What you need to know about selling goods to EU customers, and the new VAT rules

From 1 July 2021, the VAT rules have changed.

If you’re a business selling goods valued at up to 150EUR to customers in the EU, some important changes came into effect on 1 July 2021.

These changes mean that there will no longer be an exemption for parcels valued up to 22EUR and therefore all the goods you are selling to the EU will now be subject to VAT, calculated at the local rate of the country your customer is based in.

Does this seem a little complex?

Don’t worry, this page helps explain your options.

If you do nothing, you could incur additional costs.

If you have no solution in place, your EU customers will have to pay the correct VAT plus handling / clearance fees before they can receive their parcel. This solution is called Delivered Duties Unpaid (DDU).

This could result in your customers refusing delivery of the goods, especially if they weren’t aware of this cost when they made the purchase.

If customers refuse delivery this could increase the risk of your goods getting lost in transit or returned, causing additional costs.

Use the Import One Stop Shop (IOSS) to ease the burden.

The EU has introduced a scheme called the “Import One Stop Shop” (IOSS).

IOSS allows you to register with just one of the 27 EU tax authorities, and to submit one monthly IOSS VAT return in a way that allows the right payment of VAT across the other EU tax authorities where your customers are based.

The process is enabled by an IOSS number. All you need to do is include your IOSS number in the electronic data that you provide to your parcel carrier. This simple step will enable all VAT owing to the various different EU countries to be captured. Below you will see three ways to use IOSS and obtain a number.

3 ways to use IOSS if you sell goods on your own e-commerce site:

Larger volumes of parcels – annual fixed fee, paid monthly

Larger volumes of parcels – annual fixed fee, paid monthly

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Smaller volumes of parcels – fee per parcel

Smaller volumes of parcels – fee per parcel

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Fully managed by you

Fully managed by you

Who is IOSS relevant for?

IOSS isn’t relevant for everyone – some businesses won’t be able to use it. To make things simpler, we’ve outlined the circumstances that need to be true for your business to use the IOSS.

Merchants must be trading:

1. With EU customers, and shipping to the EU customer from outside of the EU.

2. With consumers. Business to business sales are not allowed to be included in the IOSS.

3. Individual consignments (e.g. a single parcel) valued at up to 150EUR.

4. Physical goods that are not excise goods. Excise goods typically include alcohol and tobacco and any shipment that includes excise goods cannot be dealt with under the IOSS.

IOSS is not right for you? You have some other options...

Have a marketplace handle the process.

If you’re selling goods up to 150EUR, on a marketplace, it’s likely that they already have a solution in place for you.

Pay duties upfront on behalf of your customer, this is called Delivered Duties Paid.

If you’re sending small but irregular volumes via your own e-commerce platform, and you’d like to ensure your customers continue to receive your parcels uninterrupted, then Delivered Duties Paid (DDP) might be right for you.

You will need to use a landed cost calculator, or similar, to determine duties, taxes and fees payable. Plus register for the DDP service through your chosen parcel carrier and pay VAT/Duty on behalf of your EU customer upfront.

It can be used for goods valued above as well as below 150EUR.

Most well-established parcel carriers will offer this service. To use it, please contact your preferred carrier.

Here are some other frequently asked questions that we think you might want to know about.

I don’t have a solution and now my goods are stuck. What can I do?

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I don’t have a solution and now my goods are stuck. What can I do?

This is a tricky one as it depends on the parcel carrier and your customer.

A few different things could happen, and it’s why we suggest you put a solution in place. Without an IOSS number or using Delivered Duties Paid:

  • The parcel carrier may choose not to collect your goods for delivery,
  • The parcel carrier could collect your goods and then choose to return the parcel to you and charge you for it, or
  • The parcel carrier may try to deliver the parcel to your customer and collect the clearance / handling fees from them. However if the customer refuses to pay, the goods may not be delivered, potentially resulting in refund costs for you, as well as lost goods whilst still having to pay the delivery fee.

What do I do if I sell on multiple marketplaces and my own e-commerce site?

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What do I do if I sell on multiple marketplaces and my own e-commerce site?

For goods sold on your own e-commerce platform we would suggest an IOSS solution.

For those goods sold on a marketplace, it depends. If the marketplace is fulfilling the sale for you, then they may be registered for IOSS and will be charging VAT on the sale and handling the VAT compliance. If you’re sending the goods sold on a marketplace and the marketplace is registered for IOSS then you should ensure that you obtain the marketplace’s IOSS number as this will need to accompany the package.

What should I do whilst waiting for my IOSS number?

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What should I do whilst waiting for my IOSS number?

You could ask your customers to pay the clearance / handling fees upon delivery of their parcel.

However, if you’re looking to maintain a quality customer experience whilst you’re waiting for your IOSS number, you could try using Taxamo by Vertex at £2 per parcel or, try Delivered Duties Paid.

I'd like my own IOSS number - what do I do?

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I'd like my own IOSS number - what do I do?

You can either register for IOSS yourself or have Deloitte register for you. We will register you in a single EU country enabling you to get an IOSS number.

What do I do if my goods are more than 150EUR?

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What do I do if my goods are more than 150EUR?

IOSS can only be used if your goods are 150EUR or less. So what do you do if they are valued at more than that? You can use Delivered Duties Paid.

How are IOSS returns filed?

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How are IOSS returns filed?

If you sign up to Deloitte's service, we will request your monthly transaction data at the end of every month. Included in this data must be the VAT you charged at the point of sale to EU consumers.

Deloitte will calculate from the data you have provided the amount of VAT due in each EU country you sold to, and from this a single IOSS VAT return will be generated.

How long are IOSS numbers?

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How long are IOSS numbers?

An IOSS number starts with an IM and is followed by 10 alphanumeric characters.

Do all IOSS numbers have an IM in front?

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Do all IOSS numbers have an IM in front?

Yes, all IM numbers have an IM at the start of the number.

IOSS numbers with IN in front are issued to intermediaries to allow them to act as such. These numbers should not be used to send parcels.

If the IOSS number is handwritten or printed on the front of the parcel, is that acceptable?

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If the IOSS number is handwritten or printed on the front of the parcel, is that acceptable?

No. The IOSS number must not be shown on the parcel. It must be included in the electronic data that you provide to your parcel carrier, for each parcel being sent.

If there are any mistakes, can the receiver provide the IOSS number at pick up?

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If there are any mistakes, can the receiver provide the IOSS number at pick up?

This is very unlikely. Items will only be cleared through customs when they arrive with a valid IOSS number.

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