SOTI transactions performed by electronic interface operators

Service-Tax

Until recently, before July 1, 2021, taxpayers did not have knowledge about distance sales of imported goods, one-stop-shop for import, the essence of the entity of the electronic interface operator and many other issues.

July 1, 2021 is the date on which the EU directives and regulations came into force, laying down the overall transactional structure of purchases and sales that take place so far between entities from the EU, outside the EU and consumers in the EU.

This publication focuses on the specifics of the supply of goods from outside the EU to buyers residing in the EU Community, where one of the actors in the supply chain is an electronic interface operator established inside and outside the EU.

Legal framework for changes relating to distance sales of goods

The above-mentioned changes relating to the distance sale of goods and specific VAT settlement procedures are based on the following legal acts:

  1. Council Directive (EU) 2017/2455 of 5 December 2017 amending Directive 2006/112 / EC and Directive 2009/132 / EC (hereinafter referred to as EU Directive 2017/2455);
  2. Council Directive (EU) 2019/1995 of November 21, 2019 amending Directive 2006/112 / EC (hereinafter referred to as the EU Directive 2019/1995);
  3. Council Implementing Regulation (EU) 2019/2026 of November 21, 2019 amending Implementing Regulation (EU) No 282/2011 (hereinafter referred to as EU Regulation 2019/2026).

What is distance selling of imported goods?

Pursuant to Art. 2 of EU Council Directive 2017/2455, distance selling of imported goods (hereinafter referred to as SOTI) from third territories or third countries is the delivery of goods sent or transported by or on behalf of the supplier - including when the supplier participates indirectly in the transport or shipment of goods - from a third territory or from a third country to a buyer in a Member State, if:

  1. the supply of goods is made to a taxable person or a non-taxable legal person, in which the intra-Community acquisitions of goods are not subject to VAT, or to any other non-taxable person;
  2. the goods delivered are not new means of transport or goods delivered after assembly or installation, with or without a trial run, by or on behalf of the supplier.

VAT does not apply to intra-Community acquisitions of goods:

  • whose supply would be exempt within the territory of the Member State of acquisition pursuant to Art. 148 (incl.fuel supply) and 151 (supply of goods or services to international organizations), made by a taxpayer or a non-taxable legal person;
  • other than those from point 1 and other than the acquisition of new means of transport and products subject to excise duty, made by the taxpayer for purposes related to his farm, forest or fishing farm subject to the common flat-rate system for farmers, by a taxpayer who only supplies goods or provides services for which he is not entitled to deduct VAT, or by a non-taxable legal person.

One-stop shop for VAT import IOSS

Import one-stop shop (special VAT settlement procedure) - VAT IOSS allows the supplier (or the operator of the electronic interface, the so-called delivery facilitator identified as the supplier) to use the simplified VAT settlement in relation to transactions constituting SOTI (distance selling of imported goods) .

Accounting and payment of VAT via IOSS VAT starts with the registration of the supplier, electronic interface operator or broker in one EU country. Settlement and payment of VAT is carried out according to various VAT rates that are appropriate for the goods sold in the EU countries of consumption. It's not everything.

Moreover, the use of VAT IOSS requires the declaration and collection (from the buyer) of the VAT charged on a given delivery at the time of sale of the given goods.

Settlement in the appropriate declaration and payment by means of VAT IOSS takes place through the tax administration of the EU country of identification (the EU country that chose the supplier as the EU identification country to handle the IOSS VAT settlement). Thanks to this solution, the part of the SOTI transaction constituting the import of goods is exempt from VAT. As a result, SOTI transactions carried out via VAT IOSS are faster subject to customs clearance by the customs office and faster released from clearance, which speeds up the delivery of goods to the final recipient.

The VAT IOSS settlement of VAT applies only to the supply of goods imported from third countries with an actual value not exceeding EUR 150.

The benefits of VAT IOSS may be used by electronic interface operators recognized as facilitating the delivery of goods, who:

  1. are based in the EU and facilitate the distance selling of low-value imported goods to relevant suppliers, up to EUR 150;
  2. they are not established in the EU and facilitate the distance selling of low-value imported goods to relevant suppliers, i.e. up to EUR 150 (operators are then considered as suppliers).

Electronic interface operators not established in the EU can register and use the IOSS VAT Import One Stop Shop as follows:

  • indirectly, i.e. through an intermediary based in the EU;
  • directly (i.e. without the obligation to identify an intermediary) if they are based in a third country with which the EU has concluded a mutual assistance agreement in the field of VAT, to the extent that they sell goods from that third country.

