Since July 1, 2021, new EU VAT regulations the so-called e-commerce package related to the supplies for EU consumers will enter into force in the territory of the European Union (EU).
As a result of the changes, VAT exemption for the import of goods in shipments with a value not exceeding EUR 22 will be removed in the EU. Consequently, as a rule, all commercial goods imported into the EU area from a third country, or third territory will be subject to VAT regardless of their value.
Customs duty exemptions for goods with an intrinsic value not exceeding EUR 150 imported into the EU will continue to apply. This means that you will not have to pay customs duties for goods in a shipment imported into the EU which intrinsic value does not exceed EUR 150 if VAT is declared and reported in the IOSS procedure.
What is Import One Stop Shop (IOSS)?
IOSS – the procedure introduces the possibility of simplifying VAT settlement by creating a One-Stop-Shop for imported goods (IOSS) in order to facilitate and simplify the submission of declarations and VAT payments for distance sales of imported goods with a value not exceeding 150 EUR.
How does IOSS work?
Through the IOSS procedure, it will be possible to settle output VAT on distance sales of imported goods to the EU Member State of consumption, via the EU Member State of identification.
IOSS registered sellers must charge VAT at the moment of sale of goods to a final consumer from the EU Member State. The final consumer is charged by the VAT rate that applies in the EU Member State where the goods are delivered.
There is no need to charge VAT on the distance sales of imported goods if:
- the sale of goods is sent in a shipment with a value exceeding EUR 150 – these goods will be taxed upon importation to EU Member State,
- the sale of goods at a distance is facilitated by an electronic interface – in such a situation, the electronic interface is responsible for charging VAT,
- sale of excise goods.
What goods deliveries does IOSS cover?
Since July 1, 2021, a new type of transaction will appear – the distance selling of imported goods.
Distance selling of goods imported from third countries or territories refers to the supply of goods shipped or transported by or on behalf of a supplier/seller, including where the supplier intervenes indirectly with the transport or shipment of goods to a customer in EU Member State that is:
- a VAT taxpayer or a legal person who is not a VAT taxpayer, who is not obliged to settle intra-Community acquisition of goods or
- any other non-taxable entity
– provided that the delivered goods are not for example a new means of transport, it is not the so-called delivery of which are installed or assembled, the goods are not subject to excise duty.
For a transaction to be considered as distance sales of imported goods, the goods must be physically shipped to an EU country from a third country or third territory.
When low-value goods (up to EUR 150) are placed in EU Member States’ customs warehouse, from which deliveries will be made to the final customer in the EU, these deliveries will not qualify as distance sales of imported goods – and the IOSS procedure will not apply.
Additionally, the goods must be in shipments with an intrinsic value not exceeding EUR 150 or its equivalent.
Intrinsic value is defined as follows:
- for commercial goods: the price of the goods themselves when sold for export to the customs territory of the European Union, excluding transport and insurance costs, unless they are included in the price and not separately indicated on the invoice, and any other taxes and charges as ascertainable by the customs authorities from any relevant documents,
- for goods of a non-commercial nature: the price which would have been paid for the goods themselves if they were sold for export to the customs territory of the European Union.
Any other related costs, besides transport and insurance, that do not reflect the value of the goods themselves must also be excluded from the intrinsic value, whenever they are separately and clearly indicated in the invoice (tooling costs, license fees, export tax, etc.). The term “other taxes and charges” refers to any tax or charge levied on the basis of the value of the goods or on top of a tax or charge applied to such goods.
Which goods deliveries are covered by the IOSS procedure?
- the goods are dispatched/transported from a third territory or a third country at the stage of delivery, and
- these goods are shipped in a parcel with an intrinsic value not exceeding EUR 150 and
- the goods are transported or dispatched by or on behalf of the supplier, including where the supplier is involved indirectly in the transport or dispatch of goods from a third country or third territory to the final customer or any other authorized person in EU Member State, and
- goods are not subject to the EU harmonized excise duty, such as alcohol products or tobacco products.
It should be noted that IOSS cannot be used when low-value goods (up to EUR 150) are purchased or shipped together with the excise goods, regardless of whether the shipment value exceeds EUR 150 or not.
Who can use IOSS?
The following taxpayers can use the import procedure:
- EU established suppliers selling goods to EU final consumers – this is usually the case when suppliers sell through their own online store.
