January 1, 2021, has become a landmark in the lives of business owners since the first changes to the charging and payment of VAT by businessmen (both EU and non-EU) were implemented. 

The second stage of the new VAT policy fulfillment started on July 1 of this year. To ease the process of declaring and collecting VAT for e-commerce retailers from and outside the EU, two regulations were created, OSS and IOSS. This article will try to figure out the peculiarities of both of them. 

From MOSS to OSS and IOSS 

In 2015, for B2C organizations selling digital goods and services, Mini One-Stop Shop (MOSS) for EU VAT was launched. This online portal has greatly clarified and eased the taxation process for both business owners and EU governments. Registration on this VAT service gave the entrepreneur an advantage — they could no longer worry about VAT fees collection and tax returns reporting to different countries where they were selling digital goods and services to non-business customers. 

All the tax information and VAT taxes themselves are reported and paid in one place and then transferred to each corresponding country by the system. Only the VAT number of one EU country is needed for that purpose. The sender will need to apply the VAT percentage from the residence country of the non-business recipient but all the tax accounting would be done under one VAT ID of the sending company at the tax authority of the country, where the company operates. Those reports had to be made quarterly. 

The basic principle of MOSS was this: 

VAT registration + quarterly filing = one online portal 

This same concept was used when creating OSS and IOSS but for online businesses selling also physical goods: 

• One-Stop-Shop (OSS) — for businesses located in the EU that sell goods to non-business customers in other European Union states. 
• Import One-Stop-Shop (IOSS) — for non-EU businesses that sell goods to EU non-business customers. Only organizations that vendor “low value” goods of up to 150 Euros can apply for registration on the platform. 

A business owner can choose one of those two variants, depending on whether a business is located in the EU or not. 

OSS Basics 

As stated earlier, the OSS portal is for EU companies/entrepreneurs selling to EU buyers. 

Features: 

• It makes sense to register in this system for those whose cross-border sales exceed €10,000 per year. In this case, for each B2C sale that an organization makes to a non-business end customer, it must apply the VAT rate of the buyer’s country. For example, if a product from a French company is sold to someone in Germany, the transaction is subject to German VAT at 19%. 
• If, however, cross-border sales do not exceed the €10,000 per year threshold, the business entity must adhere to its home country’s VAT rules, charging the local VAT rate on all B2C sales and filing a return as usual. There is no need for OSS registration in this situation. 

Registration with the OSS: 

On the tax authority website of the country where the organization is formed, there is an option to register under the new VAT e-commerce rules. The applicant receives a VAT number (if it has none yet) and access to the online portal. �ԹϹ��� can assists you in receiving the VAT ID for your company in any country of the EU. VAT reporting to the OSS is then done from �ԹϹ��� each quarter based on the declared revenues.

IOSS Characteristics

IOSS is a unified import system for non-EU companies that have e-commerce trade relations with EU member states. This platform makes it possible for businesses to assign and collect VAT on their own, thereby not exposing the buyer to unnecessary stress due to unexpected changes in the agreed price. In case the company selling the goods is not authorized by IOSS, the buyer has to pay VAT and an additional customs clearance fee at the moment of the purchase received. 

Peculiarities: 

• It makes sense to register on this portal if goods that are sold by a non-EU company to EU non-business buyers are worth less than €150. 
• Businesses selling goods above 150 Euro follow the traditional rules of import VAT. Registration in the IOSS is not reasonable. 

IOSS Registration: 

The business owner should register for VAT in one of the EU member states. The website of the chosen country tax office has the option of registering under the new VAT e-commerce rules. It is necessary to select the “non-EU members” or “for imports” option during the application. The company/entrepreneur receives a VAT number and access to the online IOSS portal. 

EU countries have different VAT rates. A non-EU company should be careful and for each B2C sale apply the local VAT rate of the country where the buyer is located. 

VAT reporting to the IOSS is done quarterly.

Summary

New rules for the assessing and collecting of the EU VAT were introduced. Some of the modifications were implemented as early as January 1, 2021, and some at the beginning of July. 

