EU: IOSS and VAT rules for non-EU businesses who import to the EU

May 21, 2021

The EU VAT reform scheduled for July 1, 2021, will bring lots of changes to how B2C businesses operate in the EU. This is valid for both EU and non-EU companies, and it’ll impact the way they register for VAT, but also how they charge it to their customers and remit it to local tax offices. 

The OSS (One-Stop-Shop) scheme, which is a major component of the reform, aims to simplify tax compliance, and also to improve the competitiveness of EU companies. This will be achieved by applying the same VAT rules for imported goods and for goods traded within the EU, which is why it also includes a specific regime for imported goods, the IOSS (Import-One-Stop-Shop)

In this article, we’ll look at how non-EU businesses can apply for IOSS and use it to their advantage, to facilitate B2C sales in the EU. 


Key principles of the IOSS (Import-One-Stop-Shop) scheme for non-EU businesses

There are a number of things you need to know about the IOSS scheme if you’re operating a non-EU business who imports goods to the EU:

  1. You get a single VAT number valid in the EU: This scheme allows you to obtain a VAT number in a single EU country and file your quarterly VAT returns there, in an electronic format. 
  2. You need a VAT intermediary. Non-EU companies will need to choose an EU-based VAT agent as an intermediary.
  3. You can only use IOSS for goods with a value of less than 150 €. IOSS is designed to simplify the trade of low-value consignments. For goods that have a higher value, you’ll need to go stick to the regular import & VAT procedures. 
  4. IOSS is optional. If you prefer to register for VAT in each EU country where you have customers, you’ll still be able to do this. 
  5. Online marketplaces handle VAT on the purchases they facilitate. If you’re selling goods at an online marketplace facilitating the transaction, it’s the marketplace operator’s responsibility to charge and remit VAT. 

These principles make the IOSS scheme relatively simple, and you can already apply for it (since April 1, 2021), in your country of choice. If you don’t, you’ll need to charge VAT to your customers based on the rules and rates of their country of residence. 


The IOSS import process in practice

Let’s now look at what the IOSS process looks like in practice for a non-EU business. 

  1. A customer living in the EU orders goods from you. At the point of sale, you charge them VAT, based on the VAT rate of their country.
  2. You import the goods from outside of the EU to an end customer (B2C) in the EU. 
  3. You don’t pay VAT or import duties when your goods are imported into the EU, if they cost 150 € or less. 
  4. You submit a VAT notification to the tax office in the country where you’re registered for VAT. 
  5. You submit your quarterly VAT return reflecting the VAT you’ve charged and remit it to the tax office. 

For this, you need to be registered for IOSS and for VAT in the EU. We recommend you to register as soon as possible: the IOSS scheme is new for everyone, including local tax authorities, so companies need to plan the switch in advance to avoid application delays. 

How can Fonoa help?

The Fonoa Tax engine automatically determines the correct tax treatment for sales transactions anywhere in the world. After you provide minimal transaction data input, the tax engine will determine if the transaction is taxable, what tax rate applies, and the amount of tax that you need to charge for that transaction.

Reach out to our team to learn more about it.


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