The European Union is the largest economy in the world with 440 million consumers. In 2021, the European eCommerce market peaked at over 465 billion dollars and is expected to reach over 569 billion dollars by 2025.
If you are an online seller, the EU is thus an Eldorado you shouldn’t miss. Yet, ever-changing rules imposed by the European Commission make the EU a difficult market to reach. In July 2021, the European Commission changed the EU VAT rules and created the IOSS scheme which leaves many companies confused.
What better way to understand the IOSS than directly asking an expert? We spoke with Triin Prei, Tax Consultant at Eurora. She explained why the IOSS is vital for online sellers who dispatch goods from outside the EU to customers in EU Member States, shed some light on the difference between IOSS and OSS, and shared how Eurora’s IOSS service works.
Before joining Eurora, Triin worked at the Estonian Tax and Customs Board for over 8 years as a Tax Auditor and a Team Lead. She has extensive experience in handling various tax questions, conducting tax audits, and advising businesses about the tax risks that may occur.
Here is what she shared with us.
What is the IOSS and why is it recommended to trade with the EU?
If you are a non-EU-based business and you sell your goods to the EU, you most likely experienced the new EU trade rules as an overwhelming tidal wave. These new regulations have changed the way you can do business with the EU, and many sellers, like Charlie from Plant Faced Clothing, struggled to keep their activity running in Europe.
From July 2021, the Low-Value Item Exemption that was in place for many years has been abolished. This exemption allowed businesses to ship goods to the EU with a total value under €22 free of VAT. In other words, from July 2021, all commercial goods imported to the EU are subject to VAT. Since many packages entering the EU cost less than €22, a lot of sellers didn’t have to think about how to calculate the EU VAT before.
The Import One Stop Shop (IOSS) was created by the European Commission to help businesses cope with these new regulations. With the IOSS, you register in one of the 27 EU tax authorities only and submit one monthly IOSS VAT return. You also collect the VAT from your customer when they place an order where the value of goods is up to €150.
If you are not familiar with the IOSS scheme, you might wonder why collecting VAT from your clients would help you. Triin explained it well. “With the IOSS, you collect the VAT from your customer at the moment of sale, which means they don´t face any unexpected fees in customs. The goods will move through customs faster because the VAT is already collected and paid. And with that scheme, you only need to submit the IOSS VAT return in one EU Member State where you are registered for the IOSS.”
Without the IOSS, your customers will have to pay VAT and handling fees when they receive their goods. Customs procedures will take longer and may end up with you losing your customers.
What is the difference between the IOSS and the OSS?
You may have heard about different schemes and got confused about what they are and who they are for. The European Commission not only created the IOSS scheme but also the Union OSS and non-Union OSS to cover different case scenarios. These schemes apply to different sellers, but they have the same purpose: facilitating the collection and declaration of EU VAT.
As we saw, the IOSS is for sellers that dispatch goods from outside the EU, to customers in the EU. Triin gave more precision: “The IOSS is for distance sales of low-value goods up to €150 imported into EU from a third country.” The One Stop Shop (OSS), however, “applies to supplies of services to EU consumers and distance sales of goods within the EU. This means that the goods are previously imported to the EU from a third country or already located in the EU.”
If we take a closer look at the OSS, it is divided into two schemes: the Union OSS and the non-Union OSS. The Union OSS applies to the distance sale of goods within the EU both for companies established in and outside the EU. Companies established in the EU can also use the Union OSS scheme for B2C services. The non-Union OSS is for sellers that are not established in the EU and offer B2C services to clients inside the EU.
We are now clear about who these schemes are made for. Still, you might wonder if the OSS works the same way as the IOSS. If you use the OSS, you will be able to register in a single Member State. There is no need to register for VAT in every country you may sell. You will also collect VAT from your clients when you conclude the sale, and you will be able to declare all your sales to different EU countries through one VAT declaration.
How does Eurora’s IOSS service work?
If you are a non-EU business and you want to use the IOSS scheme, you will need a fiscal representative. You cannot get an IOSS number on your own. In other words, you need a VAT intermediary registered in the EU, and this is where Eurora’s IOSS service comes in handy. Several companies offer an IOSS service, but Eurora was the first registered Fiscal Representative for IOSS in the EU.
Triin explained that Eurora’s IOSS registration is fast, with flexible pricing, and automated service. She also specified that Eurora’s IOSS service is unique because it combines automation with a personal approach. Each client has a personal tax consultant who accompanies him and answers his questions.
You will have a personal tax consultant, that a lot of other companies don´t offer. That means one person will handle all your declarations and tax matters and will be available to answer your questions quickly via email or a video call.
You might wonder if our IOSS service is suitable for your business. Eurora’s IOSS service is for all e-commerce companies that sell low-value goods from third countries to consumers in the EU. There is only an exception for goods subject to excise duties. “We have customers from all over the world – UK, Australia, Switzerland, USA, China,” says Triin.
To start using our services, you will need to fill our registration form and give some basic details. “This is because we have to comply with the legal and regulatory requirements,” explains Triin. Once the registration form is complete, Eurora can apply for your IOSS number. Triin explained that it can be done “in one working day, and you can start to use the IOSS scheme”. As you now know, it means that you will have to collect VAT from your EU clients any time you conclude a sale under €150 with them. “Once a month we will submit the IOSS VAT return on your behalf and for that, we need your sales data. You can send data with an excel file or via API integration,” specified Triin.
What’s next with Eurora’s VAT services?
Eurora has over 200 clients worldwide and closed an impressive $40 million Series A round in April. In this context, Eurora’s goal is to improve its existing products and develop new ones.
Eurora’s IOSS service is already an end-to-end service as Triin explained. “Our monthly service includes VAT return preparation and submission. It also includes VAT data verification, VAT payment transfer plus record-keeping, data archiving, representation before the Tax Authorities, and of course consultation.”
The focus will therefore be on developing integrations with different e-commerce platforms. “Our customers could have a fully automated IOSS service – tax calculation and sales data transfer,” says Triin. “Eurora Service Portal just launched as well. You can test our services there by using a demo page, onboard yourself, and become our customer,” she added.
The IOSS is only one of the many services we offer to make sure you comply with global trade rules. We offer UK VAT agent services, automated Custom Clearance, Duty&Tax Calculation, HS code Allocation, and even Restrictions Screening.
Is your business struggling to reach EU customers? Get in touch with us and Triin’s team will take care of your IOSS registration in a few days!