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Pros and cons of the EU’s new Import One-Stop Shop

[ June 16, 2021   //   ]

British retailers selling to the EU face major VAT changes with the introduction of the EU Import One-Stop Shop (IOSS) scheme, reports broker ParcelHero.

From 1 July, British-based e-commerce companies only need to register and pay VAT in one EU country to sell goods not exceeding £135/€150 across the entire EU. However, says ParcelHero head of consumer research, David Jinks while te new IOSS regulations will make retailers’ lives easier, they aren’t entirely good news.

He says:  “On the face of it, the new IOSS scheme helps return things to their pre-Brexit norm. However, in the case of the IOSS, the devil really is in the detail.

IOSS greatly simplifies VAT procedures by allowing non-EU online sellers (including g those based in Great Britain) to register for VAT in one EU member state, collect VAT from all their EU sales and report on a single monthly IOSS VAT return, avoiding the need for multiple VAT filings in different countries.

Life is also greatly simplified for sellers using online marketplaces. VAT liability (collecting and reporting) for sales in EU countries will fall on the marketplace rather than the merchant, providing the consignment is valued at less than £135 (€150).  Businesses using only online marketplaces may now be able to end any existing EU VAT registrations, as they will no longer be responsible for collecting and reporting VAT.

Retailers’ EU-based customers will no longer face unexpected VAT payments on purchases of goods sold in Britain, which will build back trust in buying from GB sellers.

Northern Ireland-based companies may enjoy an exemption threshold. NI firms can join the alternative intra-EU OSS scheme. Providing their sales to the EU do not exceed £8,818/€10,000 per annum, NI-based organisations will be exempt from paying VAT.

The IOSS scheme is voluntary and will speed up sellers’ EU shipments by creating a fast-track Customs clearance ‘green channel’ for consignments not exceeding £135/€150.

However, there are drawbacks to IOSS, David Jinks continues.

The changes remove the previous VAT exemptions for small and medium sized firms on EU shipments worth £19/€22 or under. , so about 26,000 UK e-commerce sellers will have to register for VAT for the first time or stop selling to the EU.

The EU estimates it will cost around £6,900 per company each year for British sellers (excluding Northern Ireland companies) to register and comply with IOSS regulations as a ‘non-Union’ user.

Unlike EU-based OSS users, IOSS users based in Great Britain don’t qualify for the new £8,818/€10,000 threshold before they have to pay VAT. Only Northern Ireland sellers (under the terms of the Northern Ireland Protocol) have this option.

The new IOSS only applies to deliveries of items valued under the £135/€150 threshold. For all goods over that amount, GB businesses will have three choices: ensure their customer pays the import VAT at Customs; offer the option of delivering with all duties paid (DDP) or hold stock somewhere in the EU and register for VAT there.

Confusion still exists around registration. The gov.uk website states: ‘…it is not expected that the UK IOSS registration portal will be available for use for the 1 July 2021 launch’. There is also uncertainty about whether GB companies signing up for IOSS in an EU country must appoint an intermediary agent to register and file returns. Together with the French and German governments, ParcelHero believes this requirement does not apply to British sellers, as the UK-EU trade deal includes a tax and VAT mutual assistance agreement. The Republic of Ireland is a favourite option for GB companies because it uses English in business but the Irish government recently stated it doesn’t yet recognise the agreement. Consequently, it will require the use of an intermediary agent.

https://www.parcelhero.com/research/brexit-study

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