What is IOSS (Import One Stop Shop)
The Import One Stop Shop or “IOSS” is a special scheme that simplifies the registration obligations for taxpayers who carry out distance sales of goods imported from third-party countries to private individuals in the EU (B2C sales).
IOSS aims to create a simplified process where VAT on imported goods is collected at the point of sale, rather than at the point of importation. This shift aims to create a balance between EU and non-EU businesses and streamline the VAT collection process for low-value goods.
Background on IOSS
Prior to the IOSS implementation, goods imported into the EU (European Union) with a value of €22 or less were exempt from VAT, while those valued between €22 and €150 were subject to VAT, but often, Tax Offices found this VAT difficult to enforce and collect. This led to an imbalance in tax treatment between EU and non-EU sellers and created administrative burdens for customs authorities, tax offices and businesses.
Under the old rules, when goods were imported from third-party countries and sold to private individuals, the normal steps would require the supplier to account for import VAT, then account for the VAT on the subsequent supply (the sale to the private individual), and finally deduct the import VAT.
However, with the implementation IOSS, the VAT on the import is exempt and only the VAT on the subsequent supply is to be collected and remitted to the relevant tax authority.
The IOSS scheme allows taxpayers to register in a single EU Member State where they account for VAT that was actually due in all other Member States where they make sales/operate. Using IOSS simplifies the entire process and makes it easier to account for VAT for all parties involved.
Eligibility for IOSS
IOSS can only be used to account for B2C distance sale of goods imported from third-party countries, whereby the eligible supplies are restricted to a single consignment value of up to €150. Should the intrinsic value of goods ordered by an EU consumer go over €150, this consignment will no longer be eligible to be reported under IOSS and instead, standard VAT rules will apply, and import VAT will be due upon importation.
Registration
From 1 April 2021, you can register businesses on the IOSS portal of any EU Member State. If businesses are not based in the EU, they will normally need to appoint an EU-established intermediary to fulfil their VAT obligations under IOSS. The IOSS registration is valid for all distance sales of imported goods to buyers in the EU. You can start using the IOSS only for the goods sold as of 1 July 2021.
IOSS numbers are required when a taxpayer decides to make use of this scheme. To obtain an IOSS number, businesses must register for the IOSS portal in an EU Member State. If the business is established in the EU, the business will generally register in the country in which they are resident. Businesses established 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 businesses established in the United Kingdom.
Process
Once you are registered on the IOSS scheme, you must use it for all eligible supplies. VAT becomes due at the time when you accept payments from EU customers. You should apply the VAT rate of the EU country where your customers are based, which is where the goods are delivered to.
A monthly or quarterly (depending on your registration) IOSS return and VAT payment will be due to remit the VAT collected from EU consumers at the point of sale.
Conclusion
The Import One Stop Shop (IOSS) is a significant initiative aimed at modernizing and simplifying the VAT scheme for low-value goods imported into the EU. By shifting the collection of VAT to the point of sale and centralizing compliance, IOSS aims to enhance efficiency, reduce administrative burdens, and create a more balanced marketplace for businesses operating within and outside the EU. Need an Expert to help with IOSS?