The changes also affected the e-commerce sector. To facilitate and streamline the VAT calculation and collection process, the online portals OSS and IOSS were developed and put into operation from the 1st of July. Their features require careful research and attention to detail from the EU and non-EU entrepreneurs’ sides. The main condition that must be fulfilled a priori to be able to use these portals is the existence of a VAT-ID of the company. 

�ԹϹ��� specialists are ready to assist you in getting your organization a VAT number in the EU country you need, or even several at once! 

We are providing service on VAT ID applications in any country within the European Union. You just need to write an email to our experts: keyaccounting@clevverlegal.com and mention the country where you need the VAT ID or a VAT filing. The �ԹϹ��� team will do the rest! If you have any questions or concerns, please, feel free to write to the email above too. 

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against �ԹϹ��� or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. �ԹϹ��� does not provide any legal advice itself. �ԹϹ��� works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.

The obligation to submit financial statements is an attribute of entrepreneurial activity. These accounts show the property and financial position of the company and the results of its business activities in the reporting period. They are, in addition to the information function, a basis for the taxation of the company and the determination of dividends. 

The German Commercial Code (HGB) regulates the basic requirements for the financial accounting of companies in Germany. The main components of the annual financial statements are:  

• A balance sheet;  
• The profit and loss statement;
• Explanatory notes; 
• A management report on the company’s status and prospects. 

Financial Reports in Germany: Structure and Characteristics 

Reports are the company’s financial statements for a quarter (3 months) or a year. Accordingly, they consist of such reports: 

• Statement of loss and profit;
• Balance sheet; 
• Cash flow statement; 
• A statement of changes in equity; 
• As well as explanations, plans, and strategies of the company. 

First and foremost, any report is a very large amount of information, so, it is important to make it structured and submit it within a specified time frame.  

Financial reporting requirements vary depending on the size of the organization. Companies doing business in Germany are divided into small, medium, and large enterprises. The criteria for classifying the size of a company are the sum of the balance sheet, the annual turnover, and the number of employees. 

The requirements for the financial statements of the company and a number of simplifications in the financial accounting of businesses directly related to the size of the company. The latter also affects the records’ composition and content, the timing, and the scope of their publication. 

Thus, the smallest and medium-sized enterprises, besides a number of other simplifications, are given the possibility to publish financial statements in abbreviated form. Medium-sized enterprises also enjoy a number of exemptions from the general requirements for financial reporting. 

Financial Statements 

The length of the fiscal year is determined in the shareholders’ agreement, with the fiscal year not exceeding 12 months. A trading company is obliged to keep accounting records. They must include a balance sheet (annual balance sheet) and a profit and loss account. In addition, the annual financial statements must contain records with explanatory notes. These must be in German. The annual financial statements must comply with accounting standards of Germany and the European Union, give a true picture of the company’s assets, finances, and profits. 

§§ 325-329 of the German Commercial Code (HGB) provide strict rules for the disclosure of the annual financial statements of capital companies. The directives also apply to trading companies (general partnerships) and limited partnerships in which the company is not the personally liable partner.  

Tax Reporting 

A tax year is a calendar year. Tax returns are filed for the company’s fiscal year ending in the respective calendar year. The standard filing date for returns is by July 31. Tax returns are filed electronically. Quarterly provisional tax payments are made during the year with a final payment at the end of the year. 

IFRS System 

IFRS (International Financial Reporting Standards) records is company’s financial statements prepared in accordance with international standards for a wide range of users. It is used by companies that list their shares and securities on European financial markets, as well as control the activities of subsidiaries and branches. The purpose of the IFRS reports is to present information on the financial position and results of the company operation. 

The main standard, which regulates the formation of the financial statements in accordance with IFRS is IAS 1 “Presentation of Financial Statements”. It defines the criteria of its compliance with IFRS rules, as well as requirements regarding materiality, continuity of operations, obligatory components of financial statements. The standard contains recommendations on the preparation of each of the main reporting forms and establishes general requirements for the recognition and evaluation of records of subjects of operations. 

Bottom Line 

A company’s financial statements are data that reveal the company’s current economic situation, performance, and changes in financial position. Statements are made from accounting data. These papers must be prepared in the right form (German national standards and IFRS) and be submitted in the appropriate time frame.

