You may have heard the acronyms OSS or IOSS over the last few weeks without really knowing much else about them? MIA Executive Director Anthony Short attempts to make sense of the potential benefit to MI Retailers in the UK.
Does IOSS help or hinder consumer sales into the EU?
In the parallel universe where we voted 52:48 to remain in the EU, there is probably a lot more discussion about the implementation of the new OSS platform than is currently taking place in this one.
This is not because it isn’t relevant post-Brexit, just that with a lot of things that have happened since the end of the transition period it has all become a little more complicated and harder to dissect.
OSS stands for One Stop Shop and is an electronic portal aimed at B2C sellers. It will allow businesses selling to consumers in multiple countries in the EU to declare and pay VAT on all of those sales in one return, and in the country from where they are selling the goods.
So let’s take as an example a music instrument reseller in France, who also sells products to consumers in other member states. Every time a cross-border sale is made the reseller would charge and collect the VAT pertinent to the country into which the sale is being made i.e. a sale into Italy would reflect the local VAT rate of 22%. The reseller would then account for its domestic sales VAT in France, and its cross-border sales in a single return via the OSS platform.
This alleviates the need to be registered for VAT in each individual country in the EU that the reseller is exporting to.
To register for OSS a company must hold finished product in a member state country, and in the case of a UK company (non-member state), you may also require fiscal representation in the country you have inventory and intend to register.
So what is IOSS?
IOSS stands for the Import One Stop Shop, and the difference between IOSS and OSS is where the stock is held. For IOSS the stock is held outside the EU (i.e. in the UK) and is sold directly to individual consumers across the EU. The value of these sales must be at a value under €150.
As with OSS, any sale made into a member state must have the correct amount of local VAT applied, again relevant to the country where the consumer is based. Assuming that the UK reseller has the infrastructure to correctly levy this, then it is possible to submit all VAT collected on a single return through the IOSS.
Clearly, this is advantageous in comparison with dealing with multiple VAT registrations at a country level, but it also has the advantage that it could potentially speed up Border Clearance because as there will be no VAT to account for or pay. Practically speaking the reseller will issue the nominated carrier with an IOSS reference, commodity code & invoice for customs and the import passes through a customs green channel. The net result is that the consumer will not be asked to pay VAT at the point of delivery, and should receive the goods quicker.
What’s the downside
I mentioned at the beginning that everything post-brexit comes with a catch, and it’s the same with IOSS.
Firstly it’s not 100% clear whether you can register directly with the IOSS portal or whether you need an intermediary. A ‘mutual assistance’ clause on tax was included as part of the Brexit TCA which removed the requirement for EU states to impose Fiscal Representative requirements on third country states.
However, at the moment it is unclear exactly how each country will interpret this. Ireland for example is requiring an intermediary for UK businesses wanting to register for IOSS there, whereas Italy isn’t. Many other EU countries are still in the process of confirming these guidelines.
The reason why this is important is that the cost of an intermediary will factor into the viability of IOSS. Early figures suggest this cost will fall between £200 to £500 per month, which is a fair chunk for a small to medium resale business to set against potential revenue. Certainly for a business currently trading across the border on an ad-hoc basis it would be hard to justify.
The second issue of course is the fact that many potential sales fall outside the €150 limit, and these transactions would have to be accounted for either by multiple VAT returns to multiple countries or by passing the VAT liability onto to the shipping agent to collect from the consumer prior to final delivery. It is of course this outcome that has led many resellers to abandon the idea of selling directly into the EU.
Want to learn more?
This Friday’s drop-in session is all about IOSS, so if you want to learn a bit more about this subject and you are free at 10am please drop a note to firstname.lastname@example.org to register your place.