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The electronic interface operator as the entity considered to be the supplier

An electronic interface operator will be considered as facilitating the delivery of goods primarily if it enables the parties to the transaction (the recipient and the relevant seller using OIE services) to contact the transaction. As a result of this contact, the process of ordering goods through OIE services (e.g. a trading platform) may take place, while the seller also uses this platform to pick up and prepare for the order. The final result is the delivery of goods to the buyer with the participation of OIE services.

Thus, the transaction by both parties is conducted through the trading platform. The delivery of the goods (transport) itself can be carried out by OIE, but also by another designated entity.

Example 1.

The OIE based in the EU is working with traders based in San Marino to provide a marketplace for the sale of low value goods shipped / transported up to EUR 150 to consumers in Spain. San Marino is an EU customs territory, but not an EU-VAT area. Will the sale of these goods through OIE constitute distance selling of imported goods? Can the VAT IOSS procedure be used in a given case?

It is worth noting that San Marino is part of the EU customs territory, and at the same time it is not an area subject to the EU VAT-EU tax.

The delivery of the goods under the circumstances under analysis will constitute SOTI. The goods will be shipped from the territory of third countries (outside the EU) to consumers in Spain. As a result, OIE will be identified as an entity facilitating the supply (obliged to settle VAT instead of the correct supplier). In addition, OIE may, in this situation, register for the simplified VAT IOSS procedure.

Electronic interface operator not considered to facilitate delivery

It is worth remembering that OIE will not always be considered a facilitator of the delivery of goods. The circumstances in which this will happen are when he will not take at least minimal participation in the processes:

  • ordering or transporting goods (does not apply to cases of diversion to another OIE without any further involvement of the existing OIE);
  • determining the terms of delivery of goods (not applicable to advertising or an offer of goods);
  • Settlement of receivables from the buyer (this should not be equated with payment processing).

Examples of activities of the electronic interface operator's participation in transaction processes

Process

Example

Ordering or transportation of goods

OIE, by managing its own trading platform, provides the buyer with a mechanism to purchase goods and settle payments for the goods received, along with the buyer receiving confirmations of these activities.


In addition, the trading platform (OIE), incl. sends information to the seller about the possibility of initiating the preparation of an order, ordering the delivery of goods, determining transport options, and also participates in other issues indicating the participation of the trading platform (OIE) in ordering or transporting goods.

Determining the terms of delivery of goods

OIE manages its own trading platform, and thus provides technical support for placing orders, defines the rules for offering goods, informs about payment methods.


In addition, the trading platform (OIE), incl. it presents possible additional costs to the buyer, offers rebates, discounts, promotional programs, offers after-sales service to the buyer, and also participates in other issues indicating the participation of the trading platform (OIE) in determining the terms of delivery of goods.

Settlement of receivables received from the buyer

OIE receives and manages information from the buyer regarding payment of receivables through its own trading platform, presents available payment methods, provides the recipient with data on additional charges or purchase options at a different price.


In addition, the trading platform (OIE), incl. triggers the process that initiates a redirection to make a payment, collects the payment, transfers it to the relevant seller, and participates in other matters indicating the participation of the trading platform (OIE) in the settlement of receivables from the buyer.

Example 2.

OIE based outside the EU in England cooperates, inter alia, with a trader based outside the EU to make his marketplace available to him for distance selling of low-value goods up to EUR 150 to consumers in the EU. The OIE wonders how it would account for VAT if it were registered with the one-stop shop for imports or if it were not registered with it.

Due to the changes introduced on the basis of the previously mentioned EU directives and regulations, of July 1, 2021, the OIE mentioned in the above example is identified as the supplier of these goods (entity facilitating the delivery), and thus as if it had delivered the goods to the final recipient itself.

In fact, it looks like the transaction is split into two parts. The relevant seller is seen as supplying the goods to the OIE, while the OIE as if it had already delivered the goods to the final recipient in the EU. Such a division (in the light of the new regulations) means that OIE is identified in these circumstances as a supplier of these goods obliged to settle VAT on this transaction and has the ability to:

  1. failure to register for VAT IOSS, then VAT is collected when importing these goods into the EU, in the EU country of ending the transport, and the payment will be made by a person designated for this according to the regulations of a given EU country (most often the buyer in the EU, sometimes OIE considered in this case as entity facilitating the delivery),
  2. IOSS VAT registration, then it takes over the obligation to keep records of SOTI transactions, VAT settlement, submission of IOSS VAT returns and payment of this tax (either directly or through an intermediary), transfers it directly or if it has to through an intermediary - the assigned identification number VAT IOSS to persons responsible for the transport / shipment of goods (couriers, postal operators, other entities), to entities obliged to declare goods for release for free circulation in the EU (e.g. customs agencies), to customs authorities carrying out customs clearance of goods.

