IOSS allows eCommerce sellers to register with just one of the 27 EU tax authorities, and to submit one monthly IOSS VAT return in a way that allows the right payment of VAT across the other EU tax authorities where customers are based.
Non-EU sellers will need to appoint an intermediary in order to register for IOSS. Upon registration for IOSS, the tax authorities in the EU Member State of registration will issue an IOSS VAT registration number.
Once registered for IOSS, the seller will then show the price of the goods and the VAT amount due on the respective order when it is placed so that the customer can pay the full amount, including any VAT due, at the point of sale. The VAT rate applicable will be the VAT rate in the EU Member State to which the goods are delivered.
The IOSS number should then be provided to Whistl in order to avoid VAT being charged at the point of importation.
IOSS returns are submitted monthly to the Member State of registration for all goods supplied to final consumers located across all of the EU Member States. The deadline for payment of the VAT is the end of the month following the month of reporting. For non-EU sellers registered through an intermediary, the relevant information may need to be provided to the intermediary to fulfill the obligations of filing the IOSS returns.
The Import One-Stop-Shop Summarised:
The Import One-Stop-Shop (IOSS) was created to facilitate and simplify the declaration and payment of VAT for distance sales of imported goods with a value not exceeding EUR 150.
- The IOSS facilitates the collection, declaration, and payment of VAT for sellers that are making distance sales of imported goods to buyers in the EU.
- The IOSS also makes the process easier for the buyer, who is only charged at the time of purchase and therefore does not face any surprise 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 transporter at the moment the goods are imported into the EU.
The EU rules governing the VAT treatment of the sale of e-commerce goods made to consumers in the EU. The rules are intended to create a ‘level playing field’ in terms of tax collection between local and non-resident sellers. In summary, they will seek to:
- Ensure that all goods sent directly from third countries (e.g. the UK) to final consumers (e.g. private individuals) in the EU are subject to VAT and that VAT is paid to the tax authority in the country where the private individual receiving the goods is resident.
- Ensure that VAT is charged and paid by non-EU established sellers that sell goods to final consumers through online marketplaces and digital platforms.
- Ensure that VAT is charged and paid by EU-established sellers that sell goods to final consumers through online marketplaces, digital platforms, and on their own account cross-border within the EU.
As noted above, the new rules are principally aimed to efficiently collect tax from direct sellers and from marketplaces.
The EU changes that will apply to direct sellers can be summarised as follows:
- All goods imported into the EU will be subject to VAT irrespective of their value.
- The EUR 150 threshold for customs duty will remain and goods above this value will be subject to both VAT and Duty.
- The current distance sales VAT thresholds for EU-based sellers making sales to EU consumers are removed and VAT is due in line with the destination principle. This is unless a seller’s overall B2C sales (i.e. sales to final consumers) to all EU Member States fall below an annual threshold of EUR 10,000.
- UK sellers will fall into the category of non-EU sellers and will be subject to the same rules as any other non-EU sellers.
- In order to help facilitate and effectively manage the changes, the Import One Stop Shop (“IOSS”) will be introduced. Sellers who supply goods valued at up to EUR 150 can apply to use the IOSS scheme. This allows suppliers selling goods to consumers in the EU to collect VAT on sales of imported goods from the customer at the point of sale and to declare and pay VAT via the IOSS.
|Goods/Total Basket Value Under €150||Goods/Total Basket Value Over €150|
|• VAT||• VAT|
|• Formal clearance||• Formal clearance|
|• Customs clearance fee||• Customs clearance fee|
|• IOSS can apply||• Customs duties|
|• IOSS can NOT apply|
- The value of the good is also referred to as the intrinsic value.
- This does NOT include the transport or insurance costs.
- VAT, however, is applicable on transport and insurance costs.
|Receipt A||Receipt B||Receipt C|
|Value of good: €100||Value of good: €100||Value of good: €160|
|Transport costs: €30||Transport costs: €30|
|Insurance costs: €30|
|VAT (20%): €20||VAT (20%): €38||VAT (20%): €38|
|Total: €120||Total: €192||Total: €228|
|IOSS can apply - As the intrinsic value of the good is under €150.||IOSS can apply - As the intrinsic value of the good is under €150.||IOSS can NOT apply - As the intrinsic value of the good is over €150.|
|The VAT rate is applied to the value of the goods PLUS the transport and insurance cost.||The VAT rate is applied to the value of the goods PLUS the transport and Insurance costs.|
As a business, you can register and file your own EU VAT returns, in order to meet the IOSS requirements all you need to do is to input your IOSS number.
