[intro]In this Guide, you can learn about IOSS, the changes to VAT guidelines in July 2021 and how these may apply to you and your EKM online shop. [/intro]
On the 1st of July 2021, the EU is launching the IOSS scheme which affects businesses that sell products to customers within the EU.
What is changing?
- The exemption on VAT and duties on orders below €22 will end. All orders of any value will now be subject to VAT and duties;
- If you register for (IOSS), it is possible for you to charge VAT on behalf of the EU on orders up to €150 in value;
- If the value of the order is over €150, you can't charge VAT and the customer has to pay VAT and duties when they receive their goods;
- To avoid the €150 limit, you would have to physically import the goods into the EU, warehouse them and then dispatch their orders from the warehouse.
Who is affected?
The changes will affect businesses:
- Selling or supplying goods from Northern Ireland to non-VAT registered customers in the European Union (EU);
- Making supplies of goods from the EU to non-VAT registered customers in Northern Ireland;
- Sending low-value goods to Northern Ireland (or the EU) from outside the EU and Northern Ireland (including from Great Britain (England, Scotland and Wales));
- non-EU businesses with goods located in Northern Ireland at the point of sale.
It also affects businesses that facilitate the sale of goods:
- Located in Northern Ireland (or the EU) by non-EU businesses to non-VAT registered customers in EU and Northern Ireland consumers;
- From Great Britain to consumers in Northern Ireland and the EU.
What is IOSS?
IOSS stands for the Import One Stop Shop. This is a platform businesses can use from the 1st of July 2021 and has been created to simplify the declaration and payment of VAT for goods sold from a distance from either the EU or from a non-EU country or territory. You can read more about IOSS in the Guide which can be downloaded here. To find further information about the UK’s existing scheme, see Changes to the VAT treatment of overseas goods sold to customers from 1 January 2021.
How will things change on the 1st of July 2021?
The exemption on VAT and duties on orders to the EU and Northern Ireland below €22 (£18.85*) will end. All value orders to the EU and Northern Ireland will now be subject to VAT and duties. If you register for IOSS, it is possible for you to charge VAT on behalf of the EU on orders up to €150 (£128.53*) in value on your EKM online shop. If the value of the order is over €150, you can't charge VAT and your customer has to pay VAT and duties when they receive their goods from your EKM online shop.
If you do not register for IOSS, you can continue operating your EKM online shop as you do already. You can send goods to customers in the EU and your customers will pay any VAT and duties owed when they receive their order. The only difference is that your customer will now have to pay VAT and duties on orders that are below €22, whereas previously they would have been exempt.
What does this mean for my EKM online shop?
As an EKM online shop owner, you can register for the IOSS scheme in an EU country of your choice. This generally requires you to appoint an EU-established intermediary to fulfil your VAT obligations and you will be required to start submitting monthly VAT returns using the IOSS portal. If you choose to go through this process, you can then start charging VAT on orders below €150, so that your customer then doesn't have to pay any VAT themselves when they receive their goods. This is not a trivial process by any means and this would only really be worthwhile for EKM online shops that are selling a large volume of goods, with a typical order value below €150 to customers within the EU.
If you choose not to register for IOSS and still want to sell items to customers in Northern Ireland and the EU, those customers will pay VAT when they receive their goods, regardless of the total price of the order.
Will EKM be upgrading the current tax system within the platform?
Currently, the EKM platform won’t have any native support for these changes on the 1st of July 2021. To combat this, a large piece of work is being undertaken to revamp the existing Tax settings functionality for both the EU and US tax systems. We don’t currently have a timeline for this project due to the large amount of work and complexity involved. As always, we recommend that you get in touch with your accountant or financial advisor for any specific questions regarding the IOSS Scheme, the VAT update and how this may apply to your own business.
*Exchange rate correct at time of publishing
[tips]We strongly encourage you to read more about the related guidelines on the .Gov.uk website by clicking here.[/tips]
[contact] If you need our help with your EKM online shop, contact your Account Manager or Customer Support, who will be able to point you in the right direction. We're open from 8am-6pm weekdays and 9am-5.30pm on the weekends. If you'd like to suggest a feature or an upgrade on any of the EKM platforms, please let us know on the EKM Suggestions board. If you have a non-account specific question to ask the EKM Team, join us in EKM Community. [/contact]