VAT IOSS - what is the specificity of the one-stop-shop procedure for importing goods?

Service-Tax

One of the directions of changes to the regulations in force from July 1, 2021 is the extension of the functionality of the current mini comprehensive VAT settlement point for the provision of TNE services in the territory of the EU (MOSS). This settlement was made through the system of one of the EU countries (regardless of where in the EU TNE services were sold), which transferred the settlements to the EU countries of service recipients. The extension of the MOSS procedure was based on two modified procedures in relation to MOSS, i.e. VAT OSS and VAT IOSS. The specificity of the latter is presented in this publication.

Special IOSS VAT import procedure

As of July 1, 2021, the import of all goods with an actual value of up to EUR 150 is already subject to VAT. Accounting for VAT when selling imported goods to many countries in the EU (according to the standard procedure) would require VAT registration in all EU countries of consumption.

In addition, the recipient often waits quite a long time for the expected shipment to arrive from a non-EU supplier. With the new, key EU regulations in force from 1 July 2021, including:

  • COUNCIL DIRECTIVE (EU) 2019/1995 of November 21, 2019 amending Directive 2006/112 / EC as regards the provisions on distance sales of goods and certain domestic supplies of goods (hereinafter referred to as EU Directive 2019/1995);

  • COUNCIL DIRECTIVE (EU) 2017/2455 of 5 December 2017 amending Directive 2006/112 / EC and Directive 2009/132 / EC as regards certain value added tax obligations for the supply of services and distance sales of goods (referred to as hereinafter EU Directive 2017/2455);

  • COUNCIL IMPLEMENTING REGULATION (EU) 2019/2026 of 21 November 2019 amending Implementing Regulation (EU) No 282/2011 as regards the supply of goods or the provision of services facilitated by the use of electronic interfaces and with regard to specific schemes for taxable persons who provide services to non-taxable persons, sell goods remotely and carry out certain domestic supplies of goods (hereinafter referred to as EU Regulation 2019/2026)

- a special import procedure was introduced, constituting a one-stop shop for imported goods sold at a distance - VAT IOSS for suppliers of goods.

The new special VAT IOSS import procedure enables the settlement of the VAT due to the realized SOTI transaction via the selected EU country of identification. Declaration and payment of VAT is transferred to all EU countries of destination of goods delivery also via the EU country of identification (selected or identified by the taxpayer to handle VAT IOSS).

The new IOSS special VAT import procedure only applies to the supply of goods imported from third countries (SOTI) with an actual value not exceeding EUR 150.

This is a significant simplification compared to the standard procedure, where VAT and customs duties are identified and collected by the customs authorities at the time of clearance of imported goods.

In the case of using the special VAT IOSS procedure, the supplier from a third country will declare and collect (from the buyer) VAT tax upon the sale of the goods, and settle it in the declaration and pay via the IOSS VAT system in the EU country of identification (the EU country that has chosen as the country of identification) EU to handle IOSS VAT settlement). Thanks to this solution, the SOTI transaction in the part of the import of goods is exempt from VAT. This, in turn, results in much faster customs clearance by customs.

An extremely important point is that the special IOSS VAT import procedure is only voluntary. The taxpayer is not obliged to use it, but has the option to do so under the following conditions.

Taxpayers entitled to use the VAT IOSS procedure

Pursuant to Art. 369m of the EU Council Directive 2017/2455 of 5 December 2017 amending Directive 2006/112 / EC and Directive 2009/132 / EC (hereinafter referred to as the EU Council Directive 2017/2455), the special VAT IOSS import procedure may be used by:

  1. taxpayers established in the territory of the EU carrying out distance sales of goods imported from third territories or third countries (SOTI);

  2. taxpayers, whether or not established in the EU, carrying out distance sales of goods imported from third territories or third countries (SOTI) and represented by an intermediary established in the Community;

  3. taxpayers established in a third country with which the Union has concluded a mutual assistance agreement with a scope similar to the scope of Council Directive 2010/24 / EU (* 2) and Regulation (EU) No 904/2010, conducting distance sales of goods from that third country (SOTI).

