The European Union (EU) has introduced new changes to low value goods imports, requiring businesses to collect tax at the time of sale on sales below 150 euro. This applies to eCommerce businesses outside of the EU and is part of a new program called Import One Stop Shop (IOSS).
The IOSS allows suppliers selling goods meeting certain conditions to report and pay VAT on shipments not exceeding €150. However, direct IOSS registration can be difficult, costly, and time-consuming for eCommerce shops with limited volume to the EU. In this article, we explore two reasonable options for IOSS and VAT compliance: KPMG and Taxamo Assure.
The IOSS Program
Explanation of the Import One Stop Shop (IOSS) program and how it works
The Import One Stop Shop (IOSS) is a new regime introduced by the European Union (EU) from 1 July 2021 for the declaration and payment of VAT on distance sales of low value goods imported from non-EU countries or territories.
From 1 July 2021, the VAT exemption for the importation of goods into the EU with a shipment value not exceeding €22 has been removed. VAT is due on all commercial goods imported into the EU regardless of their value.
Looks like the EU is really cracking down on those ‘gifts’ from overseas that conveniently happen to be worth less than €22.
For importation of goods with a shipment value not exceeding €150, suppliers can elect to use IOSS to report and pay the VAT. If IOSS is used, VAT is not paid at the time of importation of eligible goods into the EU. VAT is paid by the customer as part of the purchase price (at check-out).
Eligibility criteria for businesses to use IOSS
The Import One Stop Shop (IOSS) can be used by suppliers selling goods which meet the following conditions:
- Business-to-consumer sale
- Goods are dispatched from outside of the EU to customers in the EU
- Shipment value is not greater then €150
- Shipment not subject to excise duties (alcohol/tobacco).
In short, eCommerce businesses outside of the EU that sell low value goods to customers within the EU can use IOSS to report and pay VAT. However, businesses must meet all of these eligibility criteria to use IOSS.
Challenges with Direct IOSS Registration
Direct IOSS registration can be a challenging process for eCommerce businesses. One of the main difficulties is that it requires a representative in a country within the EU, which can be costly to maintain and stay caught up with.
Additionally, regular filling of paperwork and tax submission can be time-consuming and complex for those unfamiliar with EU tax laws. For English speakers, finding a representative in an English-speaking country such as Ireland may seem like a reasonable choice due to the tax systems being in English. However, this option may not make sense for eCommerce shops with limited volume to the EU.
Overall, direct IOSS registration can be fairly costly and difficult to manage for small businesses looking to comply with the new VAT regulations.
Who knew that selling low value goods to customers in the EU could lead to such a headache? IOSS sounds like a real pain in the VAT.
Reasonable Options for IOSS and VAT Compliance
After researching the easiest way to get compliant and continue serving customers in Europe, these are really the only two options that seemed reasonable (please drop a comment below if you know any other alternatives).
KPMG has collaborated with FedEx to offer an IOSS solution for eCommerce businesses. The service includes IOSS registration and monthly IOSS return preparation and submission.
There are different pricing tiers depending on the number of packages shipped, with a “Pay As You Ship” option available for businesses with limited volume to the EU. The service costs €10 per month for up to 5 packages, plus €2 per additional package, while the highest tier offers unlimited packages at a cost of €4,800 per year.
Overall, KPMG’s solution is a viable option for businesses without a physical presence in the EU or limited volume to the EU that want to comply with VAT regulations.
The admin dashboard is fairly friendly. However, from my understanding you need to continually use the dashboard to upload sales records (they provide a spreadsheet template for filling out and then you continue upload your sales data to the portal).
Taxamo Assure is a cloud-based solution that helps sellers comply with the EU’s new VAT regulations for low-value goods. The service is designed to integrate seamlessly with e-commerce platforms and provides the necessary transaction data for EU VAT determination and compliance.
One advantage of Taxamo Assure is its pricing structure, which charges a flat fee of £2 per parcel, regardless of weight or size. This makes it an attractive option for smaller businesses that may not have the resources to invest in a more expensive solution. Additionally, there are no upfront fees, which means that sellers can scale their usage as they grow without worrying about additional costs.
The admin dashboard is my opinion is not as visually friendly as KPMG, however, for Taxamo, order information needs to be passed through an API call. This helps to avoid manual input and generally streamlines things (past the initial configuration).
