Digitalization has reached and permeated all areas of the economy in Germany. So it is no wonder that it has also become an indispensable part of our daily work in the tax consulting industry. In hardly any other context than the OSS procedure for the registration of sales taxes in other EU member states this is more obvious. For this reason, in this article we will use the digitalization of the OSS process as an example to explain how this aspect affects our work to the benefit of our clients.

Today you read an article about modern ways of working. Because nowadays more and more classical professions disappear and make room for others, which from now on gain in importance. Of course, there has always been a certain change in the working and professional world. Nevertheless, the change in our time is more complex, profound and comprehensive than ever before. This also applies at least in part to the classic tax consulting professions.

Apart from design consulting, financial accounting in this industry is characterised by massive changes. The simple recording of tax-relevant issues has increasingly become data management in recent years. So instead of collecting data, you control the data collection. In this way, tax consultancy firms continue to increase their efficiency and performance. At the same time, they can optimize the associated costs.

In doing so, we must realize that this silent revolution, which is progressing largely unnoticed publicly, reaches practically into our entire economy. And since our economy is very internationally oriented, foreign influences also flow into our financial accounting. This article is therefore intended to shed light on the positive effects of the digitalisation of financial accounting with regard to cross-border VAT, in particular on the OSS procedure, which is decisive within the EU.

It is clear that digitalization is also very important in our own ongoing tax consulting. Because we also recognize that digitalization makes a significant contribution to the modern processing of our mandates. What is more, it has become indispensable. This contribution is therefore also an example of our service. Nevertheless, this should not be a hymn to our achievements, at least not so obvious. Rather, we report here on a general trend in our industry that otherwise attracts little attention, but is becoming increasingly important for the processes that lead to the correct taxation of sales.

Since digitization is not an end in itself, we now discuss the concrete benefits that digitization should enable us to achieve. We have selected an example from the goods industry.

If an online store sells its goods, then two situations must first be distinguished for sales tax purposes. Either customers expect delivery to a location in Germany or abroad. When delivering abroad, a distinction is still made between a delivery within or outside the EU or the EEA. For deliveries within the EU, the EU VAT Directive applies.

A further distinction in such deliveries is the type of recipients. If these are other entrepreneurs, one speaks of B2B transactions (B2B is the abbreviation for business to business). The abbreviation B2C refers to deliveries to end customers (business to customer). This distinction is relevant in terms of sales tax because B2B transactions are basically not subject to VAT, because the recipients would get the proposed VAT refunded as input tax anyway. For end customers, however, this is regularly excluded.

If we now look at the two fields holistically, we see that for B2C operations taking place within the EU or the EEA, the sales tax of the respective country in which the customers receive the service must be withheld. We describe this process here in a strongly generalised way, because just as in Germany different VAT rates apply to different types of goods, this is also the case in other EU member states.

Now it is the case that earlier these data sets had been treated separately. Either you could distinguish whether a B2B or a B2C operation is available or to which country the goods should be delivered. Digitalization now allows us to take both criteria into account together. Already when ordering, online retailers assign the country-specific correct sales tax rate to the delivery and now book the sales tax automatically in the prescribed amount.

These data sets are again important for our work in the context of the preparation of VAT advance notifications. If we can always automatically retrieve the necessary data for each turnover by means of digitalization, without having to check this each time individually, then this saves an enormous amount of time. It can also help to avoid volatility errors. The greatest benefit that digitalisation offers, especially in connection with the OSS procedure, is that the required reports to the Federal Central Office for Taxation (BZSt) can be generated automatically. The manual processing of these prescribed messages would mean an enormous effort if they had to be done without the support of digitalization.

Obviously, digitalization in financial accounting is crucial to managing the ever-growing flood of data required for processing. More and more often, the digital exchange with clients sets the course for an efficient and largely error-free recording of data.

But also in the internal processing of the OSS procedure, we rely on the support possibilities that digitalization offers us. Without digitalisation in the area of financial accounting, the OSS procedure would certainly be far more complex. Yes, it is even questionable whether the EU member states would have introduced the OSS procedure if there had been a lack of the necessary digitalization. In the past, the preparation for the implementation of this Europe-wide uniform VAT system has led to delays in its introduction. It may well be that other circumstances played a more important role. In particular, the corona pandemic should be mentioned. Nevertheless, this project seems to have only become possible through the widest possible digitalization in the tax consulting industry.