VAT One-Stop Shop & e-shops: 5 mistakes to avoid

One-Stop Shops simplifies VAT for e-sellers, but mistakes can be costly. Discover 5 common mistakes penalized by the european tax authorities.

The VAT One-Stop Shop has gradually being implemented across Europe. Some tax authorities, in Finland and Denmark for example, have immediately adjusted or deregistered e-sellers who failed to comply with the rules. In France, the tax authorities have been tolerant, giving companies time to adapt to the new system. Some therefore seemed to think that their misuse of the one-stop shop would go unnoticed indefinitely. Since the beginning of 2024, French e-sellers began to receive quarantine letters.

Discover 5 mistakes made by e-sellers on the One-Stop Shop EU scheme (OSS-EU), to avoid repeating them in the European Union.
Penalties: VAT adjustments and deregistration!

As a reminder: the VAT One-Stop Shop actually counts 3 different schemes : OSS-EU, OSS-non-EU and IOSS. See our article: Guide to the VAT One-Stop Shop : a guide for e-sellers.

Mistake #1: registering with the One-Stop shop without regularizing your previous situation

Example of an e-seller who was unaware of the thresholds applicable in Finland before the ecommerce package

A French e-seller, involved in distance selling from France to Finnish consumers, applied French VAT rules to all of its EU sales, and paid back to France the output VAT collected on its sales, without worrying about the exceeding thresholds in other member states before the reform of VAT thresholds and e-shops in July 2021.

As a reminder: given his sales in this country, he should have charged Finnish VAT to local sales and paid this VAT back to Finland.

When the VAT One-Stop Shop was implemented, the French e-seller saw it as a great way to simplify its EU VAT issues. Finland, happy but surprised to receive this new VAT revenue, wondered about the e-seller’s activity. The Finnish tax authorities used their right of access to third parties to question both Stripe and Hayden payment platforms used for these online sales. The Tax Office discovered that our e-seller should have been paying VAT in Finland for several years!

The rule: be sure to be aligned with previous VAT rules and ensure compliance with former obligations prior to registering.

What penalties are applied by the tax authorities?

The Finnish tax authorities have reassessed the e-seller for the output VAT not collected and paid to Finland, as well as the penalties for late payment. The French company found itself in a situation of double VAT taxation for the period under VAT inspection. In Finland, as in France, the statute of limitation period is three years. The e-seller has been reassessed for the whole period. In Greece, for example, it could be rectified over five years.

What to do in this situation?

• Before registering, e-sellers should contact a specialist such as EASYTAX to review their current situation and assess whether they should register to the VAT One-Stop Shop.

A posteriori:

• By breaking down your payment data on your payment platforms like Stripe and Hayden, and cross-referencing them with your sales invoices, you can limit the adjustment to sales made in the Member State concerned.
• Get the amount of VAT wrongly paid to your Member State of establishment to avoid double taxation issue.

Are these VAT adjustments frequent?

They are very common in certain member states, such as Finland or Belgium. And in terms of reassessments, there are no small amounts ! For example, the Belgian tax authorities have not hesitated to reassess a specialist in online sale of scuba diving equipment for a total amount of VAT and penalties lower than 10,000 euros.

Mistake #2: no longer making distance sales from the Member State in which you are registered for VAT One-Stop Shop.

If the Member State in which you have registered for the VAT One-Stop shop observes a lack of activity, or even presumes that your taxable activities have ended, it will simply deregister you from the VAT One-Stop Shop.

This deregistration applies to all three One-Stop Shop schemes (OSS-non-EU, OSS-EU, IOSS) for a varying period of exclusion.

The consequences of the deregistration from a country’s VAT One-Stop Shop are far-reaching (see below)!

Mistake #3: failing to file your returns regularly on the VAT One-Stop Shop

The patience of tax authorities varies from one member state to another. In France, the e-seller – or his tax agent – will receive reminders for missing returns for the three preceding declaration periods. If the e-seller doesn’t get its affairs in order very quickly, there is a high risk of being deregistered.

Mistake #4: failing to pay VAT to member states on time

The tax authorities will issue payment reminders to you – or your tax agent – for the three immediately preceeding tax periods. If you do not regularize this situation very quickly, or if it recurs after reminders and regularization, the member state in which you are registered with the One-Stop Shop will implement its exclusion procedure.

Mistake #5: using two times a One-Stop Shop scheme in two different member states

When it comes to VAT, even your own zeal is punishable!

If you’re like this e-seller of old vinyl records we assisted, you may have activated twosingle one-stop shops in two different member states, either by mistake or for fear of doing the wrong thing. The tax authorities of both member states will write you off without a second thought.

Find out more with our blog : VAT One-Stop Shop : a guide for e-sellers

Deregistration from the VAT One-Stop Shop : risks involved

What is VAT One-Stop Shop deregistration?

Member states call it an exclusion, deletion or quarantine procedure. Each member state is free to implement this procedure as it sees fit. The Member State’s tax authorities will therefore issue more or fewer reminders before implementing the write-off procedure. Depending on your mistakes, you may be permanently or temporarily deregistered, for a shorter or longer period of time.

In France, for example, the tax authorities send a “quarantine” letter, which means that the company is removed from the VAT One-Stop Shop for a period of up to three years.
In practice, we observe that e-sellers are most often deregistered from their two One-Stop Shop schemes (OSS-EU and IOSS) for a temporary period of two years.

Which VAT One-Stop Shop schemes can a company be deleted from?

Each deletion from a one-stop shop scheme carries a triple penalty. A company excluded from the VAT One-Stop Shop will no longer be able to use any of the three schemes (OSS-non-EU, OSS-EU, IOSS). For details, see our article.
If an e-seller is excluded from the OSS-EU, for example, he will be excluded from all the other one-stop shop schemes he currently uses, including his IOSS portal. He/she will not be able to register/re-register for any of the three schemes before the end of the exclusion period.

If the e-seller is registered on another one-stop shop in another Member State, that Member State of identification will also have to exclude the taxable person for systematic non-compliance. The Member State of identification communicates the exclusion to all other Member States without delay.

When is an e-seller deregistered from the VAT One-Stop Shop?

The exclusion of a company for non-compliance with the rules of the VAT One-Stop shop takes effect from the first day of the calendar quarter following the date on which the exclusion decision was communicated electronically to the company.

What should I do if I am removed from the One-Stop Shop?

What are the consequences of deregistration from the VAT One-Stop shop? You will have to register, declare and pay VAT in every EU country in which you sell.

Registration with the VAT One-Stop Shop is optional, so you cannot appeal against the deregistration penalty imposed by the Member State.
As an e-seller, you will need to register for VAT purpose in all the member states in which you carry out distance selling, to replace the use of the OSS-EU one-stop shop. You will also need to file VAT returns in each member state in which you sell to individuals, and make the corresponding local VAT payments.