Fiscal Representation in the EU

Fiscal Representation in the EU – Why and How?

By Alexander Maasik

Apr 29, 2021|4 min read

Starting in July 2021, marketplaces that sell goods to the customers of the European Union, face new regulations. They must either register a taxable entity in the EU or get fiscal representation for themselves.

This is because the EU will abolish the import VAT exemption threshold. And due to that, all sales to the EU consumers by non-EU sellers will now be declared in customs. And will also be fully subject to VAT and other taxes. The non-EU sellers can collect import VAT at the point of sale on consignments valued up to €150 through an Import One-Stop-Shop (IOSS) scheme.

To use the IOSS, non-EU sellers must have fiscal representation in the EU. Fiscal Representative is a tax-registered company in the EU that acts on behalf of non-EU sellers for VAT reporting purposes.

What is the IOSS?

The Import One-Stop Shop is a new system for handling VAT and other taxes that one must pay when importing goods to any EU country.

With the seller now responsible for collecting and paying VAT, marketplaces must also use a system like Duty & Tax Calculation to display the right VAT rates in their shopping carts. And to collect the right amount of VAT from their customer.

The IOSS makes the process easier for customers. As they are now only charged at the time of purchase, and therefore do not face any surprise fees when the goods are delivered.

If the seller is not registered in the IOSS, the buyer must pay both VAT and any customs clearance fees themselves. In this case, the carrier company will charge these fees. This will come as a nasty shock for the person ordering goods.

How does Fiscal Representation tie to this?

To declare VAT and other taxes to the EU through the IOSS, the seller must be represented in the EU.

Companies can open a business in any of the 27 EU member states and apply for an IOSS number in this country. In that case, the new company will declare and pay taxes to that country for all EU sales. However, as setting up a legal entity can be expensive and frustrating, it makes more sense to get oneself a Fiscal Representative.

A fiscal representative is a company that offers the service of declaring and paying VAT on behalf of the seller.

Eurora is one of the first companies in the world who is registered to offer this service. Being an intermediary, Eurora registers non-EU sellers to obtain a mandatory IOSS VAT identification number. These numbers are unique for each seller.

To get an IOSS registration number for a client, Eurora collects minimum identification information from each customer. This is necessary to assess money laundering and terrorist financing risk according to the EU anti-money laundering rules. Eurora will then act as an intermediary on behalf of the marketplaces for VAT  purposes in all countries in the EU.

Integrations with other services.

If a company also uses other Eurora services like the Duty & Tax Calculation or HS Code Allocation, the system will easily put together the VAT data for the IOSS.

So, for a marketplace, it makes sense to use one platform to handle each part of automation.

Eurora is a cross-border compliance platform that was developed with just that goal. To fully automate all aspects of cross-border trade. And to make shipping goods to any part of the world as easy as possible. Eurora’s fully automated and science-backed AI-based solutions allow companies to save time and resources while handling large amounts of data near-instantly and precisely.

So don’t hesitate to reach out if you wish to learn more about how to keep selling goods to the EU.