Whistl has collaborated with Deloitte and Taxamo to offer our ‘assisted’ IOSS solutions, to help businesses continue to ship goods into Europe:
Deloitte set-up, register for IOSS, preparing and submitting your monthly IOSS VAT returns, dealing with all queries that arise, along the way.
Deloitte's service is best suited to businesses that are sending larger volumes of parcels into the EU each year.
Have an accounting system able to charge the correct VAT rate, applicable on the goods you are selling into the EU
Be collecting this tax at the point of sale
Service costs £2,000 per year, plus a £300 registration fee in year one.
A simple 'pay-as-you-go' option where Taxamo becomes the VAT ‘deemed reseller’ when it facilitates through its electronic interface the sale of your goods valued at up to €150 to consumers located in the EU.
For sales where Taxamo is the electronic interface, there is no need for you to register for IOSS and file tax returns.
This solution will allow you to comply with the new rules and ensure a smooth delivery experience for your customers.
Once you have integrated the technology into your checkout, you know exactly what to charge at the checkout, for each customer transaction.
Which assisted IOSS service is right for my business?
|Deloitte: IOSS Registration & Filing Service||Taxamo Assure|
|What does it involve?||You pay Deloitte to register you for IOSS, so you can send items using your own IOSS number. Using sales and tax data from your system Deloitte will prepare and file the VAT returns for you. You pay a one-off fee for registration (£300), plus annual fee (£2,000) for VAT returns.||This is a hassle-free ‘per parcel model’ where Taxamo (a Vertex company) becomes the VAT ‘deemed reseller’ when it facilitates through its electronic interface the sale of your goods valued at up to €150 into the EU. This interface focuses on critical aspects of the checkout process and formalities required to successfully complete your online sales for £2 per parcel. As a result, there is no need for you to register for IOSS nor to file VAT IOSS returns. In addition, this solution will allow you to comply with the new VAT rules and ensure a smooth delivery experience for your customers. Once you have integrated the Taxamo technology into your checkout process, it does everything for you including creating the invoice and automatically calculating the VAT due in the country of destination – so you know what to charge to your customer at the checkout.|
|Why would you choose it?||You want to send higher volumes of EU items (3k+ a year) with a reduced cost per item and want support with your compliance obligations. You are prepared to install or already have tax IT systems needed to calculate the VAT on sales to different EU countries. You can dedicate some operational resource to managing the tax.||This is a great hassle-free solution for smaller volume senders, particularly those who send under <3k parcels a year to the EU. To avoid the VAT management overhead - calculation, registration, filing and remittance. Streamlined customer journey with seamless VAT compliance integration from checkout to delivery.|
|It may not be right if?||You only send a small number of items each year. You already have the capability and expertise to register and file for IOSS independently. You only sell to the EU through marketplace(s).||You are sending a high volume of items (at a certain volume it might become cheaper to register for IOSS and manage your own returns). You already have the capability and expertise to register and file for IOSS independently. You only sell to the EU through marketplace(s).|
This is a summary of the options available for eCommerce sellers sending parcels to the EU, this summary will help you understand which option is best suited to your business and parcel delivery volumes.
|Delivered Duties Unpaid (DDU)||IOSS - Sender Self-Registration||IOSS - Selling via a Marketplace||Assisted IOSS Solutions||Delivered Duties Paid (DDP)|
|Overview||UK sellers do not ask their customer for tax. EU recipient is contacted in country and pays VAT owed before receiving item.||UK seller registers for VAT themselves, via an intermediary, collects VAT and completes monthly tax returns.||UK seller sells through a marketplace, so the marketplace takes on the responsibility for collecting and paying VAT on items with a value of 150 EUR or below.||UK seller uses trusted partners to a) provide support in registering and completing tax returns, or b) completely take care of EU VAT compliance instead of the seller, to simplify the process for collecting and paying VAT on items with a value up to 150EUR.||Allows UK sellers to collect and pay VAT (and customs duty for items above EUR 150) on goods that would otherwise be paid by the customer before being able to receive their parcel.|
|Process involved||No action needed||Integrate a landed cost calculator or similar. Register for IOSS using a tax agent in one EU country to get an IOSS number. Register and get an IOSS number. Provide IOSS number to parcel carrier in pre-advice. Account for VAT and complete monthly returns.||Register to sell with a marketplace. Place your goods on their website. They may (but won’t necessarily) take care of VAT obligations (for products up to 150EUR).||Pay a fee to a third party to either 1) Support you in registering and filing IOSS VAT returns for a fee; OR… 2) Take care of VAT at point of sale and pay VAT obligations under the partner’s IOSS number.||Integrate a landed cost calculator. Register for DDP service and pay VAT/Duty on behalf of your EU customer upfront. The EU customer receives their product without interruption before delivery.|
