The EU e-commerce VAT package was introduced in July 2021. The new schemes, One Stop Shop (OSS) and Import One Stop Shop (IOSS) bring significant changes to VAT treatment and reporting mechanisms for sales to private individuals in the EU.
In the last of our series of FAQ blogs, we answer some of the more common questions asked on the IOSS.
In previous pieces, we’ve looked at understanding marketplace liability, understanding OSS and understanding IOSS and imports
Q: What is IOSS VAT?
IOSS VAT is the VAT collected at the time when the supply takes place and subsequently remitted to the tax authority in the Member State of Identification (MSI).
Under the old rules, when goods imported from third countries were sold to private individuals, the normal steps would require the supplier to account for import VAT, then account for the VAT on the subsequent supply (the sale to the private individual) then deduct the import VAT.
Instead, with IOSS, the VAT on the import is exempt and only the VAT on the subsequent supply is to be collected and remitted to the tax authority.
Q: What is IOSS?
IOSS is short for Import One Stop Shop. This is a special scheme that simplifies the registration obligations for taxpayers who carry out distance sales of goods imported from third countries to private individuals in the EU.
Similar to the OSS, the IOSS scheme allows taxpayers to register in a single EU Member State where they account for VAT that was actually due in other Member States.
Here’s an example. A business registered for IOSS in the Netherlands, can account for its sales to German, French, Italian, Polish etc. customers in its Dutch IOSS return thus avoiding the requirement to register in multiple jurisdictions.
Other advantages of using the schemes are:
- Making use of the exemption from import VAT.
- No customs duties are due at importation.
The scheme, however, is restricted to consignments of up to €150. Additionally, signing up for the scheme requires careful analysis of the taxpayer’s profile, the way the supply chain is structured and other factors. All of these would affect the business’ eligibility for the scheme, and the requirements to appoint a special type of representative for the purposes of the scheme that is required in certain cases.
If such representative is required, they will be jointly and severally liable with the taxpayer’s IOSS obligations. It’s also important to note that such representative must be established in the EU.
Q: What is an IOSS number?
An IOSS number is the specific identification for the IOSS scheme that is designated by the MSI (the country where the taxpayer is eligible or decides to register for the scheme) to the taxpayers that have decided to make use of this mechanism.
Although IOSS identification is a type of VAT identification it’s not an actual resident VAT registration in the MSI.
Instead, it’s an IOSS number specifically for the purposes of the scheme. In this sense only the eligible type of supplies can be accounted for using the IOSS number and the IOSS registration. In case the taxpayer will carry out other type of supplies which require a regular VAT registration the latter should be obtained for the purposes of being compliant.
Q: How much does IOSS cost?
The cost of IOSS compliance can vary depending on multiple factors. This would be ultimately affected by:
- The scope and the quality of the service offered by different providers. For example, a low-cost provider would have the best price, but it will not offer the full scope of compliance service in terms of detailed data checks, instant client communication, providing compliance or ad hoc advisory services. On the other hand, mid-market providers would be best suited to provide a balanced price that would have the added value of more coherent, consistent and higher quality service.
- The requirement to appoint an IOSS representative that is established in the EU. For example, should a taxpayer need to appoint such representative, the cost would be higher as the latter would be jointly and severally liable regarding the taxpayer’s IOSS obligations.
Q: Who needs an IOSS number?
An IOSS number is required for any taxpayer that wants to make use of the IOSS special scheme. This mechanism isn’t mandatory hence there’s no obligation to apply for an IOSS number.
However, it is advisable that any taxpayer that carries out supplies eligible to be reported using IOSS should consider this option as it has some considerable advantages. Of course, the consideration should also include the numerous requirements and conditions that must be met if a person opts to use the IOSS scheme.
Q: What’s the difference between IOSS and OSS?
Both are special schemes used to simplify the registration obligations for taxpayers involved in B2C supplies. They provide an option to account for VAT, that is due in multiple EU VAT jurisdictions, using a single registration and only one IOSS or OSS return.
The difference between both schemes is the different types of supplies that can be accounted for. More precisely:
- IOSS can only be used to account for B2C distance sale of goods imported from third countries, whereby the eligible supplies are restricted to a single consignment value of up to 150 EUR.
- OSS can be used to account for B2C intra-Community distance sale of goods irrespective of the consignment value.
Considering the above, the main difference is that with IOSS the goods are located in a third country (outside the EU customs territory) at the time of the sale, whereas with OSS the goods are located within the EU’s territory.
Q: Do I need to register for IOSS?
No, IOSS is currently an optional scheme for taxpayers. If not used, the taxpayer’s supplies are subject to the normal rules and depending on the way the supply is structured normal VAT registration/s may be required instead.
Q: What is IOSS tax ID?
IOSS tax ID is the special IOSS VAT number assigned to a taxpayer that has chosen to opt in for the IOSS scheme. It‘s not a regular VAT number that is assigned in the course of a normal VAT registration but is instead used to identify a taxpayer specifically for the purposes of the scheme.
Also, in more practical terms, the IOSS number must be indicated in a specific way on each shipment/supply in order to identify it as eligible under the IOSS as this would allow for:
- 1Quicker customs procedures
- Exemption of the import VAT
- No customs duties will be charged
- The VAT on the supply to be accounted for under the monthly IOSS VAT return of the taxpayer