IOSS or OSS – which option to choose
for businesses from UK?
Brexit has led to many vital economic changes including those in the e-commerce sector.
When the UK decided to leave the EU, it became an external trading partner for the remaining Member States. For this reason, the form of taxation for goods imported and exported via the UK to be later sold online had to change.
What does e-commerce look like in the UK today?
Entrepreneurs from EU Member States who conduct intra-Community online trade can use a simplified OSS method. But is this option also available to online shops whose owners sell goods form the UK?
OSS offers two options: the EU scheme available to businesses with their registered offices inside the EU and the non-EU scheme available to businesses with their registered offices outside the EU.
The non-EU OSS scheme concerns settling VAT on services provided for EU customers in only one Member State (the country of identification, which is also an EU Member State). There is no need for registering or settling VAT in other Member States where the service is provided (consumer Member States). Additionally, the non-EU OSS scheme enables a simpler VAT settlement method for external entities providing services to VAT payers (consumers) from outside the EU.
What about IOSS?
Until the end of 2020 business transactions between the UK and EU Member States were based on the intra-Community rules of purchase and delivery of goods and services. Since January 1, 2021, they have been replaced by import and export.
British entrepreneurs conducting distance sales to EU citizens must also keep in mind the new e-commerce and EU regulations.
Since July 1, 2021, the exemption from VAT on the import of goods which do not exceed in value 22 EUR has been revoked in all EU countries (in Poland the exemption did not apply to e-commerce). This means that the import of all goods which do not exceed in value 150 EUR will be subject to VAT.
In order to simplify VAT settlement a special procedure – Import One Stop Shop (IOSS) has been established for entrepreneurs conducting distance sales from third countries or territories into the EU.
IOSS is dedicated to businesses from outside the EU who sell their products to clients from EU Member States. In short, IOSS concerns goods imported from third countries or territories where the value of the delivered package does not exceed 150 EUR.
What it means in practice is that businesses from outside the EU who offer distance sales to EU Member States can register both for VAT OSS, and, if all requirements are met, for VAT IOSS in the country where trade is conducted. Hence, it is included in intra-Community trade on the basis of similar but simplified VAT settlement methods.
In case of any questions or queries about regulations concerning VAT settlement by entrepreneurs conducting business in e-commerce it is best to turn to the fiscal office or an experienced tax advisor for support.