It is now exactly a month until the EU VAT Package and the Import One-Stop Shop (IOSS) come into effect.
July 1 is the next major milestone for businesses committed to growing their cross-border eCommerce operations.
Events including Brexit and the US STOP Act have already highlighted this year the importance of having the highest quality product and shipment data in order to achieve the smoothest possible delivery and customer experience.
For third country online retailers and marketplaces selling into the EU, the looming EU VAT Package will further intensify this requirement. For global leaders in international eCommerce like China and the UK, these are quite simply the most significant event in their calendar in 2021.
From July 1, the EU will remove the exemption from VAT on low value goods with a value of less than EURO 22.
The EU is also making third country online retailers and marketplaces responsible for the collection and remittance of VAT.
To support retailers and marketplaces, the EU has created the Import One-Stop Shop (IOSS) with the intention of simplifying the declaration and payment of VAT on distance sales with an intrinsic value of less than EURO 150.
These are substantial changes and are intended to level the playing field between EU retailers and marketplaces and their counterparts in other parts of the world, most notably China.
It is also intended to have the same impact on postal operators and express carriers.
Any marketplaces uncertain about whether to opt into the IOSS should note the decision of Amazon to embrace the new system for both its retail activities and marketplace businesses. Several other major marketplaces are believed to be actively moving in the same direction.
Hurricane Commerce has produced a guide to the EU VAT Package and the IOSS to help retailers, marketplaces and their logistics partners to take advantage of the opportunities presented by the new rules.
Hurricane is also one of Royal Mail’s partners in providing support to its customers with the IOSS – https://www.royalmail.com/business/international/guide/delivered-duties-paid
Among the key things you need to know are:
- The retailer or marketplace (or their chosen intermediary) only needs to register on the IOSS portal of one EU member state. Registration opened on April 1, 2021;
- IOSS makes the buying process easier for the consumer with VAT being paid at the point of purchase – thereby avoiding doorstep surprises when goods are delivered;
- If the seller does not use the IOSS, the consumer will have to pay VAT at the point of import – with resulting delays in clearance and delivery and greater likelihood of returns;
- The use of the IOSS will result in much greater efficiency gains;
- Electronic customs clearance also requires only the so called Super Reduced Dataset, resulting in faster clearance, shorter transit times and reduced costs.
Online retailers or marketplaces which do not have a presence in the EU will need to appoint an intermediary in at least one EU member state.
The intermediary will be responsible for the declaration and payment of VAT to the tax authorities of the member state on the basis of a monthly IOSS VAT return.
They are also responsible for keeping records that have to be made available electronically upon request.
Of critical importance is the need for the retailer or marketplace to be able to provide complete and valid electronic data for customs clearance.
If using the IOSS, this will mean complying with the requirements of the Super Reduced Dataset, including accurate product descriptions and HS6 codes.
Various attempts to delay the introduction of the IOSS have been firmly rejected – no surprise as we emerge from the pandemic with governments around the world under huge pressure to maximise their tax revenues.
But while preparation is needed to be able to access the IOSS, it should be seen as a big opportunity to secure substantial cross-border eCommerce growth.
By registering and meeting the requirements, particularly around the provision of high-quality product and shipment data, companies will have a significant advantage over their competitors.
This will include faster customs clearance and delivery, greater efficiencies, reduced costs and enhanced customer experience.
To access a copy of Hurricane’s EU VAT and IOSS brochure, email: firstname.lastname@example.org