From 1 July 2021, e-commerce sellers are obliged to charge VAT of the customer country in the EU. They can opt to report and pay this VAT due in various EU Member States (MSs) via One-Stop-Shop (OSS). The OSS means that they report VAT due across EU in a single quarterly OSS VAT return in one EU Member State (MS). The OSS allows for a single payment to this EU MS which forwards the VAT payments to the various EU Member States (MSs) of consumption.
The different solutions that various MSs have implemented for OSS do not always work efficiently when payments and information are exchanged between MSs. This has caused that payments and the information between MSs are not always exchanged correctly and timely. As aresult, the e-commerce businesses are at risk of being wrongly imposed a default penalty. Therefore, other MSs with an exception of Finland, do not currently impose default penalties.
Difficulties faced by businesses
E-commerce businesses from other EU member states selling to Dutch customers are often unaware of the exact amount to be remitted. The applicable VAT rules are always not clear. There also may be uncertainties about payment terms, exchange rates or bank charges. Communication about obligations of businesses, which regularly goes through tax authorities of other MSs, has not always been sufficiently clear. It also appears that businesses do not always correctly estimate how much time banks need to transfer the amount due.
This has led to an increasing number of objections when default penalties have been imposed. Objections against these default fines have largely been found justified by the DTA. This is because businesses have been able to demonstrate that it is not their fault that they are not paying VAT in full or on time.
Temporary solution is used by the DTA
The DTA uses a temporary solution (the so-called ‘Emergency Track’ (noodspoor in Dutch)) for OSS until 1 June 2024. A permanent solution will be implemented from 1 June 2024.
The DTA currently processes OSS VAT returns manually and it needs at least six months to establish whether e-commerce sellers have made timely and complete payments. The DTA explains that this is due to the limited functionality of the current temporary solution and the poor quality of the (payment) data provided by tax authorities of other EU MSs.
As a result, it takes a long time to find out whether foreign businesses in the Netherlands have paid the correct VAT amount due on time. This means that businesses only find out six months later when the fine is imposed that they have made a mistake, for example, in calculating the VAT amount due. In the meantime, they have often made the same mistake in subsequent returns. This leads to businesses being liable to repeated payment default fines for the same mistake.
Due to the above reasons, the DTA have decided not to impose default fines on businesses participating in the OSS scheme until 1 June 2024 and to reverse previously imposed default fines. Fines will still be imposed for deliberate failures to pay the VAT due.
According to the letter, the DTA has issued a lot of ‘default fines’ (betaalverzuimboetes in Dutch) for OSS participants. The DTA can impose a default fine when a VAT payer makes a mistake, e.g., is late with its payment of the VAT due. The DTA only is obliged to abolish the default fine if the mistake was not at all fault of the VAT payer.
However, it appears that many OSS participants have paid default fines for mistakes that have not been their fault at all and have filed objections against those fines. Handling of these objections apparently requires a lot of resources of the DTA and these objections have mostly been found grounded. Therefore, the DTA has decided not to impose new default fines until 1 June 2024. Fines already imposed will be reversed and objections declared well-grounded.