In this article, we are discussing the situation as of 1 July 2021 where Swiss sellers sell low value goods (not exceeding EUR 150) to consumers in the EU via their own web shops and ship goods from Switzerland into the EU.
EU VAT is due on all sales
With the removal of the import VAT exemption for goods not exceeding EUR 22, all commercial goods imported into the EU are subject to VAT, at the applicable rate in the arrival country. There are two ways in which VAT is collected:
- Import VAT is due and collected upon importation.
The customs declarant will pay the VAT and then recover it either from the customer or the supplier; or
- The supplier registers for the IOSS.
The supplier will collect VAT from the customer at the point of sale. If the IOSS is used, import VAT is not due at the time of importation.
What is the IOSS regime?
IOSS is a new system for reporting and collecting VAT on B2C sales of low value goods imported from non-EU countries. It is aimed to reduce the pressure on the customs clearance of low-value goods and simplify the import procedures. The term “low-value goods” refers to goods with a value (not including separately stated transportation costs and VAT) not exceeding EUR 150, excluding some products subject to consumption tax (such as tobacco and alcohol). In addition, the value of the product is calculated as the total of the value of all the products in a single package.
What are the benefits of using the IOSS regime?
The use of the IOSS regime is voluntary. However, if the IOSS regime is applied, there are obvious benefits, including:
- Transparency to the customer
At the time of purchase, the customer will see the total cost of the goods and pays a VAT inclusive price. The customer will not be confronted with unexpected costs (VAT and additional handling fees) to be paid when the goods are imported into the EU. This improves customer experience and reduces rejected products;
- Reduced compliance burden
The seller can use a single IOSS registration to report and pay the VAT due on all sales covered by the IOSS regime. If the seller is to sell goods under DDP terms and acts as the importer, without the IOSS scheme, the seller may need to register for VAT in multiple EU Member States, depending on where the customers are based;
- Quick customs release
The IOSS is designed to enable the quick release of the goods by the customs authorities as no VAT is payable upon importation. This will result in a speedy delivery of the goods to the customer; and
- Flexible logistics
Using the IOSS regime also simplifies logistics as the goods can be imported into the EU in any EU Member State, regardless of the EU Member State where the goods are ultimately shipped to. If the IOSS regime is not used, goods can only be imported and cleared for customs in the EU Member State of final destination, which may incur additional costs.
How do I apply for an IOSS number?
Swiss sellers should register for the IOSS regime only through a VAT intermediary, who is resident in the EU. Once registered, the Swiss sellers should submit monthly IOSS returns and pay the VAT amounts to the country of registration on a monthly basis. The tax authority in the country of registration will distribute the tax to the other EU Member States according to the IOSS returns submitted. The VAT intermediary will be responsible for submitting monthly IOSS returns and making VAT payments on behalf of the sellers.
This article only briefly discussed the new rules for reporting low-value goods. If you are interested in learning more about the upcoming changes as of 1 July 2021 and our services, please reach out to us.