New EU VAT Rules — OSS and IOSS Explained

The European Union introduced new e-commerce VAT schemes on July 1, 2021, affecting businesses worldwide. These changes and the UK’s recent modifications to rules regarding overseas goods sold to UK customers require businesses to implement new systems to ensure compliance. Let’s dive into the new EU VAT schemes, focusing on the One Stop Shop (OSS) and the Import One Stop Shop (IOSS).

The OSS simplifies VAT reporting for sellers, empowering them to report all their pan-EU distance sales on a single VAT return in just one EU country. It eliminates the need for multiple VAT registrations across the EU, providing a flexible and efficient solution. Sellers can declare and pay VAT in a single electronic quarterly return, further enhancing their control over the process. However, businesses may still need foreign VAT registration for sales from a warehouse or fulfilment centre in another country.

Key facts about OSS:

• It came into effect on July 1, 2021.
• The threshold of €10,000 applies to all EU countries combined.
• OSS is not compulsory but recommended.
• Reporting OSS VAT returns and payments is required quarterly.

OSS applies to all business-to-consumer (B2C) sales of goods and services within the EU and distance sales of goods into the EU. EU and non-EU sellers can use OSS, but a seller must register with at least a single EU member state to file an OSS return for their B2C sales of goods within the EU.

The IOSS, on the other hand, introduces a new scheme for reporting sales of goods imported from outside the EU into the EU valued at less than €150. Under IOSS, the importer charges customers VAT at the point of sale and then declares and pays the VAT via a monthly IOSS return. It enables suppliers and electronic interfaces selling imported goods to EU buyers to collect, declare, and pay VAT to the tax authorities rather than requiring the buyer to pay VAT when the goods enter the EU.

Key facts about IOSS:

• It came into effect on July 1, 2021.
• The €22 VAT exemption has been removed.
• All imported goods require VAT payment, regardless of whether your business enrols in IOSS.
• IOSS is not compulsory but recommended.
• Reporting IOSS VAT returns and payments is required monthly.

IOSS applies to parcels shipped from a non-EU country to a consumer based in the EU, valued at or below €150. The value applies to the whole parcel, not an individual item. IOSS does not apply to goods subject to excise duties, such as alcohol or tobacco.

EU and Norway-based e-commerce sellers can use IOSS. Non-EU-based e-commerce sellers can use IOSS if their business has an appointed intermediary to act on their behalf in the country of registration in the EU. This intermediary must be a company established in the EU and is jointly liable to the EU tax authorities regarding their clients’ VAT obligations.

The new EU VAT rules, particularly OSS and IOSS, bring significant benefits. They aim to simplify VAT reporting, level the playing field for businesses selling goods to EU consumers, and reduce cross-border VAT compliance costs. By understanding and implementing these new schemes, companies can compete more effectively in the EU market, fostering a sense of optimism about the changes.

OSS and IOSS Registration

OSS and/or IOSS Registration Portal for the 27 member states:

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