New EU VAT rules have come into effect which marks the end of tax exemption for products valued at 22 euros or less into its 27 member states. Accompanying the end of the tax exemption changes is a new Import One-Stop-Shop (IOSS) scheme, which is designed to simplify admin processes for distance sellers who sell to buyers in the EU. The changes will affect nearly all eCommerce and distance sellers with customers in the EU.
WooCommerce is an open-source eCommerce platform that is popular with small, medium, and large-sized e-tailers and merchants, who will be directly affected by the introduction of the IOSS scheme. Although the scheme is optional, there are multiple benefits that distance sellers and eCommerce businesses can gain from registering for IOSS.
If IOSS WooCommerce merchants choose to apply for the new import system, they first need to identify whether they can opt for the One-Stop-Shop (OSS) or Import One Stop Shop (IOSS) scheme. If a business is established in one of the 27 EU member states, it can apply to the EU tax authorities in which it is registered directly for OSS or appoint an IOSS intermediary to represent it (which can be based in any EU country).
Whereas businesses that are not established in the EU must appoint an IOSS fiscal intermediary representative.
For businesses established within the EU, applying for either the OSS or appointing an IOSS intermediary still mean EU-wide, consolidated VAT payments under the scheme. However, many are choosing to hire representatives because of the VAT expertise, declaration support, and other services which they provide.
If you are a seller, it is your responsibility to collect all value-added tax owed to the EU, by displaying and charging the amount at the point of sale. Even though VAT rates vary between countries in the EU, it is also the seller's responsibility to display the correct VAT owed. The VAT charged should correspond with the VAT set in the country in which the product will be sold. For example, if you ship goods from China which land in Germany but are then transported to France for delivery, you should charge the VAT rate as set in France. Equally, if goods are ordered and dispatched from a fulfillment center in Spain but delivered in Portugal, the VAT will be charged at the Portuguese VAT rate (Please note that tax rates vary in the EU from 17% to more than 25%).
There are several options to make sure you are charging the correct VAT on each sale to an EU buyer. All methods will require you to know the location of the recipient of the goods so you can charge the VAT accordingly (as VAT rates vary from country to country within the European Union). With WooCommerce, you can either opt to work out VAT rates yourself for each sale or you can choose independent plug-ins which will automatically generate and display the correct VAT for buyers depending on their location.
No matter whether you choose to do it yourself or apply a plugin to your IOSS WooCommerce shop, you should still need to appoint an IOSS intermediary to pay the owed VAT on your behalf once you have collected it. Whereas previously you would need to register for VAT purposes for each EU country in which you sold goods beyond a certain threshold, the new tax rules mean you have to register even for one sale, making using IOSS the preferred choice for businesses. IOSS representatives make the process a lot easier by not only facilitating the payment of the relevant EU tax authorities to meet EU-wide VAT obligations under the scheme but by supporting businesses to make sure their IOSS registration goes smoothly and that the right documentation is prepared but also by providing ongoing support to make sure VAT declarations are made correctly and on time.
Ship24 offers all these services and more, all from our own dedicated international team. Find out more about applying for an IOSS number with us today and get registered within as little as 3 working days. As a shipping sector specialist who also offers tracking and logistics solutions, choosing Ship24 as your IOSS intermediary is choosing the sector experts. We also have IOSS representative solutions for DHL, UPS, Royal Mail, USPS, and lots of other couriers you may use to send your WooCommerce goods, all of which you can access on our website. Make IOSS WooCommerce transition easy, choose Ship24.
WooCommerce businesses who register for the IOSS system will benefit from being able to file a single VAT return for all sales made in the EU, consolidating the legal obligation to just one tax payment regardless of how many countries across Europe they sell goods to. (Similar to the previous Mini One-Stop-Shop scheme).
For instance, an e-tailer who imported B2C goods to French, German, and Italian consumers would not be required to register in those three countries. However, they would need to charge the local VAT rate on each sale depending on the location of the customer, at the point of sale. This also needs to be declared when the VAT is paid to the relevant tax authority.
IOSS also promises much faster delivery times, due to the fact packages will not need to be assessed and VAT calculated at the point of import or delayed as the outstanding amount is waiting to be paid.
Although again, IOSS is optional. Non-EU sellers must register with EU countries before they make any sales, due to the registration thresholds. Therefore, registering for the IOSS scheme makes much more sense for those businesses as it will mean a single registration with an IOSS intermediary and single tax payments rather than needing to register individually for every EU country in which they make even just one sale.
Also, if WooCommerce e-tailers are not registered for IOSS, VAT will need to be paid by the customer upon import, which could see them incur further handling and/or processing fees depending on the customs clearance process and/or at the courier discretion
Please note, VAT will still be required to be paid upon import for all goods valued at more than 150.00 EUR.