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EU VAT Changes & preparing for the IOSS

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EU VAT changes IOSS July 2021

What will the EU VAT changes mean to me?

As of the 1st of July 2021, the EU will put into effect their new unified VAT system. As the UK is no longer part of the EU, special considerations must apply if your business sells products in the region.

The current 22 Euro VAT exemption threshold is to be removed, meaning even low value sales will incur import VAT charges.

To facilitate these changes and ease in the collection of VAT, the EU are introducing the IOSS, or Import One-Stop Shop. There will be limits to IOSS use for shipping goods in consignments of no more than 150 Euro.

Anyone can register on the IOSS portal with any EU member state. Despite that, businesses based outside of the EU will need to appoint an EU-established intermediary in order to do so.

To simplify things, the EU requires e-commerce platforms such as Amazon and eBay to register with the IOSS. Also, they will collect VAT on behalf of their users.

The new system will assign an IOSS code to you, either directly from the IOSS or from your e-commerce platform. Thus, you can then pass on to your chosen courier.

Although it’s not strictly compulsory to use the IOSS for your EU sales, failing to do so will have consequences for your customers. This can lead to customer service disasters. If EU customs are met with an import that has no VAT paid (DDU), it should fall under what they call the Special Arrangements Scheme. In these circumstances what should happen is that the goods clean customs on the understanding that the courier will collect the VAT from the end customer. This in itself might come as an unpleasant shock to a customer. However, it is also possible additional customs clearance charges or admin fees can occur to your customer by the courier.

Use of the IOSS allows your customers to pay for everything at the point of sale and avoid any unpleasant surprises.

EU VAT with Cloud Commerce Pro

At Cloud Commerce Pro, we are working hard to ensure we are as prepared as possible for these unique changes. You should send IOSS codes directly to us from your platform so we can pass up to the courier automatically. You will also be able to enter a personal IOSS number if you are selling to the EU via your own website.

As with any big changes in international trade regulations, you can expect a few teething problems as the industry adjusts to this new way of working. Whilst EU governmental bodies try to make these new processes as transparent as possible, we won’t know the full ramifications until they come into effect. We advise everyone to act early and get themselves up to speed so they can hit the ground running.

For more information on the IOSS and how to apply, please check the links below:

The Import One-Stop Shop

FedEx – Changes to EU VAT rules

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