Reporting and record-keeping obligations for online marketplaces
Marketplaces as the deemed suppliers for EU VAT on certain transactions have reporting and record-keeping obligations. Here, we explore these obligations.
Due to the July 1 rule changes marketplaces become the deemed suppliers for VAT on certain transactions, bringing a series of reporting and record-keeping obligations. In this article, the final one in our series, we shed some light on these obligations.
Other articles in this series include:
- Part 1: Top 5 issues that online marketplaces face ahead of new July 1 VAT rules
- Part 2: Assessing marketplace liability for EU VAT on B2C sales they facilitate
- Part 3: Critical importance of online marketplace-seller relationship
- Part 4: Why online marketplaces as deemed suppliers need to know more about product classification
- Part 5: Invoicing obligations for online marketplaces as deemed suppliers
As mentioned in our second article in this series, the rule change extends the successful Mini One-Stop Shop (MOSS) system, introduced for the sales of B2C cross-border digital services in January 2015, to the new One-Stop Shop (OSS) covering all B2C goods and services.
These new EU VAT rules also introduced the Import One-Stop Shop (IOSS). The IOSS can be used by marketplaces when they are the deemed supplier with sales of goods that do not exceed €150 in a consignment.
OSS and IOSS returns
Registration for OSS, just like its predecessor, is optional. The key benefit in registering for OSS is that there is one single VAT return for all B2C sales of goods and services. The Member State where the business registers (note: EU-based businesses must register where they are established) will then be responsible for distributing the correct VAT to the relevant EU tax administration.
Pre-registration for both the OSS and the IOSS opened in most EU jurisdictions on April 1, 2021. Registration for IOSS is also optional. By opting to register for the IOSS provides a much better end-customer experience.
There is more general information available in the Guide to the VAT One Stop Shop.
In a new administrative approach, corrections can now be made in subsequent VAT returns without the requirement to correct previous VAT returns.
In summary, registration will bring benefits to marketplaces filing quarterly OSS and monthly IOSS returns (where relevant) in a single EU Member State.
The carrot for businesses is having one EU registration and one EU VAT return for all of their B2C supplies of goods and digital services. As opposed to the stick approach of having to register in multiple EU Member States.
Record-keeping and data storage obligations
Once registered, if the online marketplace is a deemed supplier (for the supplies of goods only) then its reporting obligations will be similar to those of a ‘normal’ supplier. However, the type of records it will be obliged to retain differs based on whether or not the online marketplace avails of one of the special registration schemes (the IOSS or the OSS).
The marketplace is also dependent on its underlying suppliers providing correct and up-to-date information so that the correct information used to determine the VAT can be reported.
The Explanatory Notes (on page 24) provide a summary of what information the marketplace may need to collect from its underlying suppliers, it includes:
- Place of establishment of the underlying supplier
- Description of goods
- Taxable amount for VAT purposes (based on price at checkout)
- 'Ship from' location (based on information available up to the point of check-out)
- Information on returns of goods and cancellations of sale
In addition, transaction data will also need to be stored as tax authorities may ask to see records of the details about each transaction linked to a specific marketplace seller.
Obligations as the deemed supplier
When an online marketplace is the deemed supplier for VAT purposes then their record-keeping obligations are covered in Article 63c of the EU VAT Directive. See below for a table reproduced from the EU VAT Explanatory Notes.
Obligations as the deemed supplier, but not using OSS or IOSS
Where there is no use of one of the special registration schemes then the online marketplace will need to comply with Article 242 of the EU VAT Directive, which states the “records shall be sufficiently detailed to enable the tax authorities of the Member States where those supplies are taxable to verify that VAT has been accounted for correctly.”
In addition, these records must be made available electronically on request to the Member States concerned and must be kept for a period of 10 years from the end of the year during which the original transaction was carried out.
Obligations when facilitating supplies, but not the deemed supplier
There is also guidance provided for scenarios when an online marketplace is facilitating the supply of goods and services but is not the deemed supplier. In such a scenario, the reporting obligations to be adhered to are covered by Article 53c(2) of the EU VAT Directive.
The Explanatory Notes add that online marketplaces should — in respecting the proportionality principle — keep the following minimum pieces of information:
- The name, postal address and electronic address or website of the underlying supplier whose supplies are facilitated through the use of the electronic interface and if available:
- The VAT identification number or national tax number of the underlying supplier;
- The bank account number or number of virtual account (i.e. emerging payment solutions and payment services such as digital or crypto currencies, digital wallets solutions, etc.) of the underlying supplier;
- A description of the goods, their value, the place where the dispatch or transport of the goods ends together with the time of supply and, if available, the order number or unique transaction number
- A description of the services, their value, information in order to establish the place of supply and time of supply and, if available, the order number or unique transaction number.
Technology is key to meeting reporting obligations
We believe that these VAT reporting obligations for marketplaces and their sellers can only be met by applying technology to determine the correct VAT treatment of sales of goods at the time of checkout.
For more information on Taxamo’s offering check out the Taxamo Marketplace page here: https://www.taxamo.com/marketplace.html
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