IOSS Magento solutions for buinsesses

What is Magento and how will IOSS affect it?

Magento is a successful open source eCommerce platform invented in California and now owned by Adobe. The software hosts more than 100,000 online shops and has been downloaded nearly 3 million times. The platform facilitated the sale of some 150 billion USD of goods, with many of those sales happening within the EU. In fact, Magento accounted for around 30 percent of the total market share worldwide. Magento works to meet the growing eCommerce needs of online businesses, streamlining the needs of e-tailers. The fact that Magento is used by many merchants who sell goods to the EU means that its users and the platform itself will be particularly affected by the changes and need to adapt.

How will IOSS Magento work?

In July 2021, new EU VAT changes created a ripple effect for businesses globally, particularly for distance sellers and eCommerce. The new rules saw an end to the 22 EUR or less tax exemption and the introduction of a new, simplified, Import One-Stop-Shop system. Although optional, the new system was designed to benefit online distance sellers impacted by the VAT changes, through the creation of a consolidated and simplified tax payment scheme.

There isn't much information on IOSS Magento, from Magento IOSS compatibility to functions available to link IOSS with Magento. However, Magento - as a major host of online eCommerce businesses - will be impacted by the introduction of the new EU VAT changes and the IOSS system. Registered Magento IOSS businesses will still be responsible for declaring and paying VAT to the EU, much like IOSS registered businesses using its competitor platforms - such as Shopify and WooCommerce - with the platforms which facilitate sales not ultimately responsible for VAT owed as part of EU IOSS obligations. However, platforms such as Magento may help businesses meet some EU obligations, such as the display of VAT owed at the point of sale and a way to record relevant IOSS data as part of their system functionality.

Should Magento businesses register for IOSS?

If you are a business that uses Magento and is classified as a 'distance seller' (particularly eCommerce and online businesses) and is not based in the EU, it is recommended to apply for an IOSS number. This is because of the various benefits that being registered for IOSS provides, such as:

• Full VAT transparency for sellers and customers, removing any chance of hidden fees or extra parcel processing charges
• Superior post-purchase experience for consumers, resulting in better reviews for businesses, improving sales
• Rapid customs turnaround meaning faster delivery times on average than post sent via DDU or DDP.
• Consolidated VAT payment to a single EU tax authority (with Ship24 responsible for distributing VAT among countries in which sales were made)
• EU wide tax coverage
• Priority passage for goods imported under IOSS in the EU

Ship24 provides all of the above services as an authorized fiscal intermediary, with registration with us taking as little as 3 working days. If you want to get your Magento IOSS ready, check out our complete intermediary services on our dedicated IOSS page or find out more about registering for an IOSS number on our comprehensive FAQ pages.

How good is Magento IOSS compatibility?

Magento found success by meeting customer demands for brand interactions, such as with meeting e-tailer's needs and expectations. Therefore, many have chosen Magento to deliver their eCommerce offerings, whether it be for physical products or for services. Magento is yet to offer full IOSS compatibility as far as functionality, but it is likely to begin offering businesses signed up to IOSS and using Magento service functionality which will make meeting EU obligations under the IOSS scheme easier.

The new IOSS import system will mean that those who sell physical products to the EU which cost 150 EUR or less would benefit from registering with the IOSS system. Although some marketplaces, like Amazon and eBay, have their own IOSS numbers.

What are the major IOSS Magento changes?

The new EU import scheme will mean that businesses that use Magento will have to make a decision on whether to register for the scheme or send goods without registering. However, although IOSS is optional, the scheme is designed to make the transition to the new EU VAT rules easier and therefore businesses should consider signing up for the IOSS system. The IOSS Magento changes which are due to come as the scheme matures will also make it easier for businesses to display, declare and collect relevant IOSS data to meet EU obligations in the future months. However, the responsibility still lies with the businesses and marketplaces who must register for the scheme or via an IOSS intermediary, to gain the advantages which come with being IOSS registered and compliant.

If your Magento business is not EU-based and requires IOSS intermediary representation, look no further than the shipping experts, Ship24. Alongside our market-leading shipment tracking and logistics services, we also provide full IOSS fiscal intermediary services specially designed for businesses and marketplaces, offering rapid registration within as little as two days to ongoing, best-in-class support to make sure you are fully compliant with the new IOSS system.

How will businesses who use Magento pay IOSS VAT?

If your business uses a Magento platform to sell its products, then it will likely be an independent business that handles its own eCommerce sales. If this is the case, your business will need to register for the OSS or IOSS. You can register for One-Stop-Shop if you are a business established within the EU.

You can be based in the EU and sell to others in the EU and be a distance seller. Distance sellers are those who sell goods to buyers without either party being physically present, such as sales facilitated by an electronic interface (such as an online marketplace or e-tailer). EU-based sellers, unlike non-EU-based sellers, have the choice to apply directly for OSS with the EU tax authority or with an IOSS intermediary. Whereas e-tailers and businesses not established within the EU must appoint an IOSS intermediary and cannot apply directly.

One of the advantages of IOSS is that under the scheme all VAT owed within the EU is payable in a single payment to either the tax authority directly or the IOSS intermediary, who will declare and pay forward owed tax on behalf of the business or marketplace they represent. As such, the seller only needs to collect, declare and pay owed VAT on EU sales to a single entity to meet EU-wide obligations.

Please note, businesses/marketplaces using IOSS must keep full sales and VAT records for at least 10 years in case of EU audits or otherwise.

How has Magento adapted to the introduction of the IOSS?

Magento is known for creating market-leading eCommerce platforms for businesses and therefore is sure to introduce new settings which will help businesses adapt to the new IOSS model, in line with its other rivals such as WooCommerce and Shopify. The changes, although not yet formally rolled out on the platform, will probably include something like those listed below:

• Automatically calculated VAT: This functionality will allow the platform to read the location of the EU buyer and calculate their tax accordingly (as VAT rates between EU countries), noting down the VAT paid on the sale which can be retrieved by the business when it is time to declare and pay VAT.
• Total billing display: Under the IOSS scheme all costs, including VAT, must be displayed and paid at the point of purchase by the customer. This is then collected by the business or marketplace making the sale. Therefore, an IOSS Magento functionality will probably include a way to generate and display the total amount owed for EU customers purchasing using IOSS.

Please note, Magento is not ultimately responsible for the collection, declaration and payment of VAT, which is the responsibility of the merchant or marketplace who are registered for IOSS and are using an IOSS number.

How do I declare Magento IOSS sales?

Sales made on any Magento platform must be collected, declared, and paid by the business which is registered for IOSS as part of their EU obligations under the scheme. Magento is not responsible for the actual payment as it is the business and not the platform which will need to be registered for either OSS or IOSS.