If you sell to clients in the European Union but outside its borders, you would perhaps have realized that things have changed since July 2021. It was then that the EU introduced the Import One-Stop Shop (IOSS), which aims to simplify the collection of VAT on low-value goods.

To global sellers and e-commerce sellers in particular, the knowledge of how IOSS functions is a necessity in ensuring compliance, competency, and customer friendliness.

Below, we delve more into what the IOSS is, why it exists, and how it impacts you if you are shipping into the EU.

The Reasons Why the EU Introduced IOSS

Before IOSS, the system of VAT on imports to the EU was unreliable. VAT was not charged on many low-value goods (below €22). In addition, some goods that were subject to VAT suffered a delay at the customs since they were charged VAT after entering the country. This introduced confusion, a non-competitive advantage to sellers based in the EU, and a bad customer experience.

The IOSS was introduced to:

· Make sure VAT can be charged at the time of sale and not at the border

· Establish a competitive playing field between EU sellers and non-EU sellers

· Eliminate custom delays and buyer hidden costs.

Simply put, it was about introducing more order and equity to global trade.

What IOSS Does in Practice

IOSS is used for the distance sales of goods with a value of €150 or less, imported into the EU from a non-EU country. Within this framework, non-EU sellers or platforms register with one IOSS number, which allows them to sell to all EU member states (27).

This is how it works in practice:

· During checkout, VAT is added depending on the country of the customer

· The seller adds the IOSS number to the shipping documents

· The commodities are able to go through customs quicker, and the consumers do not need to pay any additional VAT or handling service

· The seller declares and pays the VAT on a monthly basis via the IOSS portal in the country of registration.

Who Should Use IOSS?

IOSS is not compulsory, although it would be particularly helpful in case:

· You sell to end customers in several EU member states

· Your goods always fall under the €150 threshold

· You do not want your customers to be hit with an unsuspected surcharge during delivery

· You use Amazon, Shopify, or any other marketplace and fulfill the orders outside the EU.

It is best to know your VAT requirements to remain ahead of regulatory compliance and consumer confidence.

Common Misunderstandings to Know

· IOSS applies to B2C sales, but not to business-to-business shipments

· Custom duties might still be applicable when the value of your goods is above €150

· You will be required to report monthly VAT returns

· Not every courier automatically has IOSS, so make sure to consult with your logistics partner.

Summing Up

IOSS is a solution that enables you to streamline sales to the EU. It makes the processes easier for you and also keeps you ahead in the complex world of international trade.

Whether you are breaking into the European Union market or already making sales to European buyers, implementing IOSS appropriately can save you a lot of headaches later and make your business grow more confidently!