It is worth noting that the above groups of taxpayers also include electronic interface operators, i.e. an entity facilitating the execution of SOTI transactions (goods with actual value up to EUR 150):

  1. established in the territory of the EU;

  2. non-EU taxable persons and represented by an intermediary established in the Community;

  3. established in a third country with which the Union has concluded a mutual assistance agreement with a scope similar to the scope of Council Directive 2010/24 / EU (* 2) and Regulation (EU) No 904/2010, selling goods from that third country at a distance.

The table below provides a list of the possibilities for direct or indirect registration in the respective country of identification.

Provider

EU country of identification

Registration method

Appointing an intermediary

Taxpayer established in the EU

EU country of the company's seat

It does not require the participation of an intermediary

Voluntary

Non-EU based taxpayer - represented by an intermediary

EU country of residence of the broker

Only with the help of an intermediary

Obligatory

A taxpayer based outside the EU in a third country with which the EU has signed a mutual assistance agreement regarding VAT settlement

EU country chosen by the taxpayer (consumption)

It does not require the participation of an intermediary

Voluntary

A delivery facilitator (IE operator) established in the EU

EU country of the seat of the entity

It does not require the participation of an intermediary

Voluntary

Delivery facilitator (IE operator) based outside the EU - represented by an intermediary

EU country where the broker is based

Only with the help of an intermediary

Obligatory

Entity facilitating the delivery (IE operator) based outside the EU in a third country with which the EU has signed a mutual assistance agreement on VAT settlement

EU country chosen by the entity (of consumption)

It does not require the participation of an intermediary

Voluntary

It is worth noting that when the entity facilitating the delivery does not have a registered office in the EU, then it is obliged to indicate an intermediary based in the EU in order to be able to register (use) for the special IOSS VAT import procedure.

Why is it mandatory? The indicated broker (together with the supplier) will be obliged, inter alia, to down:

  • register yourself in IOSS with the status of an intermediary in an EU country according to the residence of the intermediary;

  • fulfillment of all obligations arising from the specific IOSS VAT import procedure, e.g. electronic submission of VAT settlement declarations, payment of VAT on the import.

After registration, he will have a special identification number that allows assigning the serviced taxpayer, VAT settlement in the special IOSS VAT import procedure.

The broker identification number (for the purposes of SOTI) will be one, which means that regardless of the number of taxpayers served - the broker will not receive more numbers.

Deliveries qualified for the special IOSS VAT import procedure

The application of the IOSS VAT procedure applies only to certain types of importation of goods, so the taxpayer will not always be able to register to use the above specific import procedure. The use of VAT IOSS refers to the execution of SOTI transactions, i.e. deliveries:

  1. goods shipped or transported with or on behalf of the supplier, and

  2. goods imported from third territories or third countries to their final recipient in the EU, and

  3. goods in consignments with an actual value not exceeding EUR 150, and

  4. with the exception of products subject to excise duty.

The determination of the actual value was specified in the EU Commission Delegated Regulation 2020/877 of 3 April 2020 amending and correcting Delegated Regulation (EU) 2015/2446 supplementing Regulation (EU) No 952/2013 and amending Delegated Regulation (EU) 2016/341 supplementing Regulation (EU) No 952/2013 establishing the Union Customs Code, and more specifically in Art. 1 point 48 of this regulation.

This provision says that the actual value means:

  1. for goods of a commercial nature: the price of the goods themselves sold for export to the customs territory of the Union, excluding transport and insurance costs, unless included and not separately invoiced, and excluding any other taxes and charges; which the customs authorities can determine on the basis of the relevant documents;

  2. in the case of non-commercial goods: the price that would have been paid for the goods themselves if they had been sold for export to the customs territory of the Union.

Tax obligation taking into account the special VAT IOSS import procedure

Pursuant to Art. 369n of the EU Directive 2014/2455, in the case of the SOTI transaction, where VAT is declared using the special VAT IOSS import procedure, the event giving rise to the tax obligation occurs at the time of delivery of the goods. It is considered made when the payment is accepted.