|Benefits||Simple option that requires no change to current process. Can help you to keep costs appear low at checkout.||Saves on third party costs and often uses in house tax expertise or resources where available. Better customer experience.||Marketplace takes care of VAT (for products up to 150EUR) and IOSS number. Offers broader market access.||Better customer experience – either way the VAT due is paid up-front. Peace of mind if wanting to register yourself for IOSS. Simplifies the process of filing and registering for IOSS and helps with compliance.||Useful if you have small but irregular volumes of sales or goods over 150EUR. Maintains your customer experience.|
|Challenges||Unexpected costs for your EU recipient (VAT and handling fee). Customers can refuse to pay and item is returned which can be costly. Poor customer experience.||Specialist understanding and time is required to manage returns (handling enquiries with tax authorities, choosing where to register and file, deciding on an intermediary). Risk of issues when completing returns.||Reliance on the marketplace. Fees are taken from each sale (10% plus). Reduced control and brand recognition. Doesn’t cover products over 150EUR.||Requirement to provide the right data to complete VAT returns, unless ‘per parcel model’ is used. The ‘per parcel model’ might be more costly - you need to consider the volume of parcels you send and whether you have the systems and processes in place to be able to provide the right data for your own IOSS returns.||Need to increase prices to cover the cost of VAT and Duty. Can be cost ineffective for low value parcels or larger number of parcels. Can be difficult to obtain a VAT refund when goods are returned.|
From when are the rules changing?
The rules will take effect from 1 July 2021.
When will I get my IOSS number?
On the assumption, you have provided all the information in a timely manner, and dependent on the tax authorities' processing times, we expect this to take 5-7 weeks from the time the registration application is submitted.
When can I start using my IOSS number?
Once it has been issued you can start using your IOSS number from 1 July 2021.
What does the 150EUR limit refer to?
Only goods shipped in a single package with a total price of up to 150EUR would qualify for the IOSS. IOSS also excludes goods subject to excise duties (of any value). The 150EUR refers to the price of the goods themselves when sold to the EU. This excludes insurance and transport costs, unless these are already included in the price, and excludes any other taxes and charges.
Do parcels sent using IOSS incur a handling charge?
No. Parcels sent using IOSS should not incur a handling charge.
What if I am selling via an online marketplace?
Deloitte’s IOSS service has been designed for those businesses selling directly from their own e-commerce sites to customers in the EU. If you’re selling via an online marketplace instead, there are different rules for you to consider. Deloitte’s VAT solution for marketplace sellers may be the better option for you.
Can IOSS be used for B2B sales?
No, IOSS can only be used for B2C sales. Please note, you should obtain your customer's VAT number as evidence that they are a business customer (and therefore outside of the IOSS).
Do I need an intermediary?
As a non-EU seller, you will need an intermediary if you wish to use IOSS. If you use the Deloitte IOSS service, they will set you up with a third party in order to ensure you have an intermediary for the IOSS.
What is the deadline for the IOSS return?
You need to submit an IOSS return each month to the tax authority in the registration country. The return deadline is the end of the month after the reporting period.
How do I pay the tax due and what is the payment deadline?
The deadline for these payments is the end of the month following the reporting month, the same as the return deadline. As you are established outside the EU, you are registered through a VAT intermediary. You should make a monthly payment of VAT due as declared in the IOSS VAT return to the VAT intermediary at least a few working days prior to the payment deadline as instructed. The VAT intermediary will make the payment to the tax authority in the Member State of registration on your behalf.
I am from Northern Ireland (NI). Why is IOSS not relevant for me?
When an e-commerce seller in NI sells goods to consumers in the EU, NI is treated as being within the EU and as such the seller is not importing into the EU. We are awaiting further confirmation from HM Revenue & Customs as to how these rules apply to NI sellers and how they should register.
What rate of VAT will apply to my sales?
This will depend on the type of goods sold and the country in which the customer is based. In the EU the standard VAT rate currently ranges between 17% and 27%. However, a reduced rate may also be applicable for certain goods, which could range from 3% to 18% in the EU. You should seek specific advice on the VAT rate applicable to your sales if you are unsure of the correct rate to apply.
Where can I learn more about IOSS?
- The EU has published information regarding IOSS here.
- The UK Government has published information regarding the rule changes here.
To discuss any specific needs around the continued movement of goods into Europe.