Services declared in the One Stop Shop VAT system
The One Stop Shop VAT returns do not replace the member state VAT returns of service providers (i.e. the current “traditional” VAT returns); their only role is to simplify the administration relating to the TBE services (telecommunication, broadcasting and electronic services supplied by service providers to individuals) provided in other member states. Accordingly, service providers will have to file the VAT returns they submit this year next year also. The One Stop Shop VAT return will have to be filed in addition to this one on the TBE services they provide within the territory of the EU to non-taxable-person customers
- in any member state (including the members state of registration under the One Stop Shop system) in the non-EU version and
- in member states in which they neither have a seat, nor a permanent establishment in the EU version of the One Stop Shop system.
In the member states where the service provider has an establishment (i.e. a seat or permanent establishment),data will have to be supplied on TBE services provided in the given member state to individuals not in the One Stop Shop but in a domestic VAT return. For example, the service provider providing TBE services
- from its Hungarian seat to Hungarian, German and Dutch individuals and
- from a permanent establishment in Germany to German, Dutch and British individuals
will have to file the One Stop Shop VAT return on these supplies as detailed below (assuming that the service provider chose to apply the One Stop Shop system – in which case it had to register in Hungary)
One Stop Shop VAT return filing and tax payment – important details
One Stop Shop VAT returns will consist of two parts and will contain a total of 21 (in the EUR version) or 11 (in the non-EU version) data, which does sound easier and more efficient even if enterprises having several establishments or tax registrations within the EU will have to declare certain data for each establishment or tax number.
The template of the One Stop Shop VAT return and some instructions for filling out are available here (source: Guideline of 23 October 2013 of the Taxation and Customs Union Directorate General of the European Commission).
The One Stop Shop VAT return will have to be submitted to the tax authority of the member state of registration specifying the tax base and the tax of the TBE services relating to the foreign places of supply (consumption). The tax will be payable as a lump sum amount to the same member state. The member state of registration will then break down the return to relevant sections and forward these and distribute the collected tax to the member states of consumption.
The default currency of One Stop Shop VAT returns is EUR but the member states outside the Euro Zone (including Hungary) may prescribe the filling out of the returns in their national currency. In this case, the tax authority will convert the data of the tax return to euros at the official exchange rate of the European Central Bank for the last day of the declaration period and forward the return to the other tax authorities with the converted data.
Below we list some important information relating to One Stop Shop VAT returns:
- The returns may only be filed electronically.
- The returns will have to be filled quarterly until the 20th of the month following the given quarter, which is also the deadline for tax payment. The deadline remains the same even if the 20th falls on a weekend or a holiday.
- The One Stop Shop VAT return cannot be filed before the end of the relevant period.
- No return will have to be filled (not even a return declaring zero tax liability) on the member states in which no TBE services were provided in the given quarter to non-taxable-person customers. However, if no such transactions were performed in any of the member states, a One Stop Shop declaring zero tax liability will have to be filed (i.e. if TBE services were not provided to non-taxable-person customers in any member state in the given quarter).
- Each submitted One Stop Shop VAT return will have a special reference number and service providers will have to refer to this reference number when making the transfer relating to the return.
- No deductible tax may be recognized in the One Stop Shop VAT returns. These tax returns will only contain tax payable (and the relating data). Service Providers will be able to reclaim the tax deductible in relation to TBE services provided in foreign member states in a VAT refund procedure.
- One Stop Shop VAT returns cannot be filed on negative amounts and any credits will have to be declared and applied during the adjustment of the original tax returns.
- TBE services exempt from tax in the member state of supply (the place of consumption) (e.g. certain types of gambling or e-learning services) will not have to be declared in the One Stop Shop VAT return.
- Potential adjustments will have to be performed by corrections of the original One Stop Shop VAT return and corrections may be submitted within 3 years from the filing deadline of the original tax return in the member state of registration under the One Stop Shop system. Corrections must also be filed electronically. The member states of consumption may also accept corrections after the expiry of this three-year period according to their national rules. In this case the TBE service provider will have to turn directly to the member state in which the place of consumption is located. Such corrections do not form part of the One Stop Shop system.
- If the One Stop Shop VAT return was not filed or the tax was not paid until the 30th day following the declaration period, the service provider will receive an electronic notice from the tax authority at which it registered under the One Stop Shop system. Potential further notices are sent by the tax authorities of the member states in which the places of supply of the TBE services are located. Penalties and fees payable due to late filing or late payment will also be imposed by these member states according to their own rules and procedures.
- The TBE service provider who receives notices in 3 subsequent quarters and fails to submit the One Stop Shop VAT return within 10 days of the issuing of the notices in any of the cases will be expelled from the One Stop Shop system automatically without any consideration. The same rules apply to failed tax payments with the exception that if the amount of unpaid taxes does not reach EUR 100 in any of the quarters, expelling is not compulsory.
The One Stop Shop system is a modern and efficient means of reducing the administrative burdens of foreign VAT return filing and payments relating to TBE services but service providers will also have to prepare to manage foreign tax risks. Foreign rules (i.e. the rules applicable in the member states in which the TBE services are used) will have to be applied regarding invoicing, penalties, registers and tax audits. In certain cases, 28 different sets of rules may apply to one service provider.
The records serving as the basis of the One Stop Shop VAT returns will have to be kept for 10 years. These are in part general data (e.g. the member state of the place of consumption, the type of service provided, the date of service supply, the VAT payable etc.) and in part specific information such as data relating to the advances received before actual supplies and information for determining the place of establishment or the permanent address or place of stay of the recipient of the service.
We have eight months to prepare. Do you have a strategy?