From 1 July 2021, there will be significant changes in the EU in the VAT treatment of cross-border services provided to the end-user, distance sales of goods and e-commerce. As an end-user will be deemed to be an individual or other person, who is not registered for VAT as a taxable person in another EU member state.
Current MOSS special scheme, applied to the taxation of digital services, will be extended to other services, the place of supply of which takes place in another EU member state (such services are listed in the § 10 (4) of the VAT Act). The most common examples of these are services related to the foreign real estate or admission services of the concert, trade fair or exhibition taking place in another member state. Thus, if so far upon providing these services the Estonian company generally had to register itself for VAT in another member state, then from 1 July 2021 the Estonian company may instead of that register for OSS special scheme in e-MTA. The application of the special scheme will simplify the compliance obligations arising from the VAT liabilities in another member state.
The same special scheme can be voluntarily applied to intra-EU distance sales of goods and under certain conditions also to sales of goods to another member state via e-shops (e.g. when the goods located in Estonia will be sold via e-shop by the non-EU company, which has no establishment in the EU). Intra-EU distance sales of goods is such a sale of goods located in the EU, upon which the goods will be delivered from the state of location of goods to the end-user in another EU member state.
In addition, there will be introduced new IOSS special scheme to the distance sales of goods to be imported from the non-EU country, the application of which is also on a voluntary basis. The distance sales of goods to be imported from the non-EU country is a sale of goods located in the non-EU country, upon which these goods will be delivered from the non-EU country to the end-user in the EU member state.
Until 30 June 2021, the Estonian company can apply the Estonian VAT rates on the digital services sold to the end-user of another EU member state, provided that the overall supply of respective digital services by that company in all member states will not exceed EUR 10 000.
As due to described VAT changes from 1 July 2021 there will be abolished thresholds for distance sales (e.g. EUR 35 000 in Estonia), then after that date the Estonian company can apply the Estonian VAT rates on its distance sales and digital services only when the total amount of such supplies to end-users of another EU member states will not exceed EUR 10 000 and the company will not have any permanent or fixed establishment in another member states. As the changes are introduced from the middle of the calendar year, then in 2021 the same threshold applies during the period 1.07.21-31.12.21.
The registration applications for both OSS and IOSS special schemes can be submitted from 1 April 2021, but the application of new VAT rules will commence from 1 July 2021. These registered users of existing MOSS special scheme, who would like to continue with the application of extended OSS special scheme, will be automatically deemed to be users of OSS special scheme from 1 July 2021.
Additional information on above-described changes and registration procedures can be found from the webpage of the Tax and Customs Board (currently only in Estonian): https://www.emta.ee/et/ariklient/tulu-kulu-kaive-kasum/e-kaubanduse-ja-teenuste-kaibemaksuga-maksustamise-erikorrad-oss-ja
VAT changes in relation to cross-border supplies
