The European Union (EU) recently released a new policy about the value-added tax (VAT) rules implemented on July 1st, 2021. This policy will impact businesses conveyed across EU country borders and businesses exporting products to buyers in this region. These changes will result in reduced administration and more straightforward procedures. Also, it will lead to broader implications for how retailers conduct business in this region. This post highlights the overview of the policy and how it will affect merchants’ operations in the EU.
What is Import One Stop Shop (IOSS)?
IOSS, also referred to as a one-stop import shop, is a new model of VAT payment and declaration, especially for importing products to the EU and cross-border online sales. It allows electronic interfaces and suppliers to sell imported products to buyers in the EU to pay, declare, and collect the VAT to the tax agents, instead of making the customer pay the VAT after importing the packages to the EU.
Advantages of IOSS
- The IOSS facilitates the payment, declaration, and collection of VAT for sellers involved in the sales of imported products to buyers in EU countries.
- The IOSS helps simplify the process for the buyer who pays only at the time of purchase and wouldn’t have to pay surprise fees after the delivery of the goods.
- If the seller doesn’t have an account on the IOSS, the buyer needs to pay a customs clearance fee and the VAT charged by the transporter.
Which Goods Are Covered By The IOSS?
- Transported or dispatched from outside of the EU region
- Transported or shipped in consignments with a value less than EUR 150
- Not subjected to excise duties
What Are the Policies Implemented for Intra-EU distance Sale of Goods?
There are significant changes that impact the tax filing, the rate applied for cross-border orders, and the VAT threshold, which include:
Close-Up Distances Engage In Thresholds Rules
At present, EU retailers must register for VAR in other regions as soon as they attain a specific threshold for the country. For instance, the price rate is €35000 for France and €100000 for Germany. The government has approved the withdrawal of these distance selling thresholds. Cross-border sellers are expected to set their pay rate equivalent to the VAT rate of the client’s country of residence except for the micro-business threshold.
New EU-Wide Threshold for Micro-Businesses
A new exemption now exists for micro-businesses built-in one EU country with fewer sales of €10000 for the previous two years. Retailers who qualify for this policy are allowed to charge the local VAT charges of the EU region where the package originates for the other EU countries they are conveying the goods. Also, they must remit their charges to their local tax office.
One-Stop Shop (OSS) Filing
Merchants can file a single VAT return referred to as OSS filing that is applicable for several EU countries. OSS doesn’t require to entail the registration of individual tax for EU countries. Retailers can use OSS to remit and file VAT for any EU nation they send shipments to, provided it is not their country base or a domestic supply in a region where they hold stock or have a physical location.
For these regions, merchants should always file a local return. OSS made this process more efficient and eliminated the need for registering in several countries. The retailers need to submit some essential documents through their domestic OSS portal and must also keep records for their OSS sales for a decade.
What Are The Policies Implemented For Businesses Exporting Products To Buyers In The EU Region?
There are significant changes that impact the tax filing and VAT threshold for non-EU businesses:
All Orders Conveyed to the EU Regions Are Now Subject to VAT
When buyers based in the EU purchase products shipped from an area outside of that country with total charges below €22 and can be exempted from paying VAT. But, buyers are expected to pay VAT on all shipments to a rate of €150 from July 1st, 2021.
Import duties and VAT will continue to apply on shipments above this threshold. Retailers shipping products to EU buyers from outside of the EU region can collect VAT on packages below €150 to simplify the shipping and buying experience for their customers. However, if merchants choose not to collect VAT on export goods to the EU, customers will have to pay upon the carrier’s delivery.
Import One-Stop-Shop (IOSS) Filing
Retailers who decide to collect VAT on packages below €150 should opt for the newly established import OSS (IOSS) to document a single monthly VAT return exportations to the EU. For Non-EU immigrants, they have to hire a VAT intermediary.