Publications
24 January 2012
What the One Stop Shop will mean for EU taxpayers
Taxpayers will welcome news that a One Stop Shop (OSS) for EU trade across borders is on its way, after the European Council adopted a proposal advocating the scheme.
The adoption of the proposal represents the first step towards an OSS for all electronically delivered services, due to be implemented from January 1 2015. Under the present EU VAT system, companies are required to pay VAT in every member state in which they do business, which is both time consuming and costly.
Sonia Bonnabry, a tax lawyer at LeXcom, said as the OSS will enable multinationals to declare and pay VAT solely in the member state where they are established, it will provide significant savings on cost, time and resources. “It is estimated that present compliance costs for multinationals range between 2-8% of the VAT collection, and it is even greater for the smallest businesses,” said Bonnabry.
The OSS will simplify the VAT compliance rules and reduce the administrative burden.
One way this will be achieved is by enabling suppliers to use a web portal in the member state in which they are registered, to account for the VAT due in other member states on supply of their services to private consumers. The first EU companies to benefit will be those providing e-commerce, broadcasting and telecom services.
It is hoped the OSS will enable EU companies to better compete with non-EU firms, for whom the OSS has existed since 2003. “It has been pointed out that doing business with non-EU partners was easier and more profitable than doing business with EU-firms,” said Bonnabry. “Introducing the OSS at EU level could be viewed as an important milestone to become more competitive.”
However, even with an OSS, EU firms may not be on a level playing field with those outside the EU.
The OSS mechanism applying to non-EU companies allows them to be registered for VAT purposes in the member state of their choice. “Companies usually opt for VAT registration on consideration of the VAT taxation rate applicable in the member state so they tend towards Ireland or Luxemburg,” said Bonnabry.
EU companies will not be able to select in this way under OSS, and will have to register for VAT in the member state in which they are established. The Commission has recommended that a destination principle should be implemented in the new VAT system.
Find the complete version of this article on http://www.internationaltaxreview.c...