IOSS (Import One Stop Shop)

What is IOSS?

On 1st July 2021, the EU is made changes to its VAT rules. From July, VAT will be charged on imports to the EU regardless of value. This means the exemption for goods valued up to €22 will no longer apply.

VAT will now be charged at the rate of the consignee's country of residence, but VAT rates differ from country to country in the European Union.

As a result, we encourage our Users to sign up to the IOSS (Import One Stop Shop) or the OSS (One Stop Shop) depending on your location,  for both the cost savings and ease of flow in the customs process.

Current Situation

From July 1st 2021

Value ≤ €22: 

No VAT to be paid (EXEMPTION)
No Customs Clearance Fee

Value €150

VAT

Formal Clearance

Customs Clearance

Either IOSS (Overseas-based Seller) or OSS (European based Seller)

Value Between €22-€150: 

VAT
Formal Clearance
Customs Clearance

Value above €150:

VAT 

Formal Clearance
Customs Clearance

Import Duties



Value above €150

 

VAT
Formal Clearance
Customs Clearance
Import Duties

 

 

What are the new VAT rules? IOSS vs OSS

IOSS

The Import One-Stop Shop (IOSS) provides an electronic portal created to centralize the declaration and payment of VAT for distance sales of imported goods (with a value not exceeding €150) for overseas-based sellers.  

The IOSS means the consumer/shopper is only charged once, at the time of purchase, so there are no surprise fees to pay when the goods are delivered, unlike current methods (DDU and some DDP solutions) where the customer will be charged the import VAT and admin fee in order to receive their shipment. The VAT rate will be the one applicable in the EU Member State where the goods are to be delivered (Remember, not all EU states share the same VAT rate)

 

The new VAT rules will affect B2C consignments of standard goods (i.e. not excise) imported into the EU and valued at €150 or less.
It also means marketplaces such as Amazon and eBay, will be responsible for charging and collecting VAT, acting as the deemed supplier for low-value consignments.

For more info from the European Union on the IOSS, see below:

IOSS

OSS

Until now, EU businesses have had to register VAT in each EU country in which they sold goods and charge customers their domestic VAT rate once sales hit a certain threshold.

From July, this threshold is being removed and the VAT rate must be charged from the first sale.

However, businesses can choose to close their VAT registrations in different EU countries and file all sales through a single One-Stop-Shop (OSS) VAT return. VAT would be paid to the home VAT authority of the EU country of registration, then forwarded to the relevant EU countries of the end buyers.

For more information regarding signing up to OSS- please enquire here: 

OSS

How will this affect business?

The new VAT rules require an electronic interface (such as marketplaces or an e-commerce website) to clearly display the amount of VAT to be paid by the buyer in the EU prior to finalizing the order and to ensure VAT is collected for goods being sent to any EU Member State.

All shipments will require a customs declaration, will be subject to VAT, and must provide full and correct customs data. Remember, this will also include those shipments valued at equal to or less than €22, which are currently not subject to VAT.

Further requirements include (but are not limited to) submitting monthly electronic VAT returns via the IOSS portal and keeping records of sales facilitated by IOSS for 10 years.

Rules for IOSS

Seller and marketplaces (Electronic Interfaces) registered in the IOSS must pay the VAT collected on a sale to a consumer/shopper in an EU Member State. The VAT rate is the one applicable in the EU Member State where the goods are to be delivered. Marketplaces pay on behalf of their merchants. 

How to register for IOSS?

 

If the supplier is already established in a Member State, it must register for the IOSS in that Member State.

If businesses are not based in the EU, they MUST appoint an EU-established IOSS intermediary to fulfill their VAT obligations under the IOSS scheme, unless the seller’s country has signed the 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. 

Links to registration in different EU countries can be found Here

Are there Exceptions to IOSS?

No, all consignments equal or lower to €150 of an IOSS registered company must be declared under the IOSS scheme.

Is IOSS Registration Mandatory?

No. This is optional, but when a company registers on IOSS, it must comply with IOSS rules.

IOSS will enable non-EU sellers to register in only one EU member state to centralize their VAT declarations and payments for all EU-bound shipments. If the seller decides not to declare VAT centrally, the consumer member country (the destination country of the EU) will be responsible for collecting VAT on the goods. 

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. This will greatly affect the shopping experience of end customers in the European Union; 



CURRENT SITUATION

                      PER JULY 2021

           IOSS                        NON IOSS
                                          

PRODUCT COST

€ 20

€ 20

€ 20

VAT (21%)

€ 0

(EXEMPT)

€ 4.2

€ 5.25-7.35

CUSTOMS CLEARANCE FEE

€0

(EXEMPTION)

€0
(SETTLED BY SELLER)

€ 5 - 15

TOTAL COST

€ 20

€ 24.2

€ 30.25 - € 42.35

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.

How will the VAT package affect EU Shoppers?

When purchasing merchandise with an intrinsic value not exceeding €150 from an IOSS-registered company, shoppers will pay the EU VAT during the checkout process. This should be clearly displayed at all times so there are no hidden costs for consumers/shoppers.

However, if the company is not IOSS-registered, if the order contains excise goods, or if the value is above €150, it is likely that VAT and/or customs duty will be collected from the shoppers at reception. Import taxes collected at reception will also include the customs presentation fee of the destination country customs broker.

Glossary of Terms

Electronic Interface:

An Electronic Interface can include a website, portal, gateway, marketplace, app, or any other system used to facilitate distance sales. E.G. Amazon, eBay, ETSY.

Intermediary:

An Intermediary needs to be a taxable person established in the EU: it can be a law firm, authorised economic operator, or a European-based subsidiary of a non-EU-based seller. The intermediary MUST be registered as an IOSS intermediary.

Distance Sale: 

A Distance Sale is the supply of goods that are either dispatched or transported on behalf of the seller (from a third country or territory), to a consumer in the EU Member States. E.G.
An American seller, selling to a buyer in Germany = Distance Sale.

If the online marketplace is collecting VAT at the point of sale then the marketplace will provide their IOSS for the seller to use on the shipment.

 
 

Useful Links

EU July 2021 e-Commerce VAT Package

IOSS .

Modernising VAT for cross-border e-commerce

Changes to EU VAT rules from 1st July 2021 - here's what you need to know

 

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