From 1st July 2021 there will be major changes including:
1. The extension of the VAT Mini One Stop Shop (MOSS) to the One Stop Shop (OSS)
The Mini One Stop Shop (MOSS) has been in existence since 2015 and currently only covers the supply of telecommunications, broadcasting and electronic services from business to non-business customers (B2C) services within the EU.
Prior to the introduction of MOSS, it was possible for a business to have a VAT registration obligation in several jurisdictions. By opting to use MOSS, however, that business is able to report its sales for all EU member states via one single quarterly return made to one Member State thereby notifying the Revenue Authorities in that jurisdiction of TBE sales in other EU Member States as well as facilitating the payment of VAT. There are currently two types of MOSS scheme in existence: one for businesses established within the EU and the other for those established outside the EU.
From 1st July 2021, MOSS will become the One Stop Shop (OSS).
The scope of transactions covered by this declarative system will be extended to all types of cross-border services to the final consumers within the EU as well as to the intra-EU distance sales of goods and to certain domestic supplies which are facilitated by electronic interfaces.
The choice of the EU Member State in which a business can register for the One-Stop-Shop will depend on where they are established and whether they have one or more fixed establishments within the EU.
The use of the VAT One Stop Shop procedure will be optional.
Those businesses who opt for the procedure will only be required to submit a single quarterly return to the tax authorities of the country of their choice, via a dedicated OSS web portal. They will be required to apply the VAT rates applicable in the consumer’s country.
If the OSS is not availed of, then the supplier will be required to register in each Member State in which they make supplies to consumers.
Businesses will be required to follow certain rules, including the sourcing and retaining of documentary evidence in relation to where the customer is located in order to determine the country in which the VAT is due.
In summary, from 1st July 2021, the MOSS Scheme will become the One Stop Shop and will include the following: (i) B2C supplies of services within the EU other than TBE services, (ii) B2C Intra-EU distance sales of goods, (iii) Certain domestic supplies of goods which are facilitated by electronic platforms/interfaces and (iv) Goods imported from third countries and third territories in consignments of an intrinsic value up to a maximum value of €150.
2. Current distance selling thresholds will be abolished.
For the intra-EU distance sales of goods, the thresholds amounts of €35,000 to €100,000 within the EU will be abolished.
Currently a supplier who sells to consumers from other EU member states by mail order is obliged to register for VAT in the country to which the goods are delivered once the threshold amount has been reached.
From 1st July, however, the current place of supply threshold of €10,000 for Telecommunications, Broadcasting and Electronic services will be extended to include intra-Community distances sales of goods.
This €10,000 threshold will cover cross-border supplies of TBE services as well as the intra-Community distance sales of goods but will not apply to other supplies of services. This will result in a requirement to register for VAT in multiple jurisdictions, where the total EU supplies of goods and TBE services to consumers exceed €10,000 per annum.
To avoid this obligation the EU OSS scheme can be availed of.
In situations where the value of the sales does not exceed or is unlikely to exceed this threshold amount of €10,000, then local VAT rates may be applied instead of the VAT in the country of the consumer. In other words, in such circumstances an Irish business can charge Irish VAT on its supplies.
In summary, from 1st July 2021, the individual EU Member State’s distance selling thresholds will be abolished and replaced with an aggregate threshold of €10,000 for all EU supplies. Please be aware that this exemption threshold will not apply on a State by State basis nor will it apply to separate income streams. It is calculated taking into account all TBE services and intra-community distance sales of goods in all EU states.
3. VAT exemption at importation of small consignments of a value of up to €22 will be removed
Currently, imports of goods valued at less than €22 into the EU are not liable to VAT on importation. From 1st January 2021 the low value consignment stock relief for goods valued at €22 or below will be abolished resulting in all goods being imported into the EU now being liable to VAT.
For consignments of €150 euros or below, however, a new import scheme will apply. The seller of the goods or, in the case of non-EU retailers, the agent, will only be required to charge VAT at the time of the sale by availing of the Import One Stop Shop. If they decide not to opt for this scheme, they will be able elect to have the import VAT collected from the final customer by the postal or courier service.
4. Special provisions where online marketplaces/ platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves i.e. deemed supplier provision
Over the last number of years, there has been considerable growth in online marketplaces and platforms providing B2C supplies of goods within the EU. Currently, however, this environment is difficult to monitor and as a result, businesses established outside the EU are slipping through the VAT net.
From 1st July Special provisions will be introduced whereby a business facilitating sales through the use of an online electronic interface will be deemed, for VAT purposes, to have received and supplied the goods themselves – this will be known as the “Deemed Supplier” Provision.
In other words, the online marketplace / platform provider will be viewed as (a) buying and (b) selling the underlying goods and will, therefore, be required to collect and pay the VAT on relevant sales.
Digital marketplaces will be responsible for collecting and paying VAT in relation to the following cross-border B2C sales of goods they facilitate:
The payment and declaration of VAT due will be made by the Electronic Interface through the One Stop Shop system for Electronic Interfaces.
The Import One Stop Shop (IOSS) will apply to supplies made via an Electronic Interface where this online market/platform facilities the importation of goods from outside the EU.
