IOSS procedure for distance selling of imported goods

Service-Tax

Buying goods on platforms of companies outside the European Union is very popular. This is due to lower prices as well as the lack of clear rules on taxing these transactions, which made purchases very profitable. In addition, the lack of provisions on VAT settlement by the entity owning the platform made it easier for it to sell in the EU. From July 1, there was a change in the taxation of distance sales of imported goods, i.e. the supply of goods that are sent or transported to an EU consumer from the territory of a third country. Let's see what the IOSS procedure is.

New taxation rules for sales platforms - IOSS procedure

The legislator introduced a legal fiction that a taxpayer who facilitates the sale of goods by using the so-called platform electronic interface, he himself received the goods and delivered them.

The above will apply to the following situations:

  • distance sales of goods imported from outside the EU in shipments with a real value not exceeding € 150, and

  • delivery of goods (regardless of the value of the shipment) carried out within the EU by a non-EU supplier via the platform (this is sales made from logistics centers located in the EU, where goods belonging to entities outside the EU are located).

In such a situation, the platform acting as a taxpayer takes over the obligation to collect and settle the amount of VAT due. The new regulations will mean that they will have to collect additional information, such as:

  • verification of the status of the transaction party, i.e. whether it is a VAT payer or a consumer;

  • value of shipments;

  • country of dispatch;

  • destination country.

The above data will be necessary for the proper settlement of the platform.

IOSS procedure

From 1 July, the method of settling the distance sales of imported goods has changed. Distance selling is the sending and transport of goods from a third country to a consumer from the European Union.

Currently, all commercial goods imported into the EU are subject to VAT.

In order to facilitate tax settlement, a special IOSS (Import One Stop Shop) procedure has been introduced.

In this case, it does not matter whether the entity selling to consumers is established in the EU.

The IOSS procedure applies to transactions that meet the following conditions:

  • fulfill the definition of distance selling of imported goods;

  • they do not apply to new means of transport, goods delivered with installation and assembly, as well as goods subject to excise duty;

  • relate to goods shipped in parcels with an actual value not exceeding 150 euros.

Example 1.

The company is engaged in mail order sales. It is based in Poland. Sales are made through their own website, but goods are shipped directly from China to consumers. Shipments are delivered throughout the EU. Will the IOSS procedure be correct to account for such a sale?

Yes, in this case the company may use the IOSS procedure. Thus, it will collect VAT from consumers under this procedure. The tax will be collected at the time of delivery to consumers. As the taxpayer is domiciled in the country, he registers in Poland. It is carried out by means of electronic communication on the VII-R form. The authority to which the notification is sent is the Head of the Second Tax Office Warszawa-Śródmieście.

Where the taxpayer has several fixed establishments, the country of identification is the country where he has his fixed establishment and which he has chosen for the purpose of submitting the application informing about the intention to use the IOSS procedure.

The taxpayer may change the selected country of identification, but only after 2 consecutive years, counting from the end of the year in which the procedure started to apply. Of course, the above applies to taxpayers who have several permanent establishments in different countries.

IOSS procedure and tax settlement

In most cases, the taxpayers affected by the IOSS procedure deliver to many European Union countries.

Example 2.

The taxpayer conducts mail order sales through his store throughout the European Union. Deliveries are shipped directly from China to consumers. It uses the IOSS procedure and is registered in Poland. How should I settle my taxes?

As a preliminary point, it should be recalled that the tax obligation on distance sales of imported goods under the IOSS procedure arises at the time the goods are delivered. The special moment when the obligation arises when the payment is accepted in accordance with Art. 61b of regulation 282/2011.

Taxpayers identified for the purposes of the procedure submit a special declaration, regardless of the obligation to submit JPK_V7.

If the taxpayer is represented by an intermediary, he, and not the taxpayer, is obliged to submit a declaration. If the broker represents several taxpayers registered for the import procedure, he will submit VAT declarations separately for each of them.

The declaration is submitted by electronic means of communication, i.e. via the e-declarations portal, to the Head of the Second Tax Office Warszawa-Śródmieście.

In the event of non-delivery, we provide zero declarations.

If the deadline expires on a Saturday or a statutory holiday, we submit a declaration on that day.

We show a tax for each member state of consumption (we set the tax rates for the state of consumption). We pay the tax in euro.

In order to be able to use the import procedure, taxpayers are required to keep records in electronic form.

IOSS procedure and the rules of declarations correction

There are special correction rules for IOSS declarations. First, an adjustment is made to the current declaration.

The taxpayer may submit a correction, but no later than within 3 years from the date of expiry of the deadline for submitting the VAT return in which errors were found. When making the adjustment, the taxable person must indicate the relevant Member State of consumption, the tax period and the amount of VAT.

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Does the IOSS procedure allow operation through an intermediary?

In a situation where the taxpayer does not have a registered office or a permanent place of business in the territory of the European Union, the condition for using the procedure is the appointment of an intermediary. The above rule does not apply to taxpayers from countries with which the EU has signed a cooperation agreement, i.e. Norway and Great Britain.

An entity wishing to act as an intermediary must meet the following rules:

  • be registered as an active VAT taxpayer;

  • have a seat of business or a permanent place of business in the territory of the country to be elected;

  • not to have in the last 24 months tax arrears exceeding 3 amounts of due tax liabilities in each tax;

  • has not been legally convicted of committing a fiscal offense (applies to the last 24 months);

  • is authorized to provide tax consultancy in accordance with the provisions on tax consultancy or to provide bookkeeping services.

A taxpayer intermediary using the IOSS procedure is established by means of a written agreement.

Summing up, the above procedure will certainly facilitate VAT settlement. Taxpayers will not be forced to settle it in every country. In addition, the possibility of establishing an intermediary will certainly facilitate the tax settlement of taxpayers from outside the European Union.