This article will explain the new IOSS system and how it will affect you as an international shipper.
What is IOSS?
On July 1st, 2021, the EU introduced changes to VAT rules, eliminating the VAT exemption on goods valued up to €22. VAT is now charged on all imports to the EU, calculated based on the VAT rate of the consignee’s country, which varies across EU member states.
To streamline the process and save costs, we recommend users sign up for IOSS (Import One-Stop-Shop) or OSS (One-Stop-Shop), depending on their location. These systems simplify the customs and VAT process for businesses.
Current VAT and Customs Situation
From July 1st, 2021:
- Value ≤ €22: No VAT, No Customs Clearance Fee (exemption)
- Value ≤ €150: VAT, Formal Clearance, Customs Clearance, and use of IOSS or OSS
- Value Between €22-€150: VAT, Formal Clearance, Customs Clearance
- Value Above €150: VAT, Formal Clearance, Customs Clearance, Import Duties
New VAT Rules: IOSS vs OSS
IOSS
The Import One-Stop-Shop (IOSS) allows overseas sellers to centralize the declaration and payment of VAT for goods valued under €150 imported into the EU. It ensures that the buyer is charged VAT at the time of purchase, avoiding unexpected fees at delivery.
The VAT rate is applied based on the EU country of delivery, affecting B2C consignments of non-excise goods under €150. Marketplaces like Amazon and eBay will be responsible for charging and collecting VAT as deemed suppliers for low-value consignments.
For more information, refer to the official European Union resources on IOSS and OSS.
OSS
Previously, EU businesses had to register for VAT in each country they sold goods to. Since July 2021, this threshold has been removed, and businesses can centralize VAT returns through OSS, paying VAT to their home country’s VAT authority.
Business Impact
The new VAT rules require all shipments to display the VAT amount before purchase, collect VAT, and include a customs declaration with accurate data. These rules apply to all shipments, even those previously VAT-exempt.
Further obligations include submitting monthly VAT returns through the IOSS portal and keeping sales records for 10 years.
IOSS Rules
Sellers and marketplaces registered under IOSS must pay VAT to the appropriate EU Member State based on where goods are delivered. Marketplaces pay VAT on behalf of their merchants.
How to Register For IOSS
EU-based businesses must register in their home country. Non-EU businesses must appoint an EU-based intermediary, unless their country has a VAT mutual assistance agreement with the EU.
The IOSS registration is valid for all distance sales of imported goods to consumers in the EU, similar to how one EU EORI works in all EU nations.
IOSS Exceptions
All consignments valued at €150 or less must be declared under IOSS if the company is registered. However, IOSS registration is optional.
Is IOSS Registration Mandatory?
No, IOSS registration is optional. However, registering for IOSS allows non-EU sellers to manage VAT centrally for all EU-bound shipments. If a seller doesn’t register, EU countries will charge VAT upon delivery, affecting the shopper’s experience.
If the seller has not registered for the IOSS program and has not used any customs prepaid solutions, the EU destination country/region will charge EU shoppers any import taxes and duties when the goods are delivered.
Customers in the UK may consider waiting for the appointment of an IOSS intermediary, as there are discussions between the EU and the UK on the possibility of signing a mutual VAT agreement.
VAT Package Impact on EU Shoppers?
Shoppers purchasing goods under €150 from IOSS-registered businesses will pay VAT at checkout. If the seller isn’t registered or if the order exceeds €150, VAT and customs duties will be charged upon delivery. Import taxes collected will also include the customs presentation fee of the destination country customs broker.
Glossary
Electronic Interface:
Any system (e.g., websites, marketplaces) facilitating distance sales (e.g., Amazon, eBay).
Intermediary:
An EU-based representative, such as a law firm or authorized operator, responsible for a non-EU seller’s IOSS obligations.
Distance Sale:
The supply of goods dispatched by a seller from a third country to a buyer in the EU.
For more information, see EU July 2021 e-Commerce VAT Package.