Pursuant to Art. 61b of the EU Regulation 2019/2026, the moment of accepting the payment for the application of VAT IOSS is the moment when the taxpayer using the import procedure or the person acting on his behalf receives:

  1. payment confirmation or

  2. payment authorization message, or

  3. the buyer's obligation to make the payment

- whichever occurs first, regardless of when the actual payment of the amount of money is made.

VAT declaration and payment

The VAT declaration for the application of the special IOSS VAT procedure is made in euro. It includes, among others:

  • the VAT identification number of the supplier of the goods or the broker for each EU country of consumption where VAT is due;

  • the total value, excluding VAT, of distance sales of goods imported from third territories or third countries for which VAT has become chargeable in the relevant tax period;

  • total amount of the corresponding VAT broken down by rates;

  • VAT rates and the total amount of VAT due.

Any changes occurring after the submission of the declaration, which should be shown in it, must be included in the next declaration within 3 years from the date of the deadline for submitting the original declaration.

If the Member State of consumption has not adopted the EUR currency, it may require a VAT declaration to be made in the currency of the country of consumption in the EU. However, when the deliveries of goods have already been converted in other currencies and shown in the VAT declaration according to this value - the taxpayer or intermediary settling VAT on behalf of the taxpayer according to the special VAT import procedure IOSS apply the exchange rate applicable on the last day of the settlement period.

The taxpayer or broker electronically submits a VAT return to the EU country of identification for each month, regardless of whether distance sales of goods imported from third territories or third countries have been carried out.

Currency conversions for the declaration of the value of the transaction are made by the taxpayer according to the exchange rates published by the ECB (European Central Bank):

  • for the day or

  • if on that date an exchange rate has not been published using the exchange rate on the next publication day.

The deadline for the VAT payment and submission of the IOSS VAT declaration in the IOSS system operated by the EU country of identification is the last day of the calendar month following the settlement month (the month in which the import was settled under the SOTI transaction).

Payments are made to a bank account in euro indicated by the Member State of identification. Member States that have not adopted the euro, as well as when submitting a VAT return, may require the payment of VAT made to a bank account kept in their own currency.

Tasks and obligations of a taxpayer using the special VAT IOSS import procedure

Registration for the special VAT IOSS import procedure is not enough. A taxpayer using this procedure has a number of tasks and obligations to fulfill for the implementation of all requirements of the procedure. The table below presents the most important.

Tasks and obligations of a taxpayer using the special VAT IOSS import procedure

1.

Registration of a taxable person or intermediary for the purposes of IOSS VAT settlement in the Member State of identification.

2.

Providing the amount of VAT (at the latest when closing the order submitted for execution) to be paid by the final buyer from the EU country of destination.

3.

All goods that will be shipped or transported to recipients from the EU must be shipped.

4.

Collection of the agreed amount of VAT from the EU buyer for the supply of goods with an actual value not exceeding EUR 150.

5.

Documentation of the final price to be paid by the EU customer with an invoice, together with the collected (agreed) amount of VAT at the rate appropriate for the EU country of destination.

6.

Providing carriers of goods (e.g. couriers) with the necessary information for customs clearance in the EU, i.e. the obtained identification number when registering for the specific IOSS VAT import procedure, which will identify the supplier (broker) in the light of the possibility of using the VAT exemption when clearing the imported goods by the customs office.

7.

Submission of an IOSS VAT declaration by a supplier or intermediary (implementation of the special import procedure via the IOSS VAT One-Stop Shop in the EU country of identification of the taxpayer or intermediary) covering all deliveries of goods made under SOTI to recipients in the EU with an actual value not exceeding EUR 150 for a given accounting period .

8.

Payment of VAT by the supplier or intermediary through the IOSS system in the EU country of identification of the taxpayer or intermediary (performance of IOSS VAT service in the EU country of identification).

9.

Archiving of records kept for the purposes of documenting SOTI transactions made with the use of the special VAT IOSS import procedure for 10 years.

No use of the special IOSS procedure

It is worth noting that the taxpayer has the option to opt out of the special VAT IOSS import procedure.

