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Understanding VAT, IOSS, and OSS for Hong Kong Businesses in Europe

For many businesses in Hong Kong, expanding to Europe can open up exciting new opportunities. However, it is crucial to understand the various tax regulations that come with operating in different countries. One key tax to be aware of is Value Added Tax (VAT), which businesses must pay on goods and services sold in Europe. Besides VAT, there are also two related systems that Hong Kong businesses should know about: the One Stop Shop (OSS) and the Importation One Stop Shop (IOSS). In this article, we will explore the conditions under which Hong Kong businesses have to register and fill in declarations for VAT in Europe, as well as when they can use the OSS and IOSS systems.

Firstly, it is important to know when a business needs to file and pay for VAT in Europe. If a business has an inventory in the EU, buys locally and sells locally, changes its operations from EXW or FOB to DDP, buys goods in one EU country and sells in another EU country, or exports goods from the EU as the exporter, they need to file and pay VAT. However, if a business sells products or services subject to VAT to individuals and the products come from outside the EU, they can use an IOSS number. Alternatively, if they sell products or services subject to VAT to individuals from within the EU, they can use an OSS number.

In order to avoid confusion, there are three cases where a business does not need a VAT, OSS, or IOSS number. Firstly if a business exports goods from a country outside the European zone and the client handles the import administrative work. Secondly, if a business sells services to companies that are not based in the EU. Finally, if a business has no plans to sell in Europe.

It is crucial for businesses to handle their VAT correctly to avoid any costly penalties or legal issues. To do so, it is recommended that companies work with a VAT expert who can help them navigate the complexities of VAT and taxation in Europe. There are a number of professional services available to Hong Kong businesses in Europe that can assist with VAT, but not all of them are up to the standard. At ATHENASIA we have our pattern of choice that we refer to our clients. He is professional and affordable. You can drop us an email, and we will organize a free consultation for you. Working with a competent consultant will help you save money, preserve your cashflow, and ensure compliance. It also gives you peace of mind as they handle everything for you.

Female coffee shop owner holding a POS terminal while unrecognizable customer paying cashless

Furthermore, it is essential to stay up to date with any changes to VAT regulations, which can vary from country to country. This is particularly relevant given the new system of IOSS, which was introduced in July 2021 and aims to simplify the process of collecting VAT on sales of goods from non-EU countries to customers in the EU. With the help of a VAT expert and by staying informed about regulations, Hong Kong businesses can ensure they remain compliant with VAT regulations while expanding their operations in Europe.

In conclusion, VAT is an important tax that businesses must pay when operating in Europe. It is also important to be aware of the related systems of OSS and IOSS, which can simplify (or sometimes complexity) the VAT process for businesses. By understanding the conditions under which businesses need to file and pay for VAT, as well as when they can use OSS and IOSS, Hong Kong businesses can ensure they meet their obligations while expanding their operations in Europe. Working with a VAT expert and staying informed about any changes to regulations can also help businesses avoid costly penalties and remain compliant over time.


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