iOSS: a VAT shortcut for non-EU sellers in the EU
The EU VAT rules for e-commerce will change on 1 July 2021. In order to create a level playing field for online retailers and web shops established inside and outside of the European Union, all B2C sales of goods will become subject to VAT in the EU country where the customer receives the goods.
The key changes are that:
- All B2C sales of goods will be subject to VAT in the country where the goods are received.
- The seller, also being the importer of goods dispatched from a non-EU country, is required to charge, collect and pay this local VAT.
Without any special rules, the seller would have to register for VAT in any country where the customer receives the goods.
However, for goods coming from a non-EU country, a special scheme will be available, the iOSS (import One Stop Shop). This scheme enables the non-EU seller to obtain an EU VAT registration in just one EU country and report the local VAT due on the EU B2C sales in that country electronically. Non-EU sellers who want to use the iOSS must meet certain requirements. For example, they are obliged to appoint a ‘VAT Intermediary’ that is established in the EU.
iOSS only for ‘low value consignments’
Under the current rules, there is an exemption from VAT for the importation of goods with a maximum value of EUR 22. There is also an exemption of customs duties if the intrinsic value is less than EUR 150. As of 1 July 2021, the VAT exemption will be replaced by the new iOSS scheme.
As a general rule, all commercial goods imported into the EU from a non-EU country will be subject to VAT on importation irrespective of their value, except for ‘low value consignments’ that fall under the iOSS scheme.
The iOSS scheme is an optional special scheme for goods being sent from outside the EU, to customers based within the EU with an intrinsic consignment value of less than EUR 150. In essence, the iOSS scheme can be summarized as follows:
- Using the iOSS rules, the non-EU seller, being the importer, does not pay VAT or customs duties upon importation of the (low-value consignment) goods in the EU.
- The non-EU seller must charge local VAT on its sale to the customer in the country where the customer receives the goods.
- The non-EU seller must report this VAT by submitting a ‘VAT notification’ to the tax authorities of the country where it is registered for the iOSS scheme.
If a non-EU online retailer sells and delivers goods from a non-EU country to a customer in the Netherlands, whereby the goods are imported into the Netherlands on behalf of the seller (consignor), the non-EU seller does not have to pay VAT upon the importation of the goods, but he will have to charge Dutch VAT on the sale to the customer.
Non-EU deliveries via an electronic interface or marketplace
Special rules apply if the non-EU seller uses an online marketplace of platform to make its B2C sales to EU customers. If the sale of goods is made through a facilitating marketplace, that marketplace is considered to have made the sale to the consumer and is responsible for the VAT due on that sale (platform fiction).
The condition is that the seller/consignor is established outside the EU and does not have a permanent establishment in one of the member states of the EU. The platform fiction concerns domestic deliveries as well as intra-Community distance sales.
For goods coming from outside the EU, the marketplace is deemed to import the goods when communicating its iOSS VAT-ID number , and is liable to pay VAT due on the sales of goods to the consumer in the EU country of consumption.
Due to this platform fiction, the supply from the third-country supplier to the marketplace is deemed to be a B2B sale, which is deemed to be outside the EU.
Register in time for iOSS
A non-EU online retailer can register for the iOSS scheme from 1 April 2021. As the scheme is not only new for the sellers, but also for the governments and tax authorities, it is recommended to apply for the iOSS registration as soon as possible. The processing time at the tax authorities is expected to increase as the date of 1 July 2021 approaches. If you register too late for the iOSS, you will probably face additional obligations in the countries where you are liable for VAT (registrations and submissions).
The iOSS scheme is optional, and it can only be used for low-value consignments. If a non-EU seller cannot or does not want to use the iOSS scheme, the non-EU seller is required to charge and pay local VAT, as this will apply to all B2C sales for imported goods as of July 2021. Not using the iOSS scheme may thus result in one or multiple ‘normal’ VAT registration requirements.
For the iOSS scheme, you must meet the following conditions:
- You deliver directly to customers who do not submit a VAT return (B2C transactions). This includes private individuals, but also, for example, entrepreneurs who do not have to submit a VAT return.
- The goods are shipped directly from a place outside the EU to the place of destination in an EU country.
- The goods are part of a single consignment of which the intrinsic value is less than or equal to EUR 150 (Low Value Goods).
- In order to use the iOSS scheme, the non-EU seller must register for the scheme with the tax authorities in an EU country.
- When the goods are imported, an import declaration is made, stating the special iOSS identification number of the supplier.
- Furthermore, the non-EU seller must appoint a ‘VAT intermediary’, who will be responsible for the submission of the monthly VAT notification to the tax authorities, on behalf of the non-EU seller.
EU VAT intermediary
A VAT intermediary must be established in the EU, and it must be registered with the tax authorities as ‘VAT intermediary’. A non-EU seller who wants to make use of the iOSS scheme can only appoint one intermediary for all his B2C sales throughout the EU.
The VAT intermediary is responsible (and liable) for reporting and paying the VAT due on the B2C sales of the non-EU seller.
LESS GREY acts as your VAT intermediary
The Less Grey group is a VAT specialist organisation advising and supporting companies in fulfilling their rights and obligations regarding VAT in Europe. The Less Grey business model focuses on making the most of digitization and automation of data and reporting obligations.
Specifically for the fulfilment of the iOSS compliance obligations of foreign companies in the Netherlands, Less Grey is a reliant partner that offers high-quality automated solutions acting as VAT intermediary towards the Dutch tax authorities for your EU B2C LVG sales.
If you have any questions or would like to discuss the options and possibilities for your situation, please feel free to contact us. We can discuss your specific situation and your questions during a (video) call.