Merchants outside of the European Union (EU) face some challenges when selling into it. For example, the United Kingdom (UK) no longer being part of the EU single market has presented distinct challenges to UK merchants who wish to sell online to customers located in EU member states.
The EU low value consignment relief rules were scrapped, and new rules were introduced from 1 July 2021, which have resulted in a requirement for merchants (or the marketplace where this is the deemed seller), to charge VAT at the point of sale, using the rate applicable in the customer’s member state, where consignments of goods valued at €150 or less are imported into the EU and sold to non-business customers.
The EU appreciated that this change could result in a requirement for merchants to register for VAT in up to 27 member states, so the EU Import One Stop Shop (IOSS) scheme was launched in mid 2021. This scheme allows a merchant (or a marketplace where it is the deemed seller) to register for an IOSS number in one member state to collect and remit the VAT due in all member states on one IOSS return. The scheme cannot be used for goods that are subject to excise duties such as alcohol and tobacco products.
The merchant passes their IOSS registration on to the parcel carrier with an order to evidence that VAT has been paid on the order, removing the need for local customs authorities to intercept a parcel and demand payment of VAT by the customer.
While the scheme does address some of the issues, there are still hurdles to jump for small to medium merchants.
The cost of registering for an IOSS number is not insignificant, and there remains a compliance overhead, both in understanding and applying the correct VAT rate for a given product and destination country, and the effort of remitting VAT under the IOSS scheme.
Using Taxamo Assure could, therefore, result in time and cost savings, as Taxamo acting as the deemed supplier, can take care of calculating and remitting the VAT due on consignments of low value goods imported into the EU via its IOSS registration.
Also, using Taxamo’s IOSS number should ensure that low value goods are released more quickly when they arrive in the EU and the customer receives a speedier delivery of those goods as a result. If an IOSS number is not used, the customer will be required to remit the import VAT directly to the customs authority. This is not an ideal customer experience, as customers may experience delays in receiving their orders, and potentially be liable for additional administrative fees, and the customer may refuse to accept the package/parcel as a result.
Updated over 1 year ago