In order for the businesses to adhere to their VAT e-commerce obligations on distance sales of imported goods, an electronic portal has been introduced, which is referred to as The Import One-Stop-Shop (IOSS). All of the enterprises can make use of IOSS from the 1st of July 2021.
As per the VAT rules, businesses are not required to pay import VAT for commercial goods that cost up to EUR 22. These VAT rules are applicable up until the 1st of July 2021.
From 1st July 2021, this provision will be put to an end by the new VAT e-commerce rules. For that reason, all types of commercial goods which are imported from the third countries into the European Union will be subject to VAT regardless of their value.
What is the purpose of IOSS?
In a nutshell, the purpose of IOSS is to enable the electronic interfaces along with the suppliers that are selling imported goods to EU buyers to collect, declare and ultimately pay the VAT to the tax collection authorities. Previously, this was not the case as buyers were required to pay the VAT at the specific time when the goods, which were over 22 EUR, were imported into the EU.
Advantages associated with IOSS:
IOSS makes it convenient and easy for the sellers to collect, declare, and pay the VAT. These are the sellers who sell imported goods to the EU buyers. Also, as mentioned above as well, buyers were required to pay a certain amount of fee when they received the imported goods. However, with the help of IOSS, the buyers would only be charged during the purchase of goods. This makes the process more convenient for them. In case the seller is not registered with IOSS, the buyer will be liable to pay the VAT along with a customs clearance fee to the transporter.
What changes do we witness from the 1st of July 2021?
There are multiple changes that may be witnessed from the 1st of July 2021. Firstly, as all of those goods which did not exceed EUR 22 were exempted from VAT, this scenario has changed, and this rule will be eliminated. For that reason, all of the goods imported to the EU, no matter what the value of the goods is, will not get a VAT exemption. This applies to both online sellers as well as electronic interfaces.
In case the electronic interface facilitates the sale of goods to the EU buyers, it will be considered to have made the sale. Moreover, electronic interfaces will also be, in principle, liable for the payment of VAT.
The main purpose of developing the IOSS was to make the process of declaring and paying the VAT for the goods that were sold from a distance by the sellers from the EU or non-EU nation easier and convenient. In addition to this, the VAT will only be applicable to goods with a value of less than EUR 150 and the purchases that are made by the buyers located within the territories of the EU.
Which supplies of goods does the IOSS cover?
There are various supplies of goods that are covered by IOSS. These may include the ones that are:
- Not transported or dispatched within the EU during the time of sale
- Low-value goods that are usually below or equal to EUR 150 and are also dispatched in consignments.
- exempted from the excise duties (these may apply to products such as tobacco or alcohol)
The above-mentioned supplies of goods covered by IOSS are for both the online sellers as well as the Electronic Interfaces.
In a situation where the seller and buyer contact one another through an electronic interface and the goods are ultimately sold to the buyer, it is considered that the sale of goods is facilitated by the electronic interfaces.
How does IOSS operate?
The online sellers who are registered in the IOSS will be required to apply VAT when selling to buyers located in a state which is a member of the EU.
As far as the electronic interfaces are concerned, the ones that are registered in the IOSS will be liable to pay the VAT due on sale by the buyer rather than the taxable seller located in a country that is part of the EU.
The rate of VAT will be determined, taking into account the EU member country where the goods are being delivered. In order to get more information regarding the VAT rates in the EU, you need to visit the following websites:
How can you register for the IOSS?
The online sellers will be eligible to register their businesses on any of the EU member States' IOSS portals from the 1st of April 2021, provided that the businesses are based in the EU. In case if the enterprises are not EU based, the online sellers will be required to use the services of an EU established intermediary for the purpose of fulfilling the VAT obligations. All of the distance sales of imported goods to EU buyers are valid for the IOSS registration. The IOSS can only be utilized for those goods that are sold from the 1st of July 2021.
Similar will be the case with electronic interfaces as well. They will start IOSS registration from 1 April 2021 and will also require the services of an EU-established intermediary so that all of the VAT obligations are met under the IOSS.
What are you required to do in case you make use of IOSS?
If you are using the IOSS, there are a few points that you must take into account, no matter if you are an online seller or electronic interface.
The first thing you are required to do is to give all of the essential information and details required for the purpose of customs clearance in the EU. This may also include the IOSS VAT identification number to the individual declaring and verifying the goods at the border of the EU.
In addition to this, you may also need to show the VAT amount that the buyer will pay in the EU as soon as the process of order is finalized. Not just that, but you will also make sure that the VAT has been collected from the buyer on the supply of goods that are considered eligible, having an EU member state as a final destination. Shipping the eligible goods in consignments will help you ensure that they do not exceed the threshold of EUR 150.
Where it seems possible, you may also need to show the price on the invoice, which is paid by the buyer in EUR. Moreover, you will also be required to submit an electronic monthly VAT return through the portal of IOSS. The portal can be of the state which is a member of the EU, and you are recognized for IOSS over there. Not just that, but you may also need to pay VAT on a monthly basis as stated in the VAT return to that particular member state.
The last important thing which you need to do is to maintain the record of all of the eligible IOSS sales and/or sales that have been facilitated over the period of 10 years.
Even though you may need to consider all of the aforementioned things, there will still be a few exceptions
In the case of the online sellers, you are not required to charge VAT on sales of goods in a scenario where you sell multiple goods to one buyer, and all of these goods are shipped in a particular package that will ultimately add up to EUR 150. At the importation, these goods will be taxed in the particular member state of the EU.
Another situation can be an electronic interface facilitating your distance sales of goods. In such a scenario, the responsible for the VAT due is the electronic interface itself.
The above-mentioned situations and scenarios are applied to electronic interfaces as well.
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