What you need to know about Import One Stop Shop (IOSS)

Import One Stop Shop (IOSS), the new EU VAT rules.

While new VAT regulations such as One-Stop Shop following the Brexit are affecting the European sellers, the new change – Import One-Stop Shop could impact sellers from outside the European Union. This article will provide insights into the implications of IOSS.  

What is the Import One-Stop Shop? 

The Import One-Stop Shop (IOSS) is a program initiated by the European Commission, intended to simplify VAT obligations of the e-commerce sellers who import and sell goods from outside the EU. IOSS applies to goods valued at 150€ or below. Such goods are normally exempt from customs but not from import VAT. 

When does IOSS come into effect?

The Import One Stop Shop (IOSS) is coming into effect 1 July 2021, similarly to the One-Stop Shop (OSS) program. 

VAT Exemption removed for items below 22€. Abolishment of Low-Value Consignment Relief (LVCR) 

From 1 July onwards items valued at or below 22€ will no longer be VAT exempt. This means that VAT must be paid on these items whether the seller chooses to use the Import One Stop Shop or not. This change applies to all e-commerce sellers who import products from non-EU countries. 

For items valued above 150€, the import and customs process will remain the same as before 1 July. 

IOSS threshold covers consignments, not individual items. 

An important caveat is that IOSS covers consignments, rather than individual items. 

If a consumer orders several items totaling more than €150 (179$ or £130) that are dispatched in the same order, IOSS does not apply. Furthermore, IOSS only covers items not subjected to excise duties which means that if your business imports goods such as alcohol or tobacco products, IOSS does not apply. 

Who can use IOSS? 

IOSS program is optional. You can qualify for IOSS under requirements such as: 

• You are an EU-based e-commerce seller. 

• You are NOT an EU-based e-commerce seller but your country has a treaty with the EU about mutual administrative assistance (currently only Norway). As of today, such a contract exists only between the EU and Norway. The UK which has recently left the European Union does not have such a tax arrangement, so an intermediary will be required for the moment. 

• You are NOT an EU-based e-commerce seller but your business has appointed an intermediary to act on your behalf in the country of registration. 

Which transactions are covered by IOSS? 

IOSS applies to distance selling of items valued at or below the 150€ threshold. Moreover, it applies to B2C transactions to customers in the European Union. 

Is IOSS compulsory? 

Using IOSS is optional just like using OSS. However, if you choose not to use IOSS, import VAT will still have to be collected. In such a case, the customer will be charged additional fees by the delivery company or a local postal office during the delivery or pick-up time.  The final price for the customer may double or sometimes even triple! 

Where can I register for IOSS? 

If you want to use the new IOSS system, you can register with your local tax authority or a commercial tax representative. You will then receive a VAT number for all transactions that fall under the IOSS rules. As soon as you have received your IOSS VAT number, you can participate in the program.  

How will IOSS impact my business? 

By removing the VAT exemption for imported items valued below 22€, the EU businesses will be able to compete on equal footing with non-EU businesses that are not charging VAT. 

But this also means that the price for items from outside EU (under 150€ value) will increase thus EU customers might no longer be incentivized to buy them.    

How will IOSS impact customer experience? 

Sellers who opt-in for IOSS are responsible for collecting, declaring, and paying import VAT in the customer’s place. However, if a seller is not registered in IOSS but fails to inform their customers about the potential upcoming fees, they might see customer dissatisfaction increase. Imagine a customer’s surprise when they must pay extra fees upon receiving the order while they didn’t have to do that in the past. 

Furthermore, customers could be required to pay a processing fee to the shipping company if a seller is not registered with IOSS. 

Goods ordered before July 1, 2021, but arrive in the EU after that date will be subject to the new regulations as well. 

IOSS means the end customer has full visibility of cost at the point of sale and won’t incur hidden costs further down the line when goods go through customs. Sellers registered with IOSS offer a more comfortable customer service by taking care of import VAT on behalf of the customer.  

How can we help? 

It remains to be seen what influence IOSS will have on e-commerce and how competitive the landscape will become. 

If you are not sure whether IOSS is for you or want to know how to integrate it into your VAT optimization, we at GVC are happy to assist you. Our VAT experts are equipped with the knowledge and over 30 years of experience. They are willing to take their time to learn about your individual situation to help you.  

Source: Taxation and Customs Union by European Commission