What Is The IOSS System? | IOSS & VAT On EU Imports Explained

The Import One Stop Ship (IOSS) is an electronic system designed to improve the process in which VAT is paid on goods being sold to the EU. As of July 1st 2021, all goods sold to the EU are subject to VAT, and all consignments up to a value of 150 EUROS can be processed through the IOSS.

The IOSS system allows for VAT to be paid on goods at checkout rather than after they’ve been processed through customs. Online sellers can register for the IOSS and use the portal to charge and declare VAT paid for all EU country destinations.

Who can use the IOSS system?

The IOSS system is primarily for e-commerce stores who are selling goods from outside the EU to EU countries, such as someone based in the UK selling to customers in Spain. It allows online sellers to declare when VAT has been paid, the amount, and which EU country the VAT is being paid to.

Online marketplaces such as Amazon or eBay are considered as ‘deemed sellers’, which means they are responsible for accounting for and charging VAT, but this doesn’t necessarily mean there’s nothing for you to do. Marketplaces may request that you provide additional information to support this process, such as providing your unique IOSS number.

If you hold goods in any EU country and you're importing goods to other EU states, you can handle VAT payments through alternative means. You have the option to register for VAT in the countries you'll be sending goods to, or opting to use the Union OSS system, which is similar to the IOSS but is intended for online goods being moved between EU countries.

Am I required to use IOSS?

Using the IOSS system is not mandatory, and if you choose not to register, VAT will be applied to imports at the time they're processed through customs rather than being paid at the time of a sale. However, it's important to understand that the IOSS system has specifically been developed to make this process easier, and by not signing up you could be losing out on benefits for you and your customers.

What are the benefits of IOSS?

The IOSS system aims to reduce confusion and processing times for goods imported into the EU, and some of the leading benefits are:

One account covers import VAT for all EU member states, rather than having to register for VAT in each country separately
Customers know how much the total cost will be at the time of purchase, rather than receiving two separate bills
EU countries can collect information on goods entering their country before it happens, allowing them to plan and understand the demand for their customs departments
If VAT has been paid before customs processing, goods will move faster through the system and arrive with customers sooner than if the VAT was due on delivery
Reduces the admin required by companies shipping to the EU through the use of a single centralised system
Fewer chances of incorrect charges being applied, which could lead to delays and fees for non compliance

Limitations of IOSS

While the IOSS system offers many benefits, you should be aware of the following limitations:

IOSS cannot be used for parcels costing more than 150 EUROS
Goods subject to duty charges, such as alcohol or tobacco, cannot be processed through IOSS
Marketplaces have to change the way they handle selling to the EU, which could force online sellers to adopt the solution regardless of whether its useful for them

How to get started with IOSS

If you live outside of the EU, you will need to appoint an EU-established intermediary to support you with the registration. The appointed intermediary must be registered with the tax authorities of an EU country, and they’ll share the responsibility of submitting accounts and payments relating to imports. Anyone already based within the EU can register via the designated IOSS portal of their member state.

How UK Postbox is handling this change

It is the responsibility of online sellers to charge for and report VAT charges on sales made to EU customers. If you choose to adopt the IOSS system, you'll need to provide us with your IOSS number and reference this on all forwarding batches sent to EU destinations. If you're using a service such as shop and ship to receive UK items in the EU, you'll need to be aware that VAT and duty charges may be due where they previously were not.

The couriers that we work with are also updating their systems to account for a change in how VAT is accounted and paid for. Where able, you'll be asked to provide information relating to your unique IOSS account to ensure your package is processed correctly. If you have any questions on how to handle this change in regards to your UK Postbox account, please get in touch with a member of the team who would be happy to advise you.