A retailer established outside the EU sells consumer goods by distance sale directly to private customers in the EU, with each parcel's intrinsic value declared to customs at no more than EUR 150, excluding transport, insurance and other charges shown separately on the invoice. Since 1 July 2021, if the retailer registers for the Import One Stop Shop (IOSS), what is the effect on VAT for these consignments?
- The retailer must still pay import VAT to customs on arrival in the EU at the rate of the member state of first entry, then reclaim that VAT later through the IOSS return
- IOSS applies automatically to every import valued below EUR 150 whether or not the retailer registers for it, since registration only becomes compulsory above that value
- IOSS only covers the customs duty on the consignment; VAT must still be collected separately by the delivery courier from the consumer at the point of delivery
- The retailer charges VAT at the point of sale at the rate of the consumer's member state, declares and pays it through a single monthly IOSS return, and the goods are then released at import without VAT being collected again at the border
Why D? And why not the others?
Correct answer: D. The retailer charges VAT at the point of sale at the rate of the consumer's member state, declares and pays it through a single monthly IOSS return, and the goods are then released at import without VAT being collected again at the border
IOSS lets a registered seller charge VAT to the consumer at checkout, at the rate applicable in the consumer's own member state, and remit it through one monthly return filed in a single member state; customs then releases the goods on import without collecting VAT again, avoiding double taxation and delay at the border. The option requiring VAT to be paid at first entry and reclaimed afterward describes the opposite of the intended effect: IOSS exists precisely to stop import VAT being collected at the border for goods already carrying point-of-sale VAT under the scheme. The option treating IOSS as automatic below EUR 150 is wrong because the scheme is voluntary; a seller that does not register still faces normal import VAT collection procedures at the border, including handling by the courier, on qualifying low-value consignments. The option limiting IOSS to customs duty misstates the scheme's scope: parcels within the EUR 150 threshold are, in any event, exempt from customs duty regardless of IOSS use, and IOSS itself is specifically the mechanism for VAT, not duty.
Source: EU VAT Directive (2006/112/EC), Title XII Chapter 6 (Import scheme / IOSS) and Article 143(1)(ca); effective 1 July 2021