Pursuant to Art. 57g of the EU Regulation 2019/2026, a taxpayer using the import procedure may discontinue its use regardless of whether it still conducts distance sales of goods imported from third territories or third countries.

The taxpayer or an intermediary acting on his behalf shall inform the Member State of identification of its decision at least 15 days before the end of the month in which it intends to stop applying the procedure.

The cessation takes effect from the first day of the following month and the taxpayer is no longer entitled to use this procedure for supplies of goods made from that date.

Removal of a taxpayer from the register of entities using the special IOSS procedure

Only the Member State of identification has the appropriate right to deregister a taxpayer using the special VAT IOSS import procedure from the possibility of using it. The decision to exclude a taxpayer is most often based on generally available information, including information obtained from EU countries of consumption.

The exclusion of the taxpayer from the IOSS VAT procedure will be effective only from the first day of the month following the date on which the exclusion decision was sent to the taxpayer by e-mail.

On the other hand, the exclusion will be effective from the date of the change (occurrence of the event), if the taxpayer changed the seat of business or permanent place of business.

On the other hand, exclusion will take effect from the day following the day on which the decision on exclusion has been sent to the taxpayer by electronic means in the event of systematic non-compliance with the rules governing this procedure.

Apart from the systematic failure to comply with the rules concerning this procedure, the individual VAT identification number issued by the EU country of identification (identifier for the application of the special VAT IOSS procedure) is valid for the period necessary to import goods, the delivery of which was made before the exclusion date, but this period may not exceed 2 months from that date.

The individual VAT identification number assigned for the purpose of applying the import procedure is valid for the period necessary to import goods, the delivery of which was made before the exclusion date, but this period may not exceed two months from that date.

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Removal of an intermediary or taxpayer from the register of entities using the special IOSS procedure

Pursuant to Art. 369r paragraph. 1, 2 and 3 of EU Directive 2017/2455 The EU country of identification has the right to remove the non-broker taxpayer from the identification register in the following cases:

  1. when the taxable person notifies the Member State of identification that he no longer carries out distance sales of goods imported from third territories or third countries;

  2. when it may be otherwise established that the taxable distance selling activities of that taxable person of goods imported from third territories or third countries has ended;

  3. when the taxpayer no longer meets the conditions for using this special scheme;

  4. where the taxpayer systematically fails to comply with the rules relating to this special scheme.

The EU country of identification has the right to remove an intermediary from the identification register when:

  1. it has not acted as an intermediary for the taxpayer availing itself of this special scheme for two consecutive calendar quarters;

  2. the intermediary no longer fulfills the other conditions necessary to act as an intermediary;

  3. an intermediary has systematically failed to comply with the rules governing this special scheme.

The EU country of identification has the right to remove the taxpayer represented by the intermediary from the identification register if:

  1. the broker notifies the Member State of identification that that taxable person is no longer selling goods imported from third territories or third countries at a distance;

  2. it may otherwise be stated that the taxable activity of that taxable person in the distance selling of goods imported from third territories or third countries has ended;

  3. that taxable person no longer fulfills the conditions required to benefit from this special scheme;

  4. that taxable person has systematically failed to comply with the rules relating to this special scheme;

  5. the broker notifies the Member State of identification that it no longer represents that taxpayer.

If the intermediary fulfills only one of the above conditions for deletion - the EU country of identification has the right to delete it from the identification register and exclude the taxpayers represented by this intermediary from the import procedure.

Only the Member State of identification of the broker has the appropriate power to deregister the broker using the special VAT IOSS import procedure from the possibility of using this procedure. The decision to exclude an intermediary is mostly based on publicly available information, including that obtained from EU countries of consumption.

Excluding an intermediary from the IOSS VAT procedure will be effective only from the first day of the month following the date on which the exclusion decision was sent electronically to the intermediary and the taxpayers represented by the intermediary.

On the other hand, the exclusion will be effective from the date of the change (occurrence of the event), if the intermediary changed the seat of business or permanent place of business.

In turn, the exclusion will take effect from the day following the day on which the decision on exclusion has been sent to the intermediary by e-mail in the event of systematic non-compliance with the rules governing this procedure.