�ԹϹ��� is developing a new service called the Compliance Center that will assist entrepreneurs with a compliance calendar and inform them about important filings and due dates. The service will be available in July/August 2021 in the form of a web application and it will be completely free of charge. If you are interested in the new �ԹϹ��� Compliance Center or general information regarding the assistance with the registration of companies globally, our �ԹϹ��� Team is always there to help.

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against �ԹϹ��� or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. �ԹϹ��� does not provide any legal advice itself. �ԹϹ��� works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.

The Covid-19 pandemic has had an enormous impact on all areas of modern society. The e-commerce industry is hardly the only sphere that could not only withstand the blow but also emerge victorious from the unequal battle with coronavirus. As a consequence of the Covid-19 outbreak, people around the world and the EU began to buy more on the Internet, which spurred the development and profitability of online sales. The pandemic has played to the e-commerce market’s advantage. According to , e-commerce retail sales worldwide were $4.28 trillion in 2020, and e-retail revenues are projected to grow to $5.4 trillion in 2022. 

But despite the impressive figures, not everything is as smooth and rosy as it seems, and yet there are significant obstacles for those entrepreneurs who are engaged in e-commerce in the EU. 

What EU E-commerce Entrepreneurs Should Keep a Close Eye On 

Strong Customer Authentication (SCA) 

One of the major issues affecting e-commerce this year is the move to strong customer authentication (SCA). Seamless authentication and authorization through digital identity are designed to ensure future conversion rates. Nevertheless, persistent differences in readiness and national enforcement of this technology have caused an increase in transaction failures across the EU. 

Online merchants will have to continue to adapt to the demand for seamless payments, especially with the ever-growing popularity of mobile and wearable payments. 

Brexit-related Changes in VAT Charges 

The end of the UK’s membership in the European Union is being keenly felt by both offline companies and their online “mates” operating in these territories. Because of the new rules for charging and collecting VAT, online companies began to charge additional delivery fees to compensate for the time spent filling out administrative paperwork. The increase in delivery costs due to new administrative burdens, in addition to VAT and customs duties on shipments sent from the UK to the EU, prompted many British businesses to invest in distribution networks in the EU.  

�ԹϹ��� can help with the incorporation in many EU countries, such as Ireland, the Netherlands, Cyprus, Estonia, Germany, Georgia, and Italy in order to smooth out the effects of Brexit on your business. 

Key E-commerce Trends to Consider in 2021 

Despite significant obstacles, on a weekly and monthly basis, more and more merchants are launching online projects and entering the e-commerce sector, working hard to grow their business on the Internet to join the ranks of successful merchants and conquer the field of e-commerce. Knowing key e-commerce trends in 2021 can help achieve this aim successfully.  

Let’s take a closer look at e-commerce trends of 2021 and highlight 5 of them that EU entrepreneurs involved in e-commerce should be paying attention to today to succeed tomorrow. 

Transition to D2C  

In 2021, many business owners are expected to start using a D2C scheme actively. By D2C, direct sales of the brand to the end consumer are meant. This way the business can analyze and influence all channels of communication with the user. Without intermediaries, it has complete control over every stage of interaction with the client: from acquaintance to purchase.  

Many large companies have begun to refuse even to cooperate with online marketplaces. Despite the fact that such sites have detailed information about the audience of any brand partner, they are reluctant to share it with suppliers. In 2019, Nike refused to partner with Amazon. The company explained that it wanted to concentrate its efforts on sales through the official website.  

AR Technology  

The main fear of users who hesitate to make an online purchase is not to guess at the color, size, or shape of the product and to waste money and time waiting for delivery. Augmented reality capabilities easily solve this problem. AR-technologies help customers understand how goods will look in reality, not in pictures.  

AI Technology (Voice Assistants)  

Artificial intelligence (AI) acts as an online in-store associate by offering personalized guidance and recommendations to customers. More than that, AI uses shoppers’ past purchase history and browsing behavior to show them products they are more likely to purchase.  

Around 20% of smart speaker owners already use them for shopping-related activities, whether that’s ordering products, creating a reminder, conducting research, or tracking deliveries. This figure is expected to jump to 52% within the next four years. If you’re not currently optimizing your e-commerce platform and fulfillment processes for voice search, get moving or get left behind.  

