EU VAT rules for non-EU e-commerce: guided info on the Import-One-Stop-Shop (IOSS)
From July 1 2021, important changes to the EU VAT rules are introduced. The changes will affect e-commerce businesses outside of the EU, so UK, US and China, with international shipping when they ship from China, the UK or the US into the EU. As of today, e-commerce sellers, re-sellers or marketplaces can appoint B2C Europe as their IOSS Customs Clearance agent and we’ll take care of the rest. Also companies like carriers, consolidators and other logistic companies can engage with B2C Europe regarding the IOSS. In this article, we offer you guided info on the IOSS and the new VAT rules in the EU, from July 1, shared by B2C Europe’s customs experts.
The IOSS: what is it?
The Import One Stop Shop (IOSS) is an electronic portal that can be used from July 1. The portal facilitates and simplifies the tax declaration and payment of VAT for distance sales of imported goods with a value of up to € 150. The IOSS covers products shipped or transported from outside the EU at the time of sale, products with a value not exceeding € 150 and not subject to excise duties (e.g. alcohol or tobacco).
Until now, according to the old VAT rules, no import VAT had to be paid for goods with a value of up to € 22. This will change, because from July 1, 2021 the exemption for shipments under € 22 will disappear. This means that consumers will also have to pay VAT for products with a low value.
Why are the VAT rules changing?
Products sold from outside Europe that are sold online below the exemption limit were not subject to VAT in the past. But if exactly the same product is in the store, then the products are subject to VAT. Various stakeholders therefore see the difference between offline and online sales as a form of competition distortion. As a consequence, the stakeholders have been proved right and from July 1, 2021 the € 22 threshold will disappear. Then there is a level playing field, which means that identical goods from within and outside Europe are taxed equally, both offline and online. So these new rules will also be applicable to UK e-commerce retailers shipping to Europe due to the Brexit.
What is the green lane solution?
The removal of the import VAT threshold is doubtless the change with the biggest impact on customs clearance formalities. As result of this provision, all commercial goods imported into the EU, regardless of their value, are subject to VAT as of July 1, 2021. In order to allow VAT to be levied, all imports into the EU will have to be declared at the border using an electronic customs declaration. For this procedure the “super-reduced data set” (H7 Dataset) containing 24 data elements is introduced. This simplified dataset is applicable for parcels up to € 150 and when the IOSS scheme is used. Because the customs clearance process will be a simplified and automated procedure, this is called the “green lane” solution.
B2C Europe as your IOSS Customs clearance agent
B2C Europe can act as IOSS Customs agent (direct or indirect) on behalf of your e-commerce store or e-commerce customers in order to declare the products to customs in the country of import. We offer a centralised customs clearance solution in the Netherlands and Belgium, which means that you do not have to clear your products in every destination country separately. B2C Europe can perform the customs clearance in the Netherlands and Belgium with the use of the H7 dataset through a direct IT integration with local Customs authorities. We are currently developing the exact same solution in France (Paris), Spain (Madrid) and Italy (Milan).
In the Netherlands and Belgium, we can clear each consignment on an individual level using an automated process that allows us to pre-clear your parcels before they arrive, so called pre-lodged customs declaration. This way we prevent any additional formalities at the moment of import that may increase the handling time and delay the delivery of the parcels. This pre-lodged customs declaration is also valid for the H7 dataset. Customs will have the possibility to carry out the pre-arrival risk analysis and consequently identify high-risk consignments and allow the swift release of low-risk goods immediately after their presentation.
IOSS ID Number: exempt your goods from VAT
The IOSS VAT identification number of the company selling the products, or the marketplace is one of the data elements of the H7 dataset. By using this IOSS number, B2C Europe can ensure that the importation of the goods declared is exempted from VAT. Customs authorities may perform checks to see if the conditions for the VAT exempt importation and, if applicable, the conditions for the use of the specific customs declaration are met.