- Non-EU established suppliers selling goods to EU final consumers – this is usually the case when suppliers sell through their own online store. These suppliers can use the procedure as follows:
- ➡ directly (without the obligation to identify an intermediary) if they are based in a third country with which the EU has concluded a VAT mutual assistance agreement. However, this only applies insofar as these suppliers sell goods from that particular third country. If they also start delivering goods from other third countries or third territories, they will no longer be able to use this procedure directly or will have to use it indirectly,
- ➡ indirectly, through an intermediary based in the EU.
- EU established electronic interface operators facilitating the distance selling of low-value imported goods to relevant suppliers (known as suppliers).
- Non-Eu established electronic interface operators, facilitating the distance selling of low-value imported goods to relevant suppliers (so-called deemed suppliers). These electronic interface operators can use the procedure as follows:
- ➡ directly (without the obligation to identify an intermediary) if they are based in a third country with which the EU has concluded a mutual assistance agreement on VAT, to the extent that they sell goods from that third country,
- ➡ indirectly, through an intermediary based in the EU.
If the sale of goods to the final consumer in the EU is facilitated by an electronic interface, the electronic interface is deemed to have made the sale and is generally responsible for the payment of VAT, unless the goods are over EUR 150.
A taxpayer using IOSS applies it to all distance sales of imported goods.
How to register with IOSS?
A taxpayer carrying out distance sales of imported goods may submit a declaration of intention to use IOSS in the EU Member State of identification.
The EU Member State of identification means the EU Member State:
- which the taxpayer not established in the territory of the European Union chooses to submit a declaration informing about the intention to use the import procedure,
- in which the taxpayer has its registered office, or
- in which the taxpayer has a fixed establishment if he is not established in the territory of the European Union, or
- in which the taxpayer has a fixed establishment, which he chooses to submit a notification informing about the intention to use the IOSS procedure if he is not established in the territory of the European Union but has more than one fixed establishment in the territory of the European Union,
- in which the intermediary has its registered office, or
- in which the intermediary has a fixed establishment if he is not established in the European Union, or
- in which the intermediary has a fixed establishment which he chooses to submit a notification informing about the intention to use the special import procedure if he is not established in the territory of the European Union but has more than one fixed establishment in the territory of the European Union.
If Poland is the EU Member State of identification, the notification is made by electronic means of communication by submitting appropriate interactive forms to the competent head of the tax office.
Since April 1, 2021, you can register your company on the IOSS portal of any EU Member State.
Registration with IOSS is valid for all distance sales of imported goods to buyers in the EU.
If your company is not established in the EU, you will normally need to appoint an EU-established intermediary to be able to register for the IOSS procedure who meet your IOSS VAT obligations.
Who can be the intermediary:
- a taxpayer established in one of the EU Member State,
- fulfills the obligations to set out in IOSS procedure, including the declaration and payment of VAT on distance sales of imported goods,
- receives an IOSS VAT identification number for each taxpayer for whom it has been designated,
- a taxpayer who sells imported goods at a distance may appoint an intermediary, but cannot appoint more than 1 intermediary at the same time,
- is established by way of a written agreement,
- performs, on behalf of and for the taxpayer for whom it has been established, the obligations of that taxpayer in the field of VAT settlement in the import procedure, including the preparation of tax returns and payment of VAT, keeping and storing documentation, including records, making it available, as well as other activities resulting from the provisions of this chapter, including the submission of a declaration of intention to use the import procedure by this taxpayer,
- is jointly and severally liable with the taxpayer for the tax liability, which is settled on behalf of and for the benefit of that taxpayer,
- submit a notification stating that he intends to act as such in the EU Member State of identification.
The competent head of the tax office confirms the application and sends:
- the taxpayer VAT identification number for the purpose of using the import procedure,
- gives the intermediary, for each taxpayer for whom it has been designated, a VAT identification number for the purpose of using the IOSS procedure
Identification numbers are assigned using electronic means of communication and are only used for the purpose of the IOSS procedure.
What should you do if you use IOSS?
If you use IOSS, you must perform, among others:
- display the amount of VAT to be paid by the final customer according to the correct VAT rate of the EU country to which the goods are delivered,
- collect VAT from the final customer for the supply of all goods destined for an EU Member State,
- make sure that eligible goods are shipped in the shipments with a value up to EUR 150,
- if you use a carrier, in order for the carrier to report the transaction to the customs office of the EU country of delivery of goods, you must provide the carrier with the information required for customs clearance in the EU, including the IOSS VAT identification number to the person declaring the goods for customs at the EU border,
- electronically submit your monthly VAT return via the IOSS portal in the EU Member State where you are registered,
- make the monthly payment of the VAT declared on the VAT return to the EU Member State where you are registered with IOSS,
- keep records of all eligible IOSS sales for 10 years.