Buying by Subscription

Let’s talk about the e-subscription market. According to , it has been growing at a staggering rate, doubling annually. Specifically, the demand for subscription purchases at a certain interval is increasing. This frees a person from the long and tedious procedure of selecting, paying for, and checking out an item. In addition, stores usually offer increased bonuses or discounts for signing up. For a brand, such a user is a regular customer who regularly buys a monthly or weekly supply of the product of interest. Categories for which users more often subscribe are pet food, baby products, hygiene products, and dietary supplements. 

Mobile Commerce  

The predominance of mobile Internet surfing over desktop surfing was noticed 5 years ago, and since then mobile traffic is only gaining momentum. While initially, the lion’s share of visits fell on social networks, games, messengers, and various applications, now, people have become more active in making purchases through smartphones. shows that mobile e-commerce sales are expected to grow about 73% by the end of 2021. At the same time, about 30% of customers will not complete their orders if they notice that the online store is not optimized for mobile shopping.  

Bottom Line  

E-commerce businesses looking to dominate the market must prepare themselves to adopt the latest changes (SCA and Brexit-related changes in VAT charges) and trends as soon as possible. The future of e-commerce lies in the automation of processes, direct communication with customers by the brand, and creating the effect of a visit to a regular store for online shoppers.  

The winner in business is always the one who is able to analyze the current situation competently and adjust to it in time, which we wish everyone who wants to succeed in e-commerce in 2021.

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against �ԹϹ��� or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. �ԹϹ��� does not provide any legal advice itself. �ԹϹ��� works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.

As of Jan. 1, 2021, the UK has completed the process of leaving the EU, which began at the end of January 2020. During the year, representatives of the European Union and the UK discussed how to build further relations between the parties in a variety of areas. Negotiations went on for a long time with varying success. In the course of the discussion the new realities in which the United Kingdom and the countries of the European Union will continue to coexist were defined. 

One of the things that have forever changed in doing business between the aforementioned parties because of Brexit is the rules for charging and collecting VAT on goods and services. Certain changes came into effect on January 1, 2021, and yet others are only going to be implemented on July 1, 2021. To make it easier for those who strictly follow the letter of the law and are directly affected by the Brexit-related VAT reforms, below is essential and structured information on this issue.

What EU Companies Must Keep in Mind when Trading with British Clients

See below the main Brexit-related changes to VAT payments that apply to EU companies selling goods to UK customers:

• Goods imported into the UK on deliveries, which costs are less than £135, VAT will be charged directly at the point of sale. 
• For goods with a value less than £15 the Low-Value Consignment Relief (LVCR), which provided for VAT exemption on imported goods, will no longer apply. 
• If goods are sold through online marketplaces (OMPs) such as Amazon, eBay, Wish, etc. – from January 1, 2021 – the responsibility for obtaining VAT payments will be put on those platforms. 
• Foreign traders will retain responsibility for accounting for VAT on goods that are already in Great Britain and sold directly to British customers through their website without OMPs engagement. In this case, the overseas seller will have to apply for the VAT ID.

New rules will be relevant when selling goods to British customers if the value of the shipment does not surpass £135. Shipments above this threshold will continue to be eligible for existing customs precepts.

Key Points to Consider for UK Companies Selling Goods to EU Customers

Brexit is a two-sided process, so British companies should also prepare for the new terms of trade with EU countries:

• The first thing a UK company needs to do is to decide with its EU buyer who will be responsible for paying VAT. If the latter is responsible — the UK company will not be liable for this tax. Otherwise, a British firm is in the right to arrange the import of goods into the EU and the payment of import VAT on behalf of customers through the freight forwarder. The payment to the freight forwarder service is reimbursed at the expense of the seller from the UK. 
• Resident companies from Great Britain importing into the EU are required to obtain a VAT ID in the country where the goods are introduced. 
• In the case of trade with several EU states, to avoid registering for VAT ID in different countries at once, the seller may import all the goods in one country. This will make it possible to fall under the EU VAT zero-rate rules in force until January 1, 2021, for intra-EU deliveries.

