IOSS: The New EU Import Simplification Scheme — What You Need to Know

VAT rules before July 2021 Until 1 July 2021, businesses in and outside the EU selling goods to consumers in the European Union could bring goods into the EU without VAT being charged, as long as the shipment's value did not exceed €22 (the low-value consignment relief). The aim was to relieve customs authorities of checking a large number of shipments for a small amount of potential tax revenue. Sellers within the EU were not happy with this arrangement, because they had to charge VAT when shipping goods from within the EU, which put them at a pricing disadvantage. This exemption also encouraged fraud, such as deliberately understating the value of goods to avoid VAT. Changes to VAT rules from 1 July 2021 From 1 July 2021, the EU abolished the €22 VAT exemption threshold for imports. Sellers, both inside and outside the EU, now have to charge VAT on shipments worth up to €150/£135. Above that amount, import duty applies. This means all goods shipped directly from the United Kingdom to consumers in the EU are subject to local VAT in the customer's country of residence. The IOSS Scheme — a One-Stop Shop The obligation to declare and pay VAT in every EU member state can be complicated, which is why the EU introduced the IOSS (Import One-Stop Shop) scheme for imported goods worth up to €150. If the seller is not registered for IOSS, the buyer has to pay VAT and a customs clearance fee. Registering for IOSS eliminates unexpected charges. Registering for and using IOSS Registering for IOSS simplifies the process, requiring only a single VAT return, with the tax office splitting the tax between member states. Returns are filed monthly, and registering in an English-speaking country such as Ireland can be easier. How IOSS works, an example: a company sells a toy to a German customer for €15. The seller can either zero-rate it and tell the customer they may have to pay import VAT, or register for IOSS and charge German VAT at checkout. Summary If all your sales to EU consumers are €150 or less, registering for IOSS should minimise administrative costs and improve customer satisfaction. For shipments above €150, which are excluded from the scheme, it may be easier not to register for IOSS and to settle VAT the same way for all shipments.