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EU: VAT IOSS - What businesses need to know about the

(S) Do you export low-value parcels to Europe? Arne Mielken of Customs Manager says non-EU sellers can use simplifications to accelerate imports.

The growth in online shopping has been turbocharged by the global pandemic, with more and more small parcels being exported between the UK and Europe.

Until recently, non-EU businesses could sell goods directly to consumers in the European Union (EU) without paying import VAT if the consignment was valued at €22 or below.

This has given the UK and other sellers a competitive edge over EU suppliers of similar goods, although the system has been abused by some sellers who under-declare the value of their goods to avoid import VAT.

VAT exemption axed

But the exemption on low-value consignments was scrapped on 1st July 2021 and since then, all imports are subject to EU VAT, irrespective of their value. Now, you will have to charge your EU customers VAT at the point of sale, rather than pay import VAT, for consignments of €150 or below.

Not surprisingly, many UK businesses fear that having to collect and account for this additional VAT will result in even more red tape. Not only will you have to work out what VAT rate to charge customers in different EU countries, but you may also have to adapt your e-commerce payment systems to charge VAT at the point of sale.

In some cases, however, you may be able to offload the VAT collection to postal operators, express carriers and customs agents.

Import One-Stop-Shop

The good news is that you can opt to use the EU's Import One-Stop-Shop (IOSS), which is designed to simplify the reporting and payment of VAT on consignments valued at €150 or less.

This should reduce paperwork for many non-EU traders, who won’t have to register for VAT in different EU countries. Those that use it can submit a quarterly return to just one tax authority in one member state and pay your VAT wherever you have registered your IOSS account.

Bear in mind, though, that the different VAT rates of the countries where your customers live will still apply, so you will need to invoice them accordingly. The new VAT regime should also benefit EU consumers, who won’t have any surprise import costs when their goods arrive, because they will have already paid for them.

If you are eligible to use the one-stop-shop, remember to include your IOSS identification number on all relevant invoices and packages. This will ensure that the customs authorities know that import VAT has been correctly declared.

And if you sell goods via online platforms, check whether you need to make changes to your IT systems to allow for the correct VAT to be charged.

More detail

We have created a presentation for you to understand how IOSS really works in a Presentation for you to download. Also, access EU guidance, EU Member States OSS contact points and much more.

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