Getting Your WooCommerce Store Complaint
There are two main elements for getting your store setup with IOSS compliance. The first part is related to calculating the correct tax amount on orders. The second part relates to passing the order information to the corresponding tax authorities.
Importing VAT tax rates into WooCommerce
Importing VAT tax rates is like playing a game of Tetris, but instead of blocks, it’s numbers and instead of winning, you just don’t get fined by the EU.
You can find all current EU VAT rates in a CSV file available on various websites. You should import these rates into your WooCommerce store to ensure that your customers are charged the correct amount of VAT.
The tricky part is that you will need to find a way to cut-off tax rates at 150 euros. This is because if the order amount exceeds 150 euros, you are no longer eligible to collect and remit under the new IOSS scheme.
Tio achieve this, you can use a function that gets cart information, converts cart total to euro via an exchange rate API, and removes taxes from cart if above threshold. If you need help with this, feel free to reach out in the comments section below.
Pass order data to corresponding authorities
Once you have collected VAT from your customers, it’s time to pass order data to corresponding authorities.
For KPMG, the process of exporting order data via WooCommerce order export plugins is relatively straightforward. You can choose from a range of paid and free alternatives depending on your requirements. Once you have selected the appropriate plugin, you can filter orders to only those where VAT has been collected. This ensures that you are only submitting relevant data to KPMG for tax purposes.
It is important to note that KPMG may have different requirements for submitting VAT data depending on the country in which you are registered. Therefore, it is advisable to check with them directly or consult with a tax advisor to ensure that you are meeting all necessary compliance requirements.
Using Taxamo Assure
For those who want to pass their order data to Taxamo Assure, there are two options available.
1. Connect to the API directly.
This requires some technical expertise and knowledge of how APIs work. However, if you are comfortable working with APIs, this could be a good option for you.
2. Use the Taxamo Assure plugin
This is a plugin that I have personally developed, and it makes the process of connecting to Taxamo much easier. With this plugin, all you need to do is install it on your WooCommerce site and configure it with your Taxamo account information
Once configured, the Taxamo Assure plugin will automatically collect all of the necessary order data from your WooCommerce site and pass it on to Taxamo. This includes information such as customer details, order totals, and VAT rates (it even handles the VAT tax threshold calculation for you).
Using the Taxamo Assure plugin can save you a lot of time and effort compared to connecting directly to the API. It also ensures that all of your order data is passed on correctly without any errors or omissions.
For those who register directly
For direct registration, it is important to file your VAT taxes as per the corresponding tax authority that you are registered with. This means that you will need to keep track of all your sales and submit regular reports to the relevant authorities.
As mentioned earlier, direct registration can be a bit complicated and costly, especially if you are not familiar with the local tax laws and regulations. Therefore, it is recommended that you seek professional advice from a tax expert or accountant who can guide you through the process and help ensure that your business is fully compliant with all the necessary regulations.
Pass your IOSS number to the shipper
Passing your IOSS number to the shipper is an important step in complying with VAT regulations. If you are selling goods to customers in the EU, you must provide your IOSS number to the shipper that supports it. This number allows the shipper to identify your business and ensure that VAT is collected and remitted correctly.
Most shippers now support IOSS numbers, so it should be relatively easy to pass this information along. However, it’s important to note that your IOSS number should generally not be visible on your shipments. Instead, you should provide it to the shipper via your shipping system (personally big fan of ShipStation).
If you’re unsure about how to pass your IOSS number along or which shippers support it, reach out to your shipping provider for guidance. They should be able to provide you with the necessary information and help ensure that your shipments remain compliant with VAT regulations.
In summary, the European Union’s new Import One Stop Shop (IOSS) program requires eCommerce businesses outside of the EU to collect tax on low-value goods sold to customers within the EU.
Direct IOSS registration can be challenging and costly for small businesses, but there are reasonable options for compliance, such as KPMG and Taxamo Assure. Both offer solutions that integrate with e-commerce platforms, simplify VAT reporting and payment, and ensure compliance with EU tax laws.
To get your WooCommerce store compliant with IOSS regulations, you need to import VAT tax rates into your store and pass order data to corresponding authorities using either KPMG or Taxamo Assure. Finally, don’t forget to pass your IOSS number to the shipper supporting it to ensure that VAT is collected and remitted correctly.
So, if you’re an eCommerce business selling low-value goods in the EU market, it’s time to get compliant with IOSS regulations. If you have any questions or comments about this article drop them below.