In the last year, the European Commission has put forward two proposals, the “VAT in the Digital Age” and the “EU Customs Reform,” which could significantly expand the scope of the Import One Stop Shop over the next several years.
What is the Import One Stop Shop?
The Import One Stop Shop (IOSS) is a special regime for the payment of VAT on low value imports into the European Union (EU). Registration for IOSS is currently available to both regular businesses and for marketplace facilitators acting as deemed suppliers. Registration for IOSS is currently optional.
Businesses that register for IOSS are required to collect output VAT on their business to consumer sales of goods into the EU when the goods are shipped in consignments of 150 Euros or less. In such cases, the place of supply of goods shifts from the place where transport of the goods begins to the place where transport ends. Goods sold under the IOSS scheme are exempt from import VAT, which relieves the importer of record of any obligation to pay VAT on such supplies.
Businesses register for IOSS in a single EU member state. Any supplies they make that fall under the IOSS scheme are then reported on a single IOSS return, regardless of the member state to which the goods are supplied. Output (domestic) VAT on the goods is charged, however, at the rate of tax applicable in the member state to which the goods are shipped.
Business to business supplies, supplies of goods over 150 Euros, and supplies of goods subject to excise tax are all excluded from IOSS and are thus subject to normal import procedures.
What is changing under VAT in the Digital Age package?
The VAT in the Digital Age (ViDA) package would make use of IOSS mandatory for online marketplaces. Specifically, the package amends Article 369m of the VAT Directive, which controls who can register for IOSS, to require that persons who are deemed suppliers per Article 14a(1) of the directive must use the IOSS scheme. Article 14a(1) applies to taxable persons who facilitate “through the use of an electronic interface such as a marketplace, platform, portal or similar means” the B2C sales of low value goods into the EU.
These changes were originally scheduled to take effect on January 1, 2025. However, it was recently proposed that this be delayed to January 1, 2026.
What is changing under the EU’s proposed Custom Reforms?
Under the Customs Reform package, the low value goods threshold will be removed from IOSS. This means that IOSS could be used for all B2C sales of goods into the EU, and not just those valued at less than 150 Euros. This change would potentially simplify use of the scheme and allow the EU to treat imports in a more uniform manner.
The reform also removes the 150 Euro threshold from Article 14a(1), meaning that online marketplaces would become the deemed supplier for all B2C sales of imported goods into the EU and not just those of under 150 Euros. Taken together with the changes from the ViDA package this means that marketplaces will be required to use IOSS for all B2C sales of goods into the EU which they facilitate.
These changes would be scheduled to take effect on March 1, 2028.
What should businesses keep in mind?
In the short-term, businesses acting as marketplace facilitators who have not already registered for IOSS should begin looking into the registration process and determining in which member state they would want to register. Additionally, such businesses will need to adjust their internal processing to account for the distinction between consignments of above and below 150 Euros.
In the longer term, businesses that are not already registered (or required to be registered) for IOSS should examine whether the elimination of 150 Euro threshold could simplify IOSS to such an extent that registration will ultimately ease their VAT compliance burdens.
Reach out to our team to learn more about the IOSS expansion and what it means for your business.