Händlerbund.

One-Stop-Shop (OSS) procedure

The OSS procedure was introduced in 2021 to simplify the collection of VAT on cross-border sales. Today, three years later, it is unfortunately clear that this plan has not quite worked out. More and more problems are arising:

• Technical difficulties: Retailers report frequent system failures and error messages. For example, the BZSt online portal had an incorrect VAT rate for Estonia for quite some time.
  Attention: The tax rate in Finland will change on 01.09.2024.
• Bureaucratic hurdles: Registering and managing the necessary documents is more complex than originally thought. For example, many retailers are not aware that a new warehouse in another EU country must also be entered in your OSS data! The result: declarations are rejected.
• Tax complexity: Different regulations in the EU member states lead to uncertainties.

These current problems show that tried and tested procedures such as the OSS need to be constantly developed and adapted to new challenges. It is also clear that the German tax office is only now examining the reports from 2021 and that there are a large number of traders who have been submitting incorrect reports for three years without knowing about it.

Intrastat

Intrastat is a statistical system for recording the movement of goods between EU member states. Companies that ship goods across EU borders are obliged to report these transactions. However, they must first reach defined threshold values to fulfill this obligation.

The data in the Intrastat declaration is used by the EU to monitor the internal market and for economic analysis. It is important that companies submit their Intrastat declarations correctly and on time in order to avoid sanctions

Pro forma invoice

A pro forma invoice is primarily for information purposes and does not constitute a request for payment. It is often used in international trade to indicate the value of goods and to facilitate customs clearance. Although it has no tax relevance, it is an important document for the smooth running of export and import transactions. Pro Forma invoices are part of the solutions offered by countX.

VIDA (VAT in the Digital Age)

VIDA stands for “VAT in the Digital Age” and describes the adaptation of VAT regulations to the requirements of the digital economy. It includes measures to improve the collection of VAT on online sales, to combat tax fraud and to create a fair competitive environment.

The consequence of VIDA would be that even in the case of cross-border storage, there would no longer be any local VAT liability abroad. This would be a major simplification and would finally lead to a uniform regulation of Europe-wide taxation and greatly simplify bureaucracy. The implementation of these measures is crucial for the future of digital trade. However, the introduction has been delayed for an as yet uncertain period (2027 is the current assumption).

E-bill

The electronic invoice(e-invoice) is a digitized form of the traditional paper invoice. It offers numerous advantages, including faster processing, cost savings and reduced susceptibility to errors. In many countries, e-invoicing is already required by law and its use will continue to increase in the coming years.

Stay informed!

The world of VAT is more dynamic than you might think and requires constant attention and adaptability from companies. Topics such as quick fixes, OSS procedures, Intrastat, pro forma invoices, consignment stocks, VIDA and e-invoicing characterize our everyday lives and will continue to be of great importance in the future. Stay informed and adapt your processes accordingly to minimize legal and tax risks.

For detailed information and support, please contact the countX team at any time.