VAT in Cyprus: The One Stop Shop (OSS) Scheme for Cross-Border Sales

Introduction to the One Stop Shop (OSS) Scheme

The One Stop Shop (OSS) scheme is a VAT simplification mechanism introduced by the European Union (EU) to streamline VAT compliance for businesses engaged in cross-border sales of goods and services to consumers within the EU. For Cyprus-based companies selling to EU consumers, the OSS scheme offers an efficient way to declare and pay VAT in multiple EU Member States without requiring separate VAT registrations in each country.

Who Can Use the OSS Scheme?

Cyprus companies can use the OSS scheme if they are involved in:

• Distance selling of goods to EU consumers (B2C transactions).
• Providing cross-border services to non-taxable persons (e.g., digital services, telecom, broadcasting, and electronically supplied services).
• Acting as an electronic interface (marketplaces facilitating sales of goods within the EU).

The OSS scheme is not applicable to B2B transactions, as these follow the reverse charge mechanism.

Types of OSS Schemes

The OSS scheme is divided into three categories:

1. Union OSS – For EU-based companies selling goods/services to consumers in other EU countries.
2. Non-Union OSS – For non-EU businesses selling digital services to EU consumers.
3. Import OSS (IOSS) – For businesses selling goods valued below €150 imported from outside the EU to EU consumers.

Benefits of the OSS Scheme for Cyprus Companies

• Single VAT Registration: Businesses can report and pay VAT for multiple EU Member States through the Cyprus Tax Department instead of registering in each country separately.
• Simplified VAT Compliance: A single quarterly VAT return is submitted electronically for all cross-border B2C transactions.
• Reduced Administrative Burden: No need to deal with multiple tax authorities or maintain separate VAT filings across different EU jurisdictions.
• Improved Cash Flow: Avoid delays and costs associated with multiple VAT registrations and compliance procedures.

VAT Registration for OSS in Cyprus

Cyprus-based companies that wish to use the OSS scheme must:

1. Register for OSS through the Tax Department’s electronic portal.
2. Select the relevant OSS category (Union or Import OSS) based on their business activities.
3. Ensure compliance with VAT invoicing and reporting obligations.
4. Submit VAT returns and payments on a quarterly basis.

How to Report and Pay VAT via OSS?

1. Collect VAT at the Rate Applicable in the Customer’s Country
   • Cyprus businesses selling goods or services to consumers in another EU country must apply the VAT rate of that country.
2. File a Quarterly OSS VAT Return
   • The VAT return must include all cross-border B2C sales within the EU.
   • VAT payments are made to the Cyprus Tax Department, which then distributes the amounts to the respective EU countries.
3. Maintain Proper Records
   • Businesses must keep records of OSS transactions for at least 10 years for audit purposes.

Common Challenges and Considerations

• Correct VAT Rate Application: Businesses must determine the correct VAT rates for each EU country where they have customers.
• Eligibility for OSS: Only B2C sales within the EU are eligible; B2B transactions follow different VAT rules.
• Timely VAT Submissions: Late filings or incorrect VAT reporting may result in penalties or exclusion from the OSS scheme.
• Changes in VAT Registration: If a business exceeds the EU-wide threshold of €10,000 in cross-border sales, OSS registration becomes mandatory.

Conclusion

The OSS scheme is an essential VAT compliance tool for Cyprus companies engaged in cross-border B2C sales within the EU. By leveraging this mechanism, businesses can reduce administrative costs, streamline VAT reporting, and ensure compliance with EU VAT regulations. However, companies must carefully manage their VAT obligations, apply the correct rates, and file timely returns to benefit fully from the scheme.

For businesses uncertain about VAT compliance under OSS, consulting with VAT specialists or tax advisors in Cyprus can provide tailored guidance to optimize tax efficiency while remaining compliant with EU regulations.

Savva & Associates: Your Trusted Partner in Tax & Financial Advisory

At Savva & Associates, we specialize in helping businesses, property owners, and investors navigate Cyprus’ tax landscape while maximizing available incentives. Whether you need assistance in structuring a tax-efficient debt restructuring plan or ensuring compliance with the latest regulations.  Our team of experts will work with you to create a personalized strategy that aligns with your financial goals and ensures compliance with global regulations. We invite you to connect with us for a consultation to learn more about how our bespoke services can help you navigate the complexities of the VAT world.

Visit our website at www.savvacyprus.com to schedule a consultation or reach out to our team for more information.

For more information, please contact our team at Savva & Associates.

Please get in touch with our team at:

Charles Savva Managing Director BA, MBA, TEP, CA [email protected] +357 22516671

Mina Pieri Senior Manager FCCA, MBA [email protected] +357 22510207

Makis Pavlou Account Manager FCCA [email protected] +357 22510257