Important – IOSS regime – what e-commerce sellers should be aware of?
Invoicing – the e-commerce taxpayer registered under IOSS must issue an invoice for the customer.
VAT records – the taxpayers are obliged to keep the evidence expressed in EUR including the number of data. The records must contain:
- Country of consumption,
- Type of services/quantity of goods delivered,
- Date of service execution/delivery of goods,
- The net value of goods (tax base) with an indication of the currency used,
- Other values increasing / decreasing value of tax base,
- VAT rate,
- VAT amount with an indication of the currency used,
- Date and amount of payment,
- Advance payments received,
- Data included on the invoice if issued,
- Surname/name of the customer, if known to the taxpayer
- The information used to identify the place where the customer is established or has his permanent address or usually resides,
- All proofs connected with returns of goods, net value, and VAT rate.
- VAT records should be kept for 10 years,
- the above information is subject to record by a taxpayer in a way that can be immediately available by electronic means and for each individual transaction.
Exchange rate – if the payments for rendered services or goods delivery are made in a different currency than EUR, the exchange rate used to express the amounts in EUR shall be the last day of the accounting period announced by the ECB, or the following day if not published.
Proof of delivery of goods to EU country – the taxpayer of goods should collect the documents related to the B2B and B2C sale transaction.
Correction of IOSS VAT return – if any inaccuracy in submitted VAT return appears, the correction is made in the nearest VAT return, not later than within 3 years counting from the date of the end of settlement period for which the errors were found.
IOSS EXAMPLES – EXAMPLE 1
EU established company sells low-value goods (up to EUR 150) only to the customers in EU Member State where the company headquarter is established. The goods are shipped directly from the territory outside the EU.
Registration to the IOSS procedure is voluntary.
If the company decides to register to IOSS procedure:
- there is no need to use an intermediary because the company is established in the EU Member State,
- the EU Member State of the headquarter is the EU Member State of identification,
- the company will charge and collect from the final customer the VAT applicable in the EU Member State of consumption the goods,
- the VAT identification number for the IOSS purposes needs to be provided to the entity responsible for declaring the goods for release for free circulation in the EU.
If the company decides not to register to IOSS procedure:
- the person designated as liable to pay VAT on the import of goods (usually the purchaser) will have to pay VAT in the EU Member State and, if applicable also a customs clearance fee levied by the company declaring low-value goods to the customs office.
IOSS EXAMPLES – EXAMPLE 2
EU established company imports low-value goods (up to EUR 150 each of goods) in bulk in the EU Member State where the company is established. When the goods have been cleared in the customs office, the company sells the goods to the final customer in the EU Member State where the company is established.
- the IOSS procedure cannot be used for these kinds of transactions,
- if the company imports goods in bulk (up to EUR 150 each of goods) on its own behalf, cleared in the customs office and then sells them to the final customers in the company’s established EU Members State, the IOSS procedure cannot be used in this case,
- when importing goods in bulk take place and there is no possibility to identify a single good/ to a specific final consumer the IOSS procedure in our view cannot be used in this case,
- the general rules (standard or simplified procedure) applicable to the entry and import of goods into the EU must be followed,
- the subsequent, sale to the final consumer in the EU Member State where the company is established, takes place according to the general rules for domestic deliveries,
- the company as a supplier must report this sale in the regular VAT return,
- in case of B2C shipments to other EU countries other than the country of establishment of the seller, the EU OSS scheme may be applied for a supplier.
As ASB Tax
- we provide complex support in implementation taxpayers’ business for VAT, trying to find the best individual solutions according to the transaction background by the taxpayer,
- we support entities in the registration process to obtain the VAT ID number for the purpose of IOSS procedures in the CEE region: Poland, Czech Republic, Slovakia, Hungary,
- If you are a non-EU entity and the intermediary is required for the purpose of the IOSS procedure, we also provide this service;
- we support you in the VAT compliance settlement which allows properly fulfill tax obligations in the countries of the CEE region.
- we may represent your company before the tax authorities if necessary.
For more information, please feel free to contact us:
CEE VAT Compliance Director
Managing Director, ASB Slovakia
Tax Manager, ASB Czech Republic
VAT Compliance Manager