Special VAT scheme (OSS / IOSS)
How does it work?
The special Value Added Tax (VAT) scheme ( OSS / IOSS ) is a voluntary scheme that allows taxpayers to declare VAT – which is typically payable in multiple European Union (EU) countries – only in one EU country.
The OSS/IOSS scheme can be used when cross-border transactions are carried out with individuals who are not VAT taxpayers. By using this simplified VAT payment scheme, businesses do not need to register as VAT payers in each Member State where their clients are located. For OSS/IOSS VAT declaration correction in the OSS/IOSS special scheme, there can be only one version for the tax period, which is considered the current (only) version.
In other words, the first submitted version of the VAT declaration retains the status of the current declaration, and it is not possible to delete, cancel, or amend this OSS/IOSS VAT special scheme declaration. The declared amount must be paid as a mandatory requirement.
Any corrections needed, if applicable, can be made in the next quarter’s (month’s) OSS/IOSS VAT special scheme declarations. Corrections can be submitted for up to three years. A section called “Corrections” is provided in the VAT special scheme declaration for making corrections for the previous tax period. Corrections are made by indicating the relevant “Tax Period,” “Consumption Country,” and the corrected “VAT” amount. If an overpayment has occurred and needs to be refunded, in the “VAT” column, the amount must be indicated with a “-” (minus) sign. Corrections must specify the value by which the correction should be made. The overpaid VAT will be refunded directly to your bank account, as indicated in the VAT registration application for this scheme, by the tax administration of the European Union Member State.
What are the benefits of the OSS/IOSS?
Under the OSS, companies can submit a quarterly VAT return for cross-border sales to consumers across all Member States, eliminating the need for VAT registration in individual EU countries.
IOSS simplifies the process for non-EU sellers by allowing them to declare and pay VAT on all goods imported into the EU under one Member State, instead of paying VAT upon import in each Member State. Additionally, IOSS streamlines the buying experience, relieving buyers of customs forms and VAT payments upon goods’ arrival in the EU.
OSS streamlines operations for Latvian companies selling across the EU, eliminating the necessity for VAT registration in each Member State. VAT settlement occurs quarterly through the State Revenue Service.
Opening a company in Latvia to use the OSS/IOSS VAT regime offers numerous advantages for businesses seeking to expand their cross-border operations within the European Union, as follows:
- Latvia has a strategic geographical location within the EU, connecting non-EU manufacturers with the European market, thus avoiding necessity for the foreign company to set up a permanent establishment in the EU.
- Latvia offers a favourable business environment characterized by deferred corporate tax, which is payable only by when the profits are distributed.
- Moreover, Latvia offers modern infrastructure and connectivity, including well-developed transportation networks, advanced telecommunications systems, and reliable internet connectivity. These factors contribute to efficient logistics and communication channels, essential for businesses engaged in cross-border trade and e-commerce activities.
In conclusion, while OSS and IOSS offer substantial benefits, familiarization is key. Seek guidance from our accounting team if you’re considering applying for OSS or IOSS, or if you have any queries. They’ll ensure you make the most of these opportunities.
