EU VAT e-commerce rules

Summary

Information on EU VAT e-commerce rules in Sage Accounting.

Resolution

This is an optional scheme to help you report and pay all EU VAT through a single return instead of having to register and pay VAT in each country you sell to.

This applies to sales to individuals or business who are based in the EU and who are not VAT registered. The scheme is called The One Stop Shop.

For the One Stop Shop schemes, you use Destination VAT. Instead of charging VAT at the usual Irish rate (or home rate), you charge VAT at the rate where your customer lives.

For example, if as a Irish business you sell goods to a customer in France, you charge VAT at the rate applicable in France.

Visit our business legislation hub to see how this may affect your business.

The One Stop Shop (OSS)

Use the One Stop Shop (OSS) to report and pay EU VAT on services to EU consumers which attract destination VAT. For a full list of services visit the European Commission website (opens in new tab)

Alongside the introduction of the OSS, the EU are also abolishing distance selling thresholds. This means you may now have distance sales of goods which are subject to destination VAT.

On 1 July the EU also abolished distance selling thresholds and replaced them with a single EU wide €10,000 (£8,818) threshold.

You can register for the OSS in an EU member state, usually your own. Once registered you can report all relevant EU VAT through a single return each quarter and make a single payment to the member state you register with.

European Commission guidance on the One Stop Shop schemes (opens in new tab).

Destination VAT in Sage Accounting

Destination VAT settings and reports are available in Sage Accounting.

Apply destination VAT in VAT settings

Choose whether to apply destination VAT rules to EU consumers. We’ll automatically add ledger account 2206 VAT on Destination Sales so you can report separately on the total amount you have charged for destination VAT.

Apply destination VAT to service

Add OSS Services to each service item where destination VAT needs to be charged.

For a full list of services that attract destination VAT visit the European Commission website (opens in new tab)

Apply destination VAT to sales invoices

Once you add an EU consumer (not VAT registered) and a product or OSS service to an invoice, the destination VAT rate will automatically calculate.

Recurring invoices and destination VAT

Once you apply destination VAT in financial settings, recurring invoices to EU customers will be paused and will show a status of Action Required. Create a copy of the invoice and the destination VAT rate will automatically calculate. Delete the original invoice.

Run the destination VAT report

The OSS Sales Analysis report in Reporting will show all sales where destination VAT has been charged. This will help you to complete your One Stop Shop VAT return.

Invoicing with destination VAT

Before you start

If you need to charge destination VAT, check that you have added:

Destination VAT rules in financial settings
OSS Services on each relevant service item
An EU customer who is not VAT registered

Create a sales invoice for goods

Go to Sales, Sales Invoices, and select New Invoice.
In the Customer field, select your EU customer from the list, or type the customer name. If the customer is not a saved contact, select Add a customer to create a record for them.
On the first invoice line, select a product from the list, or start typing its name to find it. If the product is not a saved item,enter a description for the item or select Create item to create a record for it.
In EU Goods/Services select Goods (and related services) to apply destination VAT rules. The destination VAT rate will automatically calculate.

TIP: To calculate destination VAT on the invoice, check that you selected:
- destination VAT rules in financial settings
- an EU customer that is not VAT registered
Repeat steps 3 and 4 on a new line for as many items as you need to add to your invoice.
Select Save.

The VAT return

The VAT element on destination VAT sales is excluded from your VAT return. You need to report this on your OSS VAT return through the OSS system.

Create a sales invoice for OSS services

Go to Sales, Sales Invoices, and select New Invoice.
In the Customer field, select your EU customer from the list, or type the customer name. If the customer is not a saved contact, select Add a customer to create a record for them.
On the first invoice line, select a service from the list, or start typing its name to find it. If the service is not a saved item, select Create item and apply OSS Services to create a record for it.
In EU Goods/Services select Services (standalone) to apply destination VAT rules.
TIP: To calculate destination VAT on the invoice, check that you selected:
- destination VAT rules in financial settings
- OSS Services for the service item
- and an EU customer that is not VAT registered
Repeat steps 3 and 4 on a new line for as many items as you need to add to your invoice.

TIP: An invoice cannot contain services subject to both home and destination VAT. If you need to invoice a service item that has home VAT rules, you must create another invoice.
Select Save.

The VAT return

The VAT element on destination VAT sales is excluded from your VAT return. You need to report this on your OSS VAT return through the OSS system.