June 28, 2021
When it comes to your business and VAT, things can often seem rather complicated and tricky. That is why we have put together a handy guide to answer some of your burning questions around the upcoming EU tax changes and the Import One Stop Shop scheme.
When it comes to your business and VAT, things can often seem rather complicated and tricky. That is why we have put together a handy guide to answer some of your burning questions around the upcoming EU tax changes and the Import One Stop Shop scheme.
You may have already heard the term IOSS a few times by now and are probably wondering how it will affect your business. From the 1st of July 2021, important changes are coming to the way VAT is handled for E-commerce and marketplace sellers who sell physical goods to consumers located within the EU. The rationale behind these changes is to help reduce cross-border barriers, increase transparency around European shipping and help facilitate overseas trading.
Before July the 1st 2021, goods sold to EU consumers by online stores and marketplace sellers at the value of €22 or less were exempt from VAT. For goods valued over €22, it was the responsibility of the customer to pay the owed VAT, unless the seller met the country’s threshold requirements.
When it came to reporting and filing returns, B2C sellers dispatching items from a single country would have to register for VAT and complete documentation for every EU country they were selling goods to.
In a nutshell, the VAT changes mean that the €22 threshold has now been removed. All goods being sold to European countries will be subject to VAT and must be declared to customs with the correct documentation.
When it comes to paying the VAT associated with the goods, rather than the customer being liable for VAT, the seller or marketplace is now responsible for handling any VAT owed. An advantage of the changes is that businesses selling goods valued at €150 and below will no longer have to sign up for VAT in every country they trade to. Instead, they can keep everything in one place and sign up for the Import One Stop Shop in one EU country/member state.
All businesses importing goods to European consumers will be affected by the VAT changes, including e-commerce and marketplace sellers. The Import One Stop Shop scheme will only apply to businesses trading goods valued at €150 and below.
Registering for the Import One Stop Shop scheme is quick and easy, but the method depends on your individual business setup. Businesses that are established within Europe (have premises) or have a subsidiary within an EU member state can register using that country’s portal. If your business is not established within Europe, you will need to sign up for the scheme using a trusted intermediary provider to act on your behalf.
When it comes to businesses that use marketplace platforms to trade to the EU, it is important to find out the marketplace’s IOSS number and include it on any customs declarations on shipments valued at less than €150. Liability for the VAT payments are the responsibility of the marketplace, however it is still vital to keep 10-years worth of sales records.
Not registering and preparing for the Import One Stop Shop VAT changes will result in the VAT charges being pushed on to the customer once the item has been imported. There is also a risk of delivery delays and some postal operators adding an additional clearance fee to collect the VAT and complete the required documentation.
Once you have registered for the Import One Stop Shop, there are a few actions you need to take. Use the below checklist to make sure your business is ready:
1. Complete and submit all the required documentation for customs clearance, including the IOSS VAT identification number for the business declaring the goods
2. Ensure your shipments are below the €150 threshold
3. Include up-to-date and accurate information about the value of the goods you are shipping
4. Detail the amount of VAT being collected from the sale
5. Keep up-to-date financial records of any sales that qualify for the IOSS scheme - all records must be kept for 10 years
6. Complete an accurate monthly VAT invoice that details all of the sales which qualify for the Import One Stop Shop, followed by VAT payment
For more in-depth information on the Import One Stop Shop and how to prepare your business visit the European Commission and Government website.
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