Written by Hemal Nayee from Simply VAT
If you areone of the many Non-EU businesses whose hopes and dreams of expanding into theEU market were dashed by the consequences of Brexit, the IOSS scheme might bethe solution for you. Since the outbreakof the Covid-19 Pandemic and the war in Ukraine, businesses on both sides ofthe Atlantic have seen their growth stunted by the state of constant flux inthe EU market.
To aid Non-EU businesses, the EU Commission launched an ambitious EU VAT reform in2021 and introduced the IOSS scheme. For businesses interested in trading with the EU, IOSS offers the opportunity to avoid further setbacks and start the recovery towards growth.
Why sell into the EU?
The EU is amajor participant in global commerce, and its single market has madesignificant strides on the international scene as one of the most open,outward-looking economies in the world. Europe has the best environment forforeign companies to grow because of its established position in globalmarketplaces and the expanding popularity of e-commerce.
The EU VAT reform has allowed businesses of all sizes, no matter where they’re based, access to the EU’s 450 million consumers. As the EU market bounces back from the pandemic, the IOSS scheme provides a gateway to selling into the EU without the previous burdens of registering and remitting VAT in each EU country that you sell into.
How can the Import One Stop Shop (IOSS) Scheme help?
If you area Non-EU business looking to expand into the EU market, you can benefit from the new Import One Stop Shop (IOSS) scheme. The scheme allows you to report all your EU sales in one single return. In simple terms, this means you can make distance sales in the EU while avoiding the delays and excess fees that come with multiple local registrations. There’s a catch – as IOSS only applies to the sales of goods with a consignment value below EUR150, and anything above this will be subject to import VAT and standard customs procedures. “Consignment value” covers the total cost of the goods being shipped, exclusive of shipping fees and taxes.
IOSS – What are the opportunities?
IOSS offers Non-EU businesses the opportunity to:
• Streamline cross-border VAT reporting.
• Fast-track customs clearance throughout all the EU.
• Ensure consignment compliance across the board.
• Save time and avoid fees by not having to register for VAT in each country where your customers are based.
However, the EU VAT reform also introduces new obligations for non-EU businesses and the IOSS scheme is no exception. Once registered on the scheme you must use it for all eligible supplies of goods. VAT will be due when you accept payment from EU customers, and you must apply the rate of the country where your customers are based. VAT rates vary across the EU– so, for example, when selling to a customer in France, you must apply the correct French VAT rate for this sale.
As a non-EU business, you also have the obligation of enlisting an IOSS intermediary. The intermediary will help your business ease into the new scheme as they are responsible for IOSS registration and submit returns on your behalf. The intermediary is also liable for IOSS VAT payment.
What about High Value Consignments?
If you’re shipping goods to the EU in consignments valued above the 150 EUR threshold, these won’t be eligible for reporting on your IOSS return. For these sales, you will need to decide how you want to account for the VAT. You can choose to make your customer the Importer of record, which will result in them having to pay the VAT at importation. This doesn’t make for a great customer experience and can cause delays, or an increased rate of goods being returned to you.
Alternatively, you can list yourself as the Importer of Record. This would include remitting import VAT to the tax authority in the country you are importing into. You will also need to register for VAT in that country to recoup the import VAT paid on your periodic VAT return. You can account for the VAT on any post-importation transfer of goods either through this local VAT registration or your OSS return.
Registering for IOSS
While the2021 EU VAT reform contributed to an already shifting economic landscape, the IOSS scheme has provided numerous benefits for non-EU businesses looking to expand into the European market.
Navigating your VAT compliance obligations can be a minefield. At SimplyVAT.com we are aware of the challenges non-EU businesses face. We want every business to have the opportunity to thrive – that’s why we offer a range of services including IOSS registration that can bolster companies of all sizes to access the EU market.
To find out if you are eligible for IOSS and how it can help your business expand into the EU market, book a call with one of our experts.