Which deliveries may identify the electronic interface operator as facilitating the delivery of the goods

In accordance with the above-mentioned of the amended provisions, the electronic interface operator is in some situations considered to be a supplier of goods for the purposes of VAT settlement, i.e. as if he received and delivered the goods himself (even though he did not make the delivery). Examples of operators include the various trading platforms through which the relevant suppliers sell their goods.

The sale of goods with the participation of an electronic interface operator (hereinafter referred to as OIE) has been divided into two parts:

  1. delivery of goods from the correct supplier to the operator (excluding transport),
  2. delivery of goods from the operator to the recipient (plus transport)

OIE can only be identified as a supplier of goods (facilitator) in relation to the supply of goods identified as:

  1. ESPO (intra-Community distance supply of goods) in the case of delivery of goods by a taxpayer not established in one of the EU countries to the territory of the EU to consumers (B2C);
  2. domestic delivery in the event of delivery of goods by a taxpayer not established in one of the EU countries to the territory of the EU to consumers (B2C);
  3. SOTI for goods with an actual value not exceeding EUR 150.

An electronic interface operator will be considered a delivery facilitator if the goods delivered through it have already been released for free circulation within the EU and the relevant seller is based in third countries. The value of the goods does not matter in this case. However, if the relevant seller is located in the EU, then OIE will not be classified as a facilitator.

In addition to the above, he will be considered a facilitator of delivery when the subject of deliveries is goods with an actual value not exceeding EUR 150, delivered to a consignee in the EU, and the relevant seller is based in the EU or in third countries. However, if the value of the goods exceeds EUR 150 then OIE will not be classified as a facilitator.

Example 3.

An OIE entrepreneur is based in the EU in France. He is registered for the IOSS VAT procedure in France and received an IOSS VAT identification number there.

A French consumer ordered goods with an actual value of less than EUR 150 via the OIE-owned marketplace. Goods located in a third country will be shipped on behalf of the appropriate supplier to the consumer in France. In this situation, who will be considered the supplier obliged to settle VAT?

The main issue in this case is to distinguish between two supplies, i.e. from the relevant supplier to OIE, which is not subject to VAT (treated as a transaction outside the EU), and from OIE to the final consumer in the EU (the two-component transaction consists of SOTI), where OIE is obliged to settle and pay VAT. It will do this by using the IOSS VAT import one-stop shop.

Thus, through VAT, IOSS keeps records of sales and returns of goods related to SOTI transactions at the appropriate VAT rate (in the country of consumption - France). In addition, he submits a monthly electronic declaration (in the tax administration in France) for the purpose of settling transactions eligible for settlement via VAT IOSS (i.e. SOTI transactions in this case). It records the IOSS VAT amount due via the IOSS VAT procedure.

Finally, it should be emphasized that the above deliveries are not subject to simultaneous recognition in the national (French) records and JPK_V7 declaration.

Example 4.

An OIE entrepreneur is established in a third country in Switzerland. It is registered through an intermediary for the IOSS VAT procedure in Germany (according to the location of the intermediary).

Consumers in Germany ordered goods with an actual value of less than EUR 150 via the OIE-owned marketplace. They are currently located in a third country. They will be shipped on behalf of the appropriate supplier to the consumer in Germany. In this situation, who will be considered the supplier obliged to settle VAT?

In these circumstances, it is first necessary to identify (split) the supply of goods from the third country seller to the German consumer. This identification consists in splitting the above supply of goods into two supplies, i.e. from the relevant supplier to OIE, which is not subject to VAT (treated as a transaction outside the EU) and from OIE to the final consumer in the EU (a given two-component transaction constitutes SOTI). In this situation, OIE as an entity facilitating the delivery will be obliged to settle and pay VAT. It will do so by using the IOSS VAT import one-stop shop. However, in the above-mentioned situation, an intermediary will be obliged to perform these activities on his behalf.

Thus, the broker on behalf of OIE, through the IOSS VAT point, will keep records of sales and returns of goods for a given SOTI transaction at the appropriate VAT rate (in the country of consumption - Germany). In addition, the broker will submit a monthly electronic declaration (to the tax administration in Germany) for the purpose of settling transactions qualifying for settlement via VAT IOSS (i.e. SOTI transactions in this case). Finally, it is the intermediary that remits the IOSS VAT due via the IOSS VAT procedure.