IOSS Number: What It Is and How to Register for EU Countries
Businesses outside the European Union (EU) will normally need to account for import VAT at the point of entry.
Previously, any sale with a consignment value of less than €22 was exempt from VAT — but since July 2021 that exemption no longer applies.
Now, EVERY import into the EU is subject to VAT.
However, the process can be quite complex and expensive, especially if you plan to ship to customers in different countries.
In this article, we'll tell you about the import one-stop shop (IOSS) number and how being registered for it can make e-commerce and imports more convenient!
What Is an Import One-Stop Shop (IOSS) Number?
An Import One-Stop Shop (IOSS) number lets sellers inside and outside of the EU sell goods to buyers in EU markets.
It makes shipping to the EU easier, fast, and more cost-effective. It also lets you manage VAT on European e-commerce sales.
However, the IOSS only covers shipments with a consignment value of up to €150. Commercial goods with a value above that must be shipped through DAP or DDP models.
The EU also implemented the IOSS scheme to prevent fraud. This improves competition among retailers and generates a fairer VAT income for the EU.
IOSS numbers have a very similar format to what's currently being used for VAT numbers — which is a nine-character long mixture of letters and numbers.
In general, you'll benefit from an IOSS number if you meet the following conditions:
- Have EU customers
- Each shipment costs a maximum of €150
- Goods are not subject to excise duties
What Are the Benefits of Having an IOSS Number?
IOSS numbers are actually not mandatory. However, they offer several benefits in completing your VAT obligations:
1. Simplified, Expedited Customs Clearance
You can certainly choose to go through the standard customs clearance procedure.
However, if you register for an IOSS number, you'll experience a simpler and quicker clearance since import VAT no longer applies.
Thanks to that, cross-border barriers can actually be REDUCED by 95% compared to other methods!
2. Centralized Clearance
The IOSS system lets sellers clear customs in any country. Goods can be shipped into just one country to be cleared and delivered anywhere in the EU.
This is more convenient than undergoing clearance in every EU country the shipments enter. After all, it reduces the risk of transit time delays.
On top of that, you can take advantage of consolidated air freight rates since the imported goods can freely move around the EU once cleared by customs.
A courier or logistics company must show a package's IOSS number at the point of a country's customs declaration for them to pass through instantly.
That's because they can easily identify that VAT has already been prepaid at the purchase point.
3. Reduced Customs Fees
Methods where couriers are required to collect VAT on behalf of a consumer will need to pay a €5 to €15 customs clearance fee per shipment.
Of course, this is on top of other courier charges, such as:
- Disbursement fee
- Minimum customs clearance fee
- Other brokerage fees
With the IOSS scheme, you can get clearance more quickly and CHEAPLY!
4. Lower VAT Rate on Some Goods
A lower VAT rate can be claimed for goods imported with an IOSS number. However, this only applies to a certain food, healthcare, personal care, and medical goods.
5. VAT Refunds
If goods are returned and re-exported to a non-EU country, sellers can reclaim the VAT paid for that shipment.
VAT is reported monthly. As such, a seller can reverse that charge and get a consolidated monthly IOSS return!
Your appointed EU intermediary can do this for you.
What Should I Consider Before Getting An IOSS Number?
There aren't many things to think about before deciding if you'll benefit from an IOSS number.
We've mentioned some general conditions on when you'd benefit from the IOSS system, but below are more specific things to consider:
Registration
IOSS is mostly for any e-commerce or online marketplace sale. As such, you'll need to first consider if you'll largely benefit from the IOSS.
Location
Businesses outside the EU that don't have an established presence in any EU country will have to register through an intermediary.
In fact, the EU rules require that you have an intermediary to manage any IOSS payment. They're also responsible for ensuring you adhere to other IOSS rules.
VAT Variations
Each buyer in various EU countries will have a different tax rate. These tax rates are sometimes already provided by marketplaces like Amazon.
However, it's best to still check it yourself.
If you have a consumer base in different parts of the EU, an IOSS number will make it easier to ship to them.
Marketplace IOSS number
If you rely on e-commerce sites for sales, you should check if they have an IOSS number for sellers on the platform or if you must apply yourself first.
How to Obtain an IOSS Number?
If you're within the EU, you can either register directly with your country's EU tax authority or through an IOSS intermediary.
But if you're from outside of the EU, you'll need to register through an EU intermediary.
How to Use Your IOSS Number
Once you're registered for the IOSS scheme, you can already use the number.
However, there are a few steps you'll need to follow to ensure that the IOSS number gets recognized:
- Clearly display the amount of tax the customer owes
- Include the IOSS number on the clearance information your provide
- Require VAT on certain goods
- Keep each delivery less than €150
- Regularly submit IOSS VAT invoices and pay VAT according to the member state
- Have accurate records for at least a decade
IMPORTANT NOTE: If you fail to properly collect, declare, and pay fees, this can result in a ban from the IOSS scheme for up to two years.
Frequently Asked Questions (FAQs)
Being registered for the IOSS scheme will make shipping goods to multiple EU countries easier and more cost-effective.
To help you understand the system more, below are some FAQs:
How Long Does It Take to Obtain an IOSS Number?
It can take as little as three days to get your own IOSS number. It can't be backdated either, so you can't apply it to shipments you have already made.
When Do I Need to Charge EU VAT?
It would be best if you charge VAT during the checkout process.
You can do this by applying the right VAT rate once you get your buyer's delivery address and country. The invoice will then be sent with the package to be cleared.
When charging EU VAT, remember not to charge UK sales VAT if you have a buyer in the UK.
What Happens If I Don't Get an IOSS Number?
Two things can happen to your package if you don't have an IOSS number:
- Be sent with delivery duty unpaid - Here, the courier will first pay the import VAT for the seller/customer.
- Be sent with delivery duty paid - This is a special arrangement between the buyers, sellers, and couriers/logistics companies involved in a transaction.
- You'll charge VAT (and possibly an administration fee) straight to the receiver. Because of this, the delivery will more likely be delayed since charges must be processed.
Do VAT Rules Apply to Marketplaces?
EU VAT laws apply to electronic interfaces like eBay and Alibaba.
For sellers outside the EU, Amazon already has its own EU VAT number that businesses on their platforms can use for every sale.
But you should contact the marketplace directly to know their procedure for sales for EU customers. You'll also be able to learn more about the IOSS scheme.
You should also ask the marketplace for permission to use their IOSS number before doing so.
However, for businesses within the EU, the e-commerce platform may still require a valid VAT number before you can sell goods.
Conclusion
The EU doesn't require businesses to have an IOSS number.
However, suppliers who register for this number to sell goods within the EU will experience quicker declaration and payment of VAT at the point of entry.
But remember that the IOSS can only account for goods sold at a value of up to €150.
Nevertheless, an IOSS number simplifies and centralizes clearance, reduces fees, and can lower VAT on certain sales.
On top of that, you can even claim a monthly return!
So, what are you waiting for? Register for an IOSS number now for easier shipping to every customer in the EU.
If you have any questions regarding obtaining an IOSS number or you’d like to subscribe to our Zero to Scale platform (which includes accounting), get in touch with us.
