Do you have an e-shop but are afraid to open it to customers elsewhere in the EU because you do not want to deal with taxation in a foreign country? Do you also supply your e-shop to customers in Slovakia, for example, and have you registered for VAT there? Do you want to provide your services online but don’t know how to deal with VAT when the customer is elsewhere in the EU? Or are you considering importing goods from third countries directly to end customers?

Then, in terms of VAT, the question arises as to where and how you will tax these services and goods. It is true that the supply of services is in many cases (although not always) to be taxed at the customer’s location and that the sale of goods to end customers is subject to taxation at the place, to which the goods are dispatched, once a certain turnover limit is exceeded. This often leads to situations where you are obliged to declare and pay VAT in different EU countries. How to solve such a situation?

It is logical to register for VAT directly in the respective countries. However, this option is often demanding organisationally and in terms of costs. It can be implemented in one, at most two or three countries. But why bear the cost of tax advisers and administration in each country? An effective solution is therefore the application of the One-Stop-Shop (OSS) scheme.

What does One-Stop-Shop mean and what are its main advantages?

The OSS scheme means that when you register with your tax office, you no longer have to deal with registrations in other EU countries. It is obvious at first glance that by registering for this scheme, the provider will significantly simplify its obligations towards tax administrations across the EU. In the country of identification, where the entity registers for the scheme, it files a single tax return, in which transactions in all EU countries are declared. The total amount of tax is sent by the registered entity to the tax administration in the State of identification, which forwards the relevant amounts of tax to the individual States concerned (States of consumption).

Using the one-stop scheme eliminates costly and time-consuming cross-border payments. In the vast majority of cases, the risk of language barriers is also eliminated. However, our experience in practice shows that even if the filing of the return and payment of the tax is done through the domestic tax administration, it is sometimes necessary to communicate with other affected tax administrations, too.

At Grant Thornton, we are happy to handle this communication for you. We have had much experience with the OSS scheme and all its types since its inception. We offer help with assessing whether OSS is the best possible solution for you and with possible registration for the scheme. As part of our services, we also process tax returns and handle all communication with our tax administration arising from the scheme.

We keep the clients we represent within the OSS informed of any changes to national VAT rates and are ready to assist them in setting up systems, including identifying mechanisms for determining the customer’s place of establishment. We will, of course, arrange the refund of the local VAT paid to the suppliers if necessary. In our view, the only potential disadvantage of using OSS schemes as opposed to normal VAT registrations is the fact that local input VAT always has to be reclaimed by way of a refund, rather than claiming deductions more quickly through the tax return.

What are the OSS schemes and when can I apply for them in the Czech Republic?

There are three OSS schemes – the Union scheme, the non-Union scheme and the import scheme (Import One-Shop-Shop or IOSS):

1. The EU scheme is intended for providers established in the EU and for non-EU persons who supply goods remotely to end consumers in the EU. It is possible to register in the Czech Republic if you are based here, or if you are based outside the EU, if you have an establishment here; if the goods are delivered by a person not based in the EU, it is sufficient that the goods are dispatched from the Czech Republic.
2. The non-EU scheme is exclusively for non-EU persons who provide services to end consumers in the EU. Registration in the Czech Republic is possible for all persons who meet this condition, the state of identification is a matter of choice in this case.
3. The IOSS scheme is for sellers of imported goods to customers in EU Member States. You can register for it in the Czech Republic if you are based here. If you are based outside the EU, you must have an establishment there. Others may appoint an intermediary who fulfils this condition and will carry out the obligations under this scheme on behalf of the importer.

How often are returns submitted?

In the case of both the EU and non-EU schemes, the return is made on a calendar quarter basis; in the case of the IOSS, it is made on a calendar month basis.

In what currency is tax declared and paid?

For all EU countries, transactions are reported in euros, and tax is also paid to the Czech tax office in this currency.

Are there any other special obligations arising from registration with the OSS?

In addition to the usual records for VAT purposes that tax entities are obliged to keep under the VAT Act, the European legislation imposes an obligation to keep special records for the purposes of the OSS regime for all transactions carried out under this regime. This includes, for example, the type of transaction selected, the tax rate used, the information used to determine the place of transaction, etc. The tax entity must be able to make these records available electronically at the request of both domestic and foreign tax authorities.

More detailed information about the operation and rules of the OSS/IOSS scheme can be found on our website.