Are you already shipping e-commerce goods into the EU? If so, you may have heard about the new VAT regime that came into effect on July 1, 2021.
The first thing to be aware of is that the €22 import VAT exemption has been removed. That helps to level the playing field between EU and non-EU sellers and means that all commercial goods imported into the EU now attract VAT regardless of value.
The VAT can still be paid upon importation, usually by your customers and before they receive their goods. But the EU has also introduced a new solution – the Import One-Stop Shop (IOSS) – that could simplify things for them. It could also make things easier for you.
If that sounds like something which can impact you, it’s worth understanding how to make the most of the new systems that are in place – especially as the EU e-commerce market is currently booming. Revenue is expected to reach $530bn this year, up 15% on 2020, and is projected to hit $655.6bn by 2025.
FedEx has produced a thorough breakdown of the new regulations – including a webinar explaining what they could mean for your business.
How IOSS works
You can use the IOSS for B2C e-commerce shipments worth €150 or below. If you do, VAT is paid by customers at the point of sale. There are several potential advantages to doing this:
A better customer experience
The VAT-inclusive price is shown and paid at checkout, meaning no unexpected VAT costs for customers to pay before they can get their goods. This also has the potential to lead to fewer returns.
Simpler VAT admin
VAT declarations and payments for qualifying goods can be submitted monthly in one nominated EU Member State (which then forwards them to the appropriate Member States). Because of this, you may no longer have to register for VAT in every EU country you sell in.
More efficient customs clearance
As no VAT is paid upon importation, goods can be cleared through customs more quickly.
Flexible shipping options
When the IOSS is used, goods can be shipped to – and customs cleared in – any EU member state, regardless of which one they are ultimately shipped to.
Taking advantage of the IOSS
You can use the IOSS for B2C sales made on your own website – different rules apply for sales via marketplaces. The goods must be shipped from outside the EU to a consumer within, and the shipment cannot contain items subject to excise duties.
But before you can do this, you need to register. This can be done on the IOSS portal of any EU Member State. If you’re not already established in the EU, you’ll also need to appoint a VAT intermediary to file the monthly returns on your behalf.
To make this easier for you, FedEx has joined forces with KPMG to offer customers established outside the EU a discounted VAT compliance service. The KPMG IOSS solution includes a streamlined IOSS registration process and the preparation – and submission – of your returns.
Using the IOSS: six practical steps
Collect the correct amount of VAT
This should be charged at the rate set in the Member State where the goods will be delivered. You can find more information on those rates at the European Commission website.
Make the VAT payment clear
It should be shown to customers when they are making the transaction, and it’s recommended that this is also included – in euros – on the commercial invoice.
Package consignments properly
Remember to ensure that goods are shipped in consignments worth €150 or less. That’s because the IOSS can’t be used for consignments with a total value above this. Instead, these will be taxed at importation, regardless of the value of the individual items within them.
Submit your returns
You must file an electronic IOSS return (and make the VAT payment) for all eligible shipments each month. Your VAT intermediary, if using one, will likely do this on your behalf.
Tell your shipper your IOSS number
You need to give your IOSS number to whoever is declaring the goods when they enter the EU. If you ship with FedEx, you’ll need to include this number on your Air Waybill when you book your shipment.
Keep a record
You must keep records of all your eligible IOSS sales for a period of 10 years.
Selling through online marketplaces
If you sell through an online marketplace, the rules are a bit different. They state that if the marketplace has facilitated a sale between a seller and a buyer, then it will be considered as having made the sale.
From a seller’s perspective, it means the compliance burden is further reduced. It will be the marketplace that is responsible for collecting VAT on all eligible consignments imported into the EU of €150 and under.
If the marketplace has opted-in to the IOSS, it will now collect VAT at the point of sale. When shipping the goods, you must use the IOSS number of the marketplace. You can’t use your own.
If the marketplace hasn’t opted-in to the IOSS, then the responsibility for collecting VAT is passed onto postal express services or customs brokers.
Shipping without using the IOSS
The IOSS isn’t mandatory. You can choose not to use it and instead the VAT will be collected from customers upon importation. If you ship with FedEx, it will pay the VAT to the authorities to ensure the shipment can be delivered as quickly as possible.
The amount will then be invoiced to the receiver of the goods, along with a disbursement fee. More detail on this can be found on FedEx’s webpage explaining the EU VAT changes.
Other VAT changes to be aware of
The changes outlined here form only part of the new rules, and other regulations apply in different circumstances depending on where sellers are based and where goods are shipped from. Official information on the VAT changes is available from the Publications Office of the European Union.
Why use Shiptheory together with FedEx?
Shiptheory's integration with FedEx allows you to manage and automate all your shipments and returns for your e-commerce store from a single, easy-to-use platform that offers multiple-user support, advanced reporting features, and an excellent customer support team.
The combination of Shiptheory's intelligent shipping automation and the wide range of international delivery services offered by FedEx will allow you to grow your e-commerce business cross-border, save your business money and time, and provide you with the peace of mind that your products will reach your customers safely and on time, wherever they may be in the world.