The deeming provision will not apply in situations where the taxable person only provides payment processing services, advertising or listing services, or redirecting/transferring services in circumstances where the customer is redirected to another online market/platform and the supply is concluded through that other electronic interface.
Online Markets/Platforms will also be required to retain complete documentation, in electronic format, in relation to their sellers’ transactions for the purposes VAT audits/inspections.
The application of this provision is mandatory for traders/taxable persons. The use of the other schemes, however, will be optional.
5. The introduction of the Import One Stop Shop
There is currently a VAT exemption in relation to the importation (from outside the EU) of consignments valued at less than €22. From 1st July this exemption will be abolished and as a result, all goods imported into the EU will be liable to VAT.
The current customs duty exemption covering distance sales of goods imported from third countries or third territories to customers within the EU up to a value of €150 remains unchanged providing the trader declares and pays the VAT, at the time of the sale, using the Import One Stop-Shop.
For Non EU based suppliers there are two options:
With regard to the appointment of an intermediary for the purposes of IOSS, please be aware that:
The IOSS will facilitate traders registering and declaring import VAT due in all Member States through a single monthly return in the Member State in which they have registered for the Import One Stop Shop scheme.
Where the IOSS is used, the supplier will charge VAT to the customer at the time of the supply and, as a result, the goods will not be liable to VAT at the time of importation. The VAT collected by the supplier will then be submitted through their monthly IOSS return.
The use of this scheme is not mandatory.
As the supplier/taxable person will only be required to register for IOSS in one Member State this will considerably reduce the administrative burden involved in accounting for VAT. After registration for IOSS, the supplier will be issued an IOSS identification number and this should expedite customs clearance.
If, however, the IOSS Scheme is not availed of, the supplier will be able to use another simplification procedure for the purposes of importing goods at a value not exceeding €150 whereby the import VAT may be collected by the postal services, courier company, shipping/customs agents, etc. from the customer, and the operator will then report and pay the VAT over to the relevant Revenue Authority on monthly basis. This special arrangement will only apply where both conditions are met: (i) the IOSS has not been availed of and (ii) where the final destination of the goods is the Member State of importation.
The special arrangement allows for a deferred payment of VAT on the same basis.
In summary, the purpose of the IOSS is that suppliers who import goods into the EU can declare and pay the VAT due on those goods through the Import One Stop Shop in the member state where they have registered for the scheme.
There are two main types of director: a proprietary director who owns more than 15% of the share capital of the company and a non-proprietary director who owns less than 15% of the share capital of the company.
In general, a director is deemed to be a ‘chargeable person’ for Income Tax purposes. This means that he/she is obliged to file an Income Tax Return every year even in situations where his/her entire income has already been taxed at source through the PAYE system.
Non-proprietary directors, however, as well as unpaid directors, are excluded from the obligation to file an annual income tax return.
A Proprietary Director must also comply with the self-assessment regime which means he/she has a requirement to make payments on account to meet his/her preliminary tax obligations. In situations where these payments are not made by the due date, the director is exposed to statutory interest at a rate of approximately 8% per annum.
A late surcharge applies in circumstances where the Director’s Income Tax Return is filed after the due date. The surcharge is either (a) 5% where the tax return is delivered within two months of the filing date or (b) 10% where the tax return is not delivered within two months of the filing date. It is important to keep in mind that the surcharge will be calculated on the director’s income tax liability for the year of assessment before taking into account any PAYE deducted from his/her salary at source. It should also be remembered that the Director can only claim a credit for the PAYE deducted if the company has in fact paid over this tax in full to Revenue.
Proprietary directors are not entitled to an Employee Tax Credit. In general, this rule, subject to some exceptions, also applies in relation to a spouse or family member of a proprietary director who is in receipt of a salary from the company. Proprietary Directors and their spouse and family members may, however, be entitled to the Earned Income Credit.
The director’s salary, just like any other employee’s salary, is an allowable deduction for the purposes of calculating Corporation Tax.
According to the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013, a director with a 50% shareholding in the company will be insurable under Class S for PRSI purposes. For proprietary directors with a shareholding of less than 50% of the company the PRSI treatment will be established on a case by case basis.
Where the director has a ‘controlling interest’ in the company, he/she will not be treated as ‘an employed contributor’ for PRSI purposes on any income or salary he/she receives from the company. Therefore, all amounts paid by the company to the director will be insurable under Class ‘S’ meaning that he/she will be treated as a self-employed contributor and liable to PRSI at 4%. Employers’ PRSI will not be applicable to his/her salary.
Where a Director is insured under Class A, PRSI is payable on his/her earnings at 4% and up to 10.75% Employer’s PRSI by the employer/company.
Even if you are not considered to be Irish resident by virtue of the 183 day rule or the “Look Back” rule, if you are in receipt of a salary from an Irish limited company you will be required to pay Income Tax to the Revenue Commissioners. If, however, you are resident in a country with which Ireland has a Double Taxation Agreement and your income is liable to tax in both countries, you should be able to claim relief on the tax you paid in Ireland.