Registration limit for VAT OSS on the examples

Service-Tax

I run an online store and I am an active VAT taxpayer. I sell goods both to customers from the European Union and from Poland. What is the VAT OSS registration limit for me from July 1, 2021, how to calculate it and is registration for this procedure obligatory?

Łukasz, Opole

The VAT OSS procedure was introduced under the so-called e-commerce VAT package and is valid from July 1, 2021. It replaced the MOSS VAT procedure, which until now only covered the sale of telecommunications, electronic and broadcasting services (known as TBE services). Currently, VAT OSS has been inextricably linked with the concept of the ESPO, i.e. intra-Community distance sales of goods - and in short with mail order sales to the EU.

What is the registration limit for VAT OSS?

With the entry into force of the VAT OSS, the limits for mail order sales to the EU were unified and now it is EUR 10,000 net, ie excluding the value of foreign VAT.

The registration limit for VAT OSS is EUR 10,000, and after conversion to PLN 42,000, it is a fixed value, i.e. independent of the conversion rate or the country of the buyer.

This means that entrepreneurs no longer have to monitor sales limits to individual European Union countries. What's more, the legislator not only simplified the sale, unifying the limits in all EU countries. The most important benefits that every taxpayer must remember are:

  • the VAT OSS registration limit applies to the total sale of goods (ESPO) and services (TBE);

  • the limit of PLN 42,000 covers sales to all EU countries in total, and not to each country separately;

  • registration for the VAT OSS is voluntary (voluntary means that the taxpayer chooses himself whether he uses one registration for the VAT OSS or registers himself in individual countries).

How to calculate the registration limit for VAT OSS?

Pursuant to Art. 22a paragraph. 2 of the VAT Act, if the sales limit under the OSS VAT is exceeded during the tax year or the taxpayer exceeds the limit in the previous tax year, then the supply that caused the exceedance of this limit, inclusive, must be taxed in the country in which the exceedance took place. limit.

If the VAT OSS registration limit of PLN 42,000 net was exceeded in 2020 or in the first half of 2021, then from 1 July 2021 each sale transaction should be taxed in the buyer's country under the OSS VAT procedure or after registration for VAT in buyer's country.

Example 1.

The taxpayer sells goods to Germany for private individuals not engaged in business. On March 25, 2020, it exceeded the value of mail order sales of PLN 42,000 by issuing an invoice number 100/03/2020. Until June 30, 2021, the limit of mail order sales to Germany was EUR 100,000. Should the taxpayer correct the VAT rate on the invoice issued in March?

No, because the law is not retroactive. This means that invoices issued before July 1, 2021 (including FV 100/03/2020) in accordance with the existing mail-order sales limits are not subject to correction. From July 1, 2021, each sale of goods to private individuals from the EU must be taxed at the VAT rate applicable to the buyer's country.

Example 2.

The taxpayer conducts mail order sales to private individuals from the EU. In 2020, the value of sales to individual countries was: Germany - PLN 30,000, France - PLN 12,000, Italy - PLN 10,000. Can a taxpayer still issue invoices subject to Polish VAT if the limit of PLN 42,000 has not been exceeded in any of the countries?

No, because the VAT OSS registration limit is calculated jointly for sales throughout the European Union. This means that in 2020 the value of mail order sales to the EU was PLN 52,000, so the limit of PLN 42,000 was exceeded. Therefore, from 1 July 2021, each invoice related to ESPO or TBE must be taxed with the VAT rate applicable to the buyer's country.

Example 3.

From July 1, 2021, the taxpayer sells under the ESPO and TBE. On July 5, 2021, he sold goods to a private person from the Czech Republic, worth PLN 40,000, and on July 10, 2021, he provided an electronic service to a private person from Spain, worth PLN 5,000. How should sales invoices be issued if the VAT OSS registration limit has been exceeded?

Sales under ESPO to a contractor from the Czech Republic should be taxed with the Polish national VAT rate, as it did not result in exceeding the limit. Due to the fact that the registration limit for VAT OSS is calculated as the sum of ESPO and TBE sales to all EU countries, an invoice worth PLN 5,000 regarding the sale of a service to a contractor from Spain should be taxed with the VAT rate applicable in Spain.

Is registration for VAT OSS obligatory?

The legislator does not force taxpayers to use the VAT OSS procedure. If the registration limit for VAT OSS is exceeded, the entrepreneur is free to choose whether he wants to settle VAT under VAT OSS or register for VAT in the EU country of the buyer.

When deciding to register for VAT in the buyer's country after exceeding the sales limit of PLN 42,000, the entrepreneur is obliged to register in each country of the buyer, not only in the country where the sales limit was exceeded.

Example 4.

The taxpayer sells by mail order, the so-called ESPO, to Germany and the Czech Republic. In June 2021, it generated sales of PLN 50,000 to Germany and PLN 10,000 to the Czech Republic. How should he issue invoices after July 1, 2021, if he does not want to use the VAT OSS procedure?

Due to the fact that the total value of sales under the ESPO is PLN 60,000, from July 1, 2021, the taxpayer should issue invoices with the VAT rate applicable to the buyer's country. When resigning from registration for VAT OSS, he is obliged to register for VAT in both Germany and the Czech Republic, and in any other EU country, if he will sell to contractors from other EU countries.

When can you opt out of using the VAT OSS?

Registration for the OSS VAT procedure is not for life. An entrepreneur who has registered by submitting the VIU-R form has the right to resign and register for VAT in the buyer's country. Pursuant to Art. 22a paragraph. 5 of the VAT Act, a taxpayer who has decided to settle ESPO under the OSS VAT may resign from using this procedure at the earliest after two consecutive years, counting from the date of the first delivery under this procedure.

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Example 5.

The taxpayer registered to the VAT OSS voluntarily on June 25, 2021. The first delivery settled in this procedure was made on July 10, 2021. When will he be able to resign from VAT settlements under VAT OSS at the earliest?

The taxpayer must use the VAT OSS procedure for the next two years. The earliest deadline for him to resign is July 10, 2023.

To sum up, the registration limit for VAT OSS has been unified and applies to all sales under ESPO and TBE. Thanks to this, entrepreneurs do not have to control the amount of sales within a given EU country. Registration for the VAT OSS is voluntary, but it improves tax settlements, because all sales to the EU are shown on one VIU-D declaration, which is submitted to the Second Tax Office Warszawa-Śródmieście once a quarter in Polish.