The Import One Stop Shop Scheme (IOSS)
The VAT rules for exporting low value goods from the UK to the EU are changing from the 1 July 2021 and with that date fast approaching, businesses will need to review their procedures to not be caught out.
What is the IOSS and who does it concern?
The Import One Stop Shop scheme (IOSS) has been introduced for businesses who sell goods online either through their own website or an electronic interface such as eBay, and allows them to collect, declare and pay the VAT to the tax authorities instead of making the buyer pay the VAT at the time the goods are imported into the EU. The IOSS applies when the total shipment value of goods is less than €150.
As of 1st July 2021, what changes and are my customers affected?
The VAT exemption for goods imported not exceeding €22 will be removed and consequently, all goods imported to the EU will be subject to VAT. Customers in the EU buying goods from a non-EU country, such as Great Britain, will now have to pay the import VAT and usually a customs clearance fee charged by the transporter. However, if the seller is registered in the IOSS then the customer receives the following benefits:
- When goods enter the EU, no import VAT or customs clearance fee is payable by the customer.
- Sellers apply VAT to their goods meaning the customer has certainty about the amount of tax charged.
Remember, this only applies when the total shipment value of goods is less than €150 and is not applicable to individual items in the same shipment. So, if you sell computer screens for €80 each and send five within the same shipment, they would be subject to import VAT.
Selling through an online marketplace
If a non-EU business uses an online marketplace for all sales of goods to the EU, it will not need to register for IOSS. This is because the online marketplace will be seen to have made the sale and is liable for the payment of VAT based on the rate that is applicable in the country the goods are sold.
However, if the UK business sells multiple goods to the same buyer through the online marketplace with a total shipment value exceeding €150, then IOSS rules do not apply, and the goods will be liable to import VAT.
IOSS direct online sales and obligations
Non-EU businesses selling directly to the EU will need to appoint an EU-established intermediary to fulfil their VAT obligations under the IOSS to liaise with a single tax authority for VAT purposes. Register in a country that speaks good English such as Ireland or the Netherlands to make the process a lot easier!
Once a non-EU business is registered for IOSS, they are obligated to submit an electronic monthly VAT return via the IOSS portal and make a monthly VAT payment to the state where they are identified for IOSS.
The first return will be for the month ended 31st July 2021 with the deadline being the end of August 2021.
Overall, the IOSS Scheme is great for e-commerce as it will save a lot of time and money otherwise spent on administration, however, now is the time to prepare your business for the changes coming 1st July 2021.
For any advice on VAT please contact us here.
Bookkeeping and VAT Manager