An IOSS number can make shipping to EU countries simpler, faster and more cost-effective. The Import One Stop Shop (IOSS) is also an excellent way to manage VAT on your European e-commerce sales. If you’re unsure whether IOSS applies to your business model, you can contact us for guidance.
However, the Import One Stop Shop (IOSS) number only applies in certain conditions. If you sell commercial goods online, you will likely benefit from an IOSS number under the following conditions:
• You are selling to an EU consumer base
• The items are located outside of the EU at the time of sale
• Each shipment is worth no more than €150
• The goods are not subject to excise duties
The importance of an IOSS number becomes clearer when looking at how importing and selling works without it.
All imports into EU countries are subject to VAT. Previously, EU shipments of low-value goods (items worth less than €22) were exempt from VAT. However, the exemption no longer applies. In most cases, importers need to account for import VAT at the point of entry. This is often a complex process that poses a significant upfront cost.
With an IOSS, managing the VAT due becomes much simpler. When you sell goods using the IOSS, all applicable VAT is accounted for at the time the sale is made. In addition to simplifying the import process for the seller, the IOSS has benefits for shoppers, as there are no additional surprise costs when the package is delivered to the customer. EU authorities also undertake to expedite the import process for goods imported via the IOSS, provided that your IOSS number is included in your EU customs clearance information. Therefore, sellers can offer customers a more predictable and seamless e-commerce experience, with no hidden costs and potentially reduced delivery times.
See related: What is IOSS?
E-commerce within the EU is also subject to special distance selling rules. Once sales in any given EU country exceed the local annual distance selling threshold, a business is obliged to register for VAT in that country.
Practically speaking, online retailers are often obliged to register for VAT in several countries. Once registered, they must charge VAT and file regular returns in each country in which they have an obligation.
To simplify the process, EU lawmakers introduced new e-commerce VAT mechanisms. These are the OSS (for goods already within the EU at the point of sales and the IOSS, for imported goods).
To get an IOSS number you need to first register for the IOSS portal in an EU Member State. If your business is based in the EU, you will generally register in the country in which you are resident.
Businesses based outside of the EU will ordinarily require an EU intermediary to manage the process. Note that following Brexit, the requirement for an EU intermediary extends to UK businesses. Contact a VAT specialist for an appropriate solution for your company.
Once registered for the IOSS, you will need to follow a number of steps to take advantage of the mechanism:
• Clearly display the amount of VAT owed to the buyer
• Provide your IOSS number to customs authorities
• Collect VAT on all eligible goods
• Ensure shipments do not exceed €150
• Submit regular IOSS VAT invoices and pay VAT payment due to the relevant EU country
• Keep accurate records for at least ten years
See related: What’s the Difference Between IOSS and OSS?
The IOSS is not obligatory. You do not have to register for the IOSS. Nor do you have to provide an IOSS number to import goods.
However, if you do not elect to use the IOSS, you are nonetheless obliged to account for VAT. In most cases, the alternative mechanism will be considerably more complex and time-consuming.
You will often be obliged to register for VAT in multiple countries and file multiple VAT returns. You will also have to comply with complex, time-consuming import VAT processes.
By contrast, the IOSS enables you to meet your VAT obligations with a single consolidated IOSS VAT return and benefit from expedited, simplified customs clearance.
If you sell your goods in the EU via an online marketplace (such as eBay or Amazon) then different VAT rules may apply.
Occasionally, the marketplace itself, like Amazon, may already offer this service, but sellers are strongly advised to verify it independently. The marketplace IOSS number is available for sales made through electronic platforms like eBay and Shopify, and they will provide specific guidelines on how these regulations will impact your business.
Under EU e-commerce regulations, the online marketplace itself is generally responsible for charging and managing VAT on sales. However, the online marketplace may nonetheless require a valid VAT number from businesses that wish to sell via its platform.
Get in touch with a VAT expert if you are unsure about your specific obligations.
If you qualify for the IOSS and you have VAT obligations, the IOSS makes managing VAT more seamless and efficient.
However, the IOSS is a relatively new VAT compliance mechanism. Businesses need guidance to ensure they get the most of the IOSS. You also need to ensure you have the appropriate VAT technology to enable you to file complete and accurate IOSS returns.
In some cases, e-commerce businesses may need to account for VAT through a number of advanced VAT mechanisms. In addition to the IOSS, the OSS may be appropriate for some sales. Moreover, warehousing and distribution raises additional, often complex, VAT issues.
VAT IT can carefully assess your entire value chain and optimise your VAT compliance and recovery processes to save you time and money, while ensuring you are always 100% compliant. Contact VAT IT for a customised VAT solution for your business.
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