Taxes & Law

Online retailers: divided reaction to OSS

Fatih-Kağan Taşkoparan

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On July 1, 2021, the largest VAT reform for EU-wide online trade to date came into force with the aim of simplifying the taxation of sales of goods within the EU and creating fair competitive conditions for online retailers. However, six months after it came into force, a new survey shows that opinions among German online retailers are mixed. The study was conducted jointly by the research institute ibi Research at the University of Regensburg and Logistic Natives e.V.

The core of the reform

Essentially, the EU package standardized delivery thresholds and set up a central reporting and payment office (one-stop store). This means that if you sell goods to private customers in another EU country, you must pay VAT if your sales exceed the delivery threshold in that country. This delivery threshold has been standardized at 10,000 euros and applies to all sales throughout the EU. You can report the sales that you generate in the EU countries centrally for all countries to a uniform office and pay the VAT. A One Stop Shop (OSS) has been set up for German online retailers at the Federal Central Tax Office for this purpose. In contrast, the so-called Import One Stop Shop (IOSS) was developed for trade with third countries.

Not everyone knows the regulation and uses the procedure

The study first examines the level of awareness of the regulations among online retailers. More than 30 percent of respondents stated that they were familiar with the new regulations and knew what they had to do. For eleven percent of retailers, however, the regulation was new.

How many use the simplified procedure for remote sales via the One Stop Shop?

  • As many as 39 percent use the OSS method.
  • 34 percent do not use it and do not plan to.
  • 23 percent do not know the procedure at all.

There is also the Import One Stop Shop (IOSS) for trade with third countries. However, only 9 percent of respondents use this procedure. 38 percent are not familiar with the procedure at all.

Advantages or disadvantages? Mixed experiences

The experiences of online retailers with the new system are mixed. First of all, the monthly VAT return: small online retailers complain that it takes too much time and has high administrative requirements. Some criticize that the new system drives up tax consultant costs and that they have to bear the additional costs if the VAT in the respective country is higher than in Germany. Others, however, praise the system as suitable for everyday use and forward-looking.

A full 62 percent of respondents see neither advantages nor disadvantages in the new regulations. However, implementation is too complicated and the administrative burden is too high. Customer complaints and the loss of regular customers result from the fact that they have to suspend shipping to EU end customers until the problem is solved. On the other hand, supporters are pleased that compliance is simplified, costs can be reduced and there is a central point for processing.

Major technical problems 

It had already become apparent after just a few weeks: The changeover to the OSS process caused a number of problems. 24 percent of those surveyed complained about technical problems, while 29 percent managed without any IT problems.

What were and are the problems?

  • Online retailers were unable to find suitable partner companies and there was a lack of implementation in the internal ERP system,
  • The connection, including the merchandise management and shopware software, was very expensive and complex,
  • Marketplace data was inadequate or there was no solution for the web store,
  • Marketplaces asked for various pieces of information, which made implementation very complex,
  • The effort involved in updating the software and converting the account assignment was very high.

Online retailers are divided on the new regulations. Problems can be seen above all in the technical implementation. There is definitely still a lot of room for improvement. You can download the study here free of charge.

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