From 1 July 2021, only four months after the launch of the ICS2, the EU will introduce reforms to the VAT obligations for B2C e-commerce retailers and marketplaces.
1. The value-added tax (VAT) exemption for importing goods with a value not exceeding €22 will be removed, and all goods imported to the EU will be subject to VAT.
2. Online marketplaces will become responsible for charging and collecting VAT for imports not exceeding €150. Instead of import VAT, the marketplace will charge the customer VAT at the point-of-sale and declare it instead of the seller.
3. The launch of The Import One-Stop Shop (IOSS) which will facilitate the collection, declaration, and payment of VAT for imports not exceeding €150.
How does the Import One Stop Shop work?
The €22 VAT exemption on goods being imported into the EU has been heavily exploited by several sellers who deliberately are under-declaring their products' import values to avoid VAT.
From July 2021, the €22 VAT exemption will be withdrawn, and VAT is required to be charged at the point-of-sale for every product up to €150. This VAT can be declared and paid via a new submission, the Import One Stop Shop (IOSS).
The Import One Stop Shop (IOSS) was created to simplify the declaration and payment of VAT for imported goods with a value not exceeding €150 and re-establish fair competition between European and third-country e-commerce retailers.
Retailers shipping goods from their home country to customers across the EU should now register to use IOSS to report all their pan-EU sales.
At the moment, retailers who wish to sell their products to a buyer in the EU need to apply VAT at the rate applicable in the EU country where the goods are to be delivered.
To do that, retailers need to be registered for VAT in each country they are sending their products to. When registered with the IOSS, EU sellers will be able to report all their EU sales on a single VAT return in their home country instead of having multiple VAT registrations across the EU.
Non-EU sellers will have to register for IOSS in just one EU state to declare the VAT on any affected imports on consignments below €150.
When registering to the IOSS, online sellers receive an IOSS VAT number. This IOSS VAT number is used by postal operators and carriers to declare goods upon importation to the customs authorities.
The IOSS is an extension of the Mini One Stop Shop (MOSS), which was launched in 2015 and trialled a single EU VAT return for B2C sales of digital, telecoms, and broadcast services.
The IOSS will also make things easier for buyers, who are only charged at the time of purchase and can avoid extra fees when the goods are delivered. If the seller is not registered in the IOSS, the buyer has to pay the VAT and usually a customs clearance fee charged by the carrier.
When does the IOSS not apply?
If an online marketplace facilitates the sale of goods, the marketplace is responsible for collecting and paying the VAT. For imports not exceeding €150, instead of import VAT, the marketplace will charge the buyer VAT at the point-of-sale and declare it instead of the seller.
There is scope for the marketplace to opt-out of this scheme and the VAT obligations to be transferred to the carrier used by the seller.
Suppose you are about to sell several goods to the same buyer that individually cost less than €150, but you ship them as a single consignment that amounts to more than €150. In that case, these goods are not covered by the IOSS and will be taxed at importation in the EU Member State of destination.
Additionally, sellers holding stocks in other EU countries will not benefit from the IOSS. This is because they must remain VAT registered in each country where they are holding stocks to record any intra-community goods movements. That also includes selling using the Amazon FBA program.
It's also worth noting that IOSS does not cover goods subject to excise duties such as alcohol and tobacco products.
How can I register for the IOSS?
From 1 April 2021, retailers can register their business on the IOSS portal of any EU Member State and receive their unique IOSS VAT number. You can then use this number to declare all sales to your customers in all EU Member States and pass it to your carrier, who will use it to declare goods to the customs authorities.
If your business is not based in the EU, you will need to appoint an EU-established intermediary to fulfil your VAT obligations under IOSS. An intermediary is a taxable person established in any EU Member State whose responsibility is to declare and pay the VAT for all imported goods.
What do I need to do if I am using the IOSS?
If you register for the IOSS, you are required to do the following:
1. Provide the information required for customs clearance in the EU, including the IOSS VAT identification number, to the person declaring the goods at the EU border. That would usually be a postal operator or a carrier.
2. Show/display the amount of VAT to be paid by the buyer in the EU at the latest when the ordering process is finalised.
3. Ensure the collection of VAT from the buyer on the supply of all eligible goods that have an EU Member State as their final destination.
4. Make sure that eligible goods are shipped in consignments with a value up to €150.
5. Show on the VAT invoice (if issued) or on the commercial invoice accompanying the goods for customs clearance the price paid by the buyer in EUR.
6. Submit an electronic monthly VAT return via the Member State's IOSS portal where you are registered for IOSS.
7. Make a monthly payment of the VAT declared in the VAT return to the Member State where you are registered for IOSS.
8. Keep records of all eligible IOSS sales for ten years.
How can Shiptheory help?
Shiptheory does not only automatically generates your shipping labels and customs documentation like CN22A, CN22B and CN23 forms, Commercial Invoices, and Electronic Paperless Trade Documents (where the carrier and country support it), moments after an order is complete, but it also passes your IOSS number directly to your carriers on your behalf.
If you have any queries regarding the IOSS and how it might affect your current shipping process, please do not hesitate to reach out to support.
Otherwise, create a free Shiptheory account and start shipping smarter and faster today!