IOSS VAT rules are facilitating the massive growth of e-commerce into the European Union. Simplified tax rules are levelling the playing field between postal imports, commercial imports, and domestic EU sellers. These modernized rules actually present a massive opportunity for Canadian and US sellers shipping to Europe and the UK. With over 70 percent of the EU population purchasing online, North American goods remain a highly popular option.
The EU recognizes the need to treat all 27 member countries as a single digital marketplace. To successfully navigate this space, e-commerce merchants must understand how import taxes operate across borders.
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Value-Added Tax (VAT) is a consumption tax levied by all European countries. Each country sets its own rules and rates with some standardization based on overarching EU directives. VAT is applied to the sale of all goods and services, including imported e-commerce goods like electronics and clothing. Ultimately, the end consumer bears the final tax burden.
The Import One Stop Shop (IOSS) streamlines the process of declaring and paying VAT for transactions outside the EU. It simplifies the process of importing goods by allowing businesses to complete customs declarations and pay applicable taxes in a single transaction.
When you use IOSS, pricing becomes completely transparent for your customers. They pay all the VAT due at the online checkout, avoiding surprise import fees or delays upon delivery.
Note that IOSS is strictly for business-to-consumer sales; business-to-business shipment import processes remain unchanged.
If you qualify for IOSS, managing VAT obligations becomes incredibly efficient. Registration for all distance sales of imported goods to EU customers is handled via any single EU Member State.
Note: Jet Worldwide facilitates IOSS registration for our Canadian customers using our direct e-commerce shipping options.
While IOSS applies to shipments sent directly to consumers, you must use an EORI number for business imports.
An Economic Operators Registration and Identification number (EORI number) is a unique EU identification number for businesses that import or export goods into or out of Europe. It is a mandatory part of the data set required for customs entries in all EU countries. Before shipping from Canada to a business in Europe, always verify the consignee's EORI number.
The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is a free trade agreement that removes barriers to trade. Under CETA, goods that qualify as "Canadian origin" can clear duty-free into the EU. However, it is important to note that while duties may be waived, VAT still applies to these imports.
Read More: Certification of Origin Explained
Historically, many North American sellers utilized postal clearance because it offered lax customs oversight. Today, new rules mandate strict compliance for both postal and commercial carrier clearance.
Direct Air freight shipping to the EU and UK from North America offers a much faster, more reliable alternative to the postal system. Canadian and American merchants can easily scale their sales into the European Union without needing a physical warehouse abroad.
Disclaimer: The information in Jet Worldwide online content, including this post, is for general information only and is not intended as strict legal or tax advice.