On the 1st of July 2021, a new set of EU Value Added Tax (VAT) rules were imposed along with a new import scheme. Previously, all imported products from countries outside the European Union that do not exceed the value of 22 EUR were exempt from duty. This was with, albeit a few exceptions, such as alcohol and tobacco products. This has now been scapped an all imported goods will have a tax applied.
The new EU rules have consequently affected many eCommerce sellers, e-tailers, and marketplaces based in China. In order to aid the transition to the new EU VAT rules concerning low-value goods, and import scheme for shipments valued at 150 EUR or less has also been put in place.
The system, called the Import One-Stop-Shop (IOSS), is a new scheme designed to benefit buyers and sellers of low-value goods worldwide, by simplifying VAT payments on this category of goods. The system will facilitate the option for businesses to consolidate EU-wide tax payments into one, which will only need to be paid to one EU country with which they or an appointed IOSS intermediary will deal with. The system will also require VAT to be paid at the point of purchase, meaning that the collection, declaration, and payment of VAT will be the responsibility of the marketplace or business which makes the sale.
This has a number of benefits for the buyer and the seller. For the buyer, it means that there is full transparency over the total amount that needs to be paid on an order (the cost of the product, shipping costs, and VAT), ensuring there will be no hidden fees - such as customs processing charges, etc - when the goods are imported. For the seller, this means an improved post-purchase experience for the customer, which should mean a boost in consumer confidence and positive online reviews, fostering more sales.
It is important to note that the IOSS system only covers consignments that are valued at 150 EUR or less. This includes the product, transportation costs, insurance, VAT, etc.
Businesses will now have the chance to send IOSS China Post parcels and take advantage of the benefits provided by the scheme when selling products to EU buyers. The main difference that people sending China Post parcels with IOSS will see should be improved delivery times, as prepaid VAT on packages promises to shorten customs processing procedures and see packages released and dispatched quicker within the EU.
However, businesses that use China Post to dispatch items are often based in China and not established within the EU, which means that in order to sell products under the IOSS scheme, they will need to appoint an IOSS fiscal intermediary which is based in the EU to declare and make VAT payments to the relevant authorities on their behalf.
While businesses who are established in the EU have the option of declaring and paying EU-wide VAT directly to the tax authorities in the country in which they are established, they can also choose to appoint an IOSS intermediary if they wish, which many are choosing to do because of the benefits IOSS representation can offer.
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The benefits of sending a parcel under the IOSS system with China Post are as follows:
When you send a parcel without IOSS with China Post, the seller or buyer of the goods may also be liable for other fees, such as processing or import fees that were not stated at the point of purchase. The IOSS system aims to end these hidden fees by making it a requirement at the point of sale that the seller (either electronic-based business or marketplace) displays the total cost of the order (total value of the goods, shipping costs, and VAT).
As well as removing hidden fees, the IOSS system will see companies/marketplaces able to meet full VAT obligations in a single payment to a single EU authority. The authority which will be paid will be the relevant tax body which either the company/marketplace will be registered directly for OSS or a company/marketplace intermediary will be registered with (IOSS).
With the average order on Aliexpress being around 20 to 30 USD, it makes sense that businesses who use Aliexpress and sell to EU buyers sign up for the IOSS system or make sure whether an Aliexpress China Post IOSS number is available for them to use, in order to make sure they benefit from the advantages of the scheme.
If you are a business that uses Aliexpress to sell goods under IOSS (which you then send with China Post) you need to assure your IOSS China Post number is declared to the customs declarant (China Post) in order to make sure it is fast-tracked at customs.
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The benefits of using the IOSS scheme when sending a China Post parcel are that it will be given rapid import clearance. This is because VAT on all IOSS parcels must be prepaid before sending (at the point of sale). If customs can identify an IOSS China Post package, it will speed up the clearance turnaround on the China Post parcel. Equally, IOSS goods can enter the European Union in any of the 27 member countries, regardless of where they will finally be delivered, without any extra cost. For instance, if the goods land in Germany but are then transported to France, they will not incur any extra processing fees as the full charge will have been covered at the point of purchase.
If you are a business or marketplace who uses China Post and want rapid IOSS registration to begin taking advantage of the scheme, look no further than the sector experts, Ship24. We provide rapid registration, with IOSS numbers granted within as little as two days. We also match our registration efficiency with ongoing expert support to make sure you meet all EU obligations. Ensure your business has a smooth transition to the new IOSS system and no issues sending China Post IOSS parcels with the shipping experts, Ship24.
Please note that the tax rate on the consignment imported will always correspond with the destination country.
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China Post IOSS parcels, or orders made under IOSS and sent with China Post, will be required to have either the customs declarant or an automatic/electronic customs declaration reference number on the package in order to meet EU obligations.
Once the China Post IOSS package has been identified, it will be speedily released free of charge. Once your China Post IOSS package is moved on, you will reportedly receive an MRN number, which will be given to the handler, who will finish delivery of the shipment free of charge after verifying the status of the proceedings. This is because the VAT will already be prepaid at the point of purchase by the customer.
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