IOSS and Fiscal Representation in the EU
By Alexander Maasik
“What is IOSS and how will it affect my business? Why do I need fiscal representation in the EU and how do I organize it?” These are some of the most common questions our customers ask us on a daily basis.
The reasons for these questions are the new trade regulations that go into effect in July. And govern how goods can be moved into the EU from other countries. The core of these regulations is that sales to the EU consumers by non-EU Marketplaces will be fully subject to VAT from July 1st, 2021. As the import VAT exemption threshold (€22) will be abolished. Also, now marketplaces need to declare all packages in customs and pay taxes based on the VAT tax rates of the country the goods are sent to.
These new trade rules require all eCommerce businesses who sell goods to EU customers to register a company in the EU. Or find a fiscal representative.
European Union will also abolish the exemption of VAT on low-value items that cost less than 22EUR. The changes mean that all orders will be subject to VAT. And EU and non-EU sellers must charge VAT at the point of sale. IOSS is introduced to assist with the reporting of VAT charged at the point of sale.
What is IOSS and how does it affect you?
The Import One-Stop Shop is a new way for handling VAT and other taxes that one must pay when importing goods to any EU country.
It allows businesses to collect, declare, and pay VAT on low-valued consignments (up to €150 in value) in one EU member state. This system replaces the current obligation to register in every country where one is selling goods in the EU.
The IOSS also makes the process easier for the buyer, who is only charged at the time of purchase, and therefore does 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, these fees are charged by the transporter and might come as a nasty shock for the person ordering goods. We can assume, that in case, customers will start preferring online shops that can handle taxation themselves as this will be much more convenient and transparent for the consumer.
How to get a fiscal representative in the EU?
In order to join the IOSS and sell goods to EU customers, an eCommerce seller needs to either register a taxable entity inside one of the EU member states or find a fiscal representative that handles taxation and reporting for goods entering the EU.
As setting up a company can be expensive and bureaucratic, it is much cheaper to use a fiscal representative like Eurora.
Eurora’s platform can automatically handle everything related to sending goods to the EU. From collecting taxes with our Duty & Tax calculator to filling declarations through the IOSS.
Being a registered intermediary, Eurora registers non-EU sellers to obtain an IOSS VAT identification number, which is unique for each seller. And a mandatory requirement if one wishes to sell to the EU consumer.
To obtain an IOSS registration number, Eurora will collect minimum identification information from each customer. This is necessary to assess money laundering and terrorist financing risk according to the anti-money laundering rules. Eurora will act as an Intermediary from July 1st, 2021 on behalf of online marketplaces for VAT reporting purposes in all countries in the EU. This allows the marketplace to effortlessly continue selling their goods without much effort.
The new rules affect everyone who wishes to transport goods into any of the EU’s countries. If you are not ready for them, you will not be able to sell to EU customers from July 1st, 2021.