The validity of the IOSS VAT identification number provided in the customs declaration is checked electronically by the customs authorities against the IOSS VAT identification number registry. The database will contain all the IOSS VAT identification numbers assigned by all EU countries. If the IOSS number is valid and the intrinsic value of the consignment does not exceed EUR 150, the customs authorities will not request the payment of VAT on low value goods imported under the IOSS.
The Customs authorities will create a monthly listing containing the total value of imports of low value products declared in the EU country of import for each IOSS VAT number during a given month. This listing will be made available to tax authorities in the EU who will compare this data with the value of the VAT declared in the IOSS return by the same IOSS number. In the end, the Tax authorities will take care of the distribution of the collected VAT to the authorities of the destination countries.
How can you minimise administrative burden?
All products under € 150 can be declared throughout Europe in the single IOSS. The VAT rate applied for each transaction should be based on the end user’s country of residence. The online entrepreneur who receives the VAT is obliged to transfer it to the EU. Therefore, you have to submit a declaration twelve times a year to the tax authorities of the member state where you are registered with your IOSS VAT number. In order to minimise the administrative burden, you only have to register and pay VAT in one country.
The tax authorities receive VAT and an appendix stating exactly how it should be redistributed among the various European member states. To verify this, the tax authorities will compare this with the import data from the customs authorities. That is why it is essential to register all your products correctly and digitally!
What are the benefits of using the EU VAT’s Import One-Stop Shop?
As on e-commerce retailer, you’re keen on saving time and money, work as efficiently as possible and comply to VAT regulations. The IOSS is of added value for your business, as these are the key benefits:
- The IOSS facilitates the collection, declaration and payment of VAT for sellers that are making distance sales of imported goods to buyers in the EU.
- The IOSS also makes the process easier for the buyer, who is only charged at the time of purchase, and therefore does not face any surprise fees when the goods are delivered.
- If the seller isn’t registered in the IOSS, the buyer has to pay the VAT and usually a customs clearance fee charged by the transporter.
Protect yourself from fraud
Unfortunately, the way the IOSS scheme is currently set up, makes the system subject to fraud and misuse. B2C Europe identified the risk that the holder of the IOSS number can be held responsible for the VAT payment on shipments coming into the EU containing their IOSS number while the actual sales are not performed by the marketplace or seller connected to this IOSS number. Therefore, it is very important that the IOSS VAT identification number is securely transmitted between involved parties before being communicated to the customs authorities. This to prevent fraud and misuse of the IOSS number by other companies.
Communication of the IOSS VAT number should be kept to the minimum necessary. Consequently, it should only be transmitted to the parties in the supply chain that will need it for the release for free circulation in the country of importation.
B2C Europe as IOSS agent and customs agent has developed specific solutions for e-sellers and marketplaces in order to fully protect the IOSS number from fraud and misuse. This way you will not have to establish contractual agreements and strict rules regarding the use of your IOSS VAT number with your underlying suppliers or transport companies. The exact services strongly depend on your IT environment and we can provide you with more detailed information on request. In the medium term, the EU is working on introducing a direct exchange of information between sellers / marketplaces and customs authorities regarding the IOSS number, which will be similar to the services that B2C Europe has developed.
Where can I find more information about IOSS?
The EU has published lots of useful information regarding the EU VAT changes and the Import One-Stop-Shop on the Commission website. This can be found here.
Or contact us to talk about how we can unburden you when shipping parcels from your webshop internationally.
And what about the OSS (One-stop-shop)?
Want to know more about OSS? Check out this blog and you’ll read everything you need to know about the One-Stop-Shop and the new VAT regulations for the EU from July 1st.
How do you scale up your business while ensuring you provide the highest standard of shipping services? A multi-carrier strategy could be the answer.
Europe is one of the most advanced markets in e-commerce with fairly complex parcel delivery supply chains. Building on our core expertise, we create logistics solutions for e-commerce that integrate with your entire supply chain.
Maersk announced its intent to acquire B2C Europe on August 6th, 2021 and today it is announced that A.P. Moller – Maersk has completed the acquisition.