The E-Commerce VAT Charges

Starting July 1, 2021, a British business entity using the IOSS system will be obliged to charge and collect VAT in the EU country where they sell goods or services according to the established regulations. These goods will then be freed from VAT charges on the importation, allowing them to be released quickly at customs. To use the IOSS system, a seller will have to register as a VAT payer in one EU country (if a company has shares in several EU countries, registration as a VAT payer is mandatory in all those states). 

When the IOSS is not in use, it is possible to apply it to another facilitation mechanism for imports. VAT on imports may be charged to customers by the customs declarant (e.g., postal operator, courier firm, customs agents), who will pay it to the customs authorities through a monthly payment.

Changes to VAT on Services Charges

The alterations to the charging and collection of VAT on services are not as extensive as those on goods but still, they must be considered and well-studied too:

• With effect from 1 January 2021, the rules that applied to the charging and collection of VAT for the provision of services between the UK and EU have been abolished. Therefore, VAT for the above activities will now be charged as for any other third state that is not an EU member. 
• For B2B services, the assistance is considered to be provided where the client resides. That is why the UK companies which provide services in the EU are not liable to UK VAT. EU customers will use the “reverse charge” method to show the VAT in their return. Likewise, UK companies buying services from the EU need to apply reverse charge rules in their UK VAT return. 
• The £8,818 per year threshold for cross-border sales of digital services by UK companies to consumers in the EU no longer applies, so VAT must be paid on all sales. 
• UK companies providing insurance and financial services to EU clients will now be subject to the existing rules on the supply of these services to customers outside the EU. 
• The UK and EU suppliers have to VAT register if they have foreign B2C customers in the UK and EU. 
• UK Financial Services businesses are able to recover input VAT incurred on the sales to EU consumers.

Bottom Line

Brexit is a bilateral process that will affect trade in goods and services between the United Kingdom and EU member states. Both sides will have to be careful and keep a close eye on the new rules. 

�ԹϹ��� understands the depth of the possible difficulties that Brexit has brought to businesses that have trade relations with the UK and offers its help in finding a possible solution to the problem — incorporation in Ireland! Contact us to learn more.

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against �ԹϹ��� or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. �ԹϹ��� does not provide any legal advice itself. �ԹϹ��� works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.

Сlevver experts work tirelessly to ensure that the list of services offered grows and covers more and more interesting topics of international business.

Our most recent project is a comprehensive work on real estate investment in Germany and taxation issues related to it. The whitepaper “International holding structure for real estate investments in Germany and resulting tax effects” is freely available for everyone as a Download. So don’t miss the opportunity to give it a read!

Now, here is a small sneak peek of what will be discussed in our whitepaper and why it is worth your attention:

Subject of Research

In this paper, we will present to you suitable business structures for real estate investments in Germany. It’s an essential topic since a thoughtful selection of relevant business entities and their proper structuring gives real estate investors the opportunity to:  

• maximize their profits over time; 
• minimize the payment of taxes in a completely legal manner. 

Why Real Estate Investing is a Good Choice for Capital Accumulation?

Real estate is justifiably considered one of the least risky investment options. Experts assert that such kind of investing is no doubt profitable, but it does not tolerate haste and an investor should not expect a multiple capital increase in a short time frame. 

In this paper, Сlevver specialists offer optimal strategies for long-term real estate investments in Germany by researching relevant local and international business structures. This will allow the reader to optimize their tax payouts from real estate investments legally. 

We also discuss the scenario where the investor does not use a real estate company but owns the property privately; the consequences, and the possible benefits of such a decision. 

Taxation Issues

Investment in real estate is quite a profitable endeavor. With the right approach to this business, it can be called one of the most beneficial types of investment in terms of tax payout. The key phrase here is “the right approach,” because if you choose the wrong strategy for investing in property, the benefit will not just be little, it might not be present at all.

In our whitepaper “”, we offer one of the most effective legal schemes for making property investments truly profitable while paying the lowest possible taxes.

Bottom Line

Real estate investments can generate a steady, passive income. The thing is to organize this process properly and with an appropriate partner; this one-stop store partner to keep your real estate business on the lowest taxes is �ԹϹ���. We will take care of all accounting matters and tax returns. to find out how!

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against �ԹϹ��� or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. �ԹϹ��� does not provide any legal advice itself. �ԹϹ��� works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.