Starting from 1st July, the new VAT policy will be implemented in European Union. How will the new rule impact your e-commerce business? How do e-commerce sellers need to prepare for these VAT changes? What does the difference between old and new policy?
What is IOSS?
The IOSS is Import One-stop Shop, it allows suppliers and electronic interfaces selling imported goods to buyers in the EU to collect, declare and pay the VAT to the tax authorities, instead of making the buyer pay the VAT at the moment the goods are imported into the EU as it was previously the case (for products over 22 EUR).
Why is IOSS being introduced?
First, the IOSS provides more fair competition for the EU companies and outside of EU companies. Before, the import goods value under 22 euros, there was no VAT applied, which means the goods come from outside of the EU would have more competitive selling prices. Second, the IOSS is simplifying the process of collecting and declaring VAT for companies. Third, the government can increase their tax revenue by collecting VAT of under 22 euros imported goods.
How does IOSS impact e-commerce sellers?
The customers buy from the online stores, when they checkout, the VAT will be added to the bill, so the customers buy the VAT when they place orders. For e-commerce sellers, the average checkout amount will be increased, but the part of the mount is VAT, which means it does belong to your store revenue. And you need to declare to the EU.
Do my customers need to pay the import tax when the package deliver?
No need, with the IOSS VAT system, if the product custom declares value is under 150 euros. And the import VAT is already paid when they checkout.
Does the IOSS apply to e-commerce in the EU?
No, if the transaction during the EU, the new system is called OSS (One-stop Shop). This system works for all B2C sales within the EU, and certain supplies of goods. The OSS works for FBA and orders fulfilled by the fulfillment centers in the EU.
What do changes take place after July 1st?
- Ending the 22 euro import value exemption
- Ending Mini One-stop Shop, switch to One-stop Shop
- IOSS VAT system increase the impart tax threshold from 22 euros to 150 euros
- The online marketplace will deem the sellers for collecting and reporting VAT
How can e-commerce sellers register for the IOSS?
- For EU companies, you can register businesses on the IOSS portal of any EU Member State.
- For non-EU companies, they will normally need to appoint an EU-established intermediary to fulfill their VAT obligations under IOSS.