What is the EU VAT scheme?
The European Union implemented a Value-Added Tax (VAT) scheme that went into effect July 1, 2021. This scheme makes every order into the EU, regardless of value, subject to VAT and expands the VAT collection options by introducing IOSS (Import One-Stop Shop).
Here is a high-level summary of the changes:
- The €22 de minimis ended. The new de minimis is €0, meaning all shipments into the EU are subject to VAT.
- The EU introduced IOSS (Import One-Stop Shop) as an optional method for tax remittance. The other options for remittance remain; carriers can still facilitate tax remittance through Delivered Duty Paid (DDP) and Delivered at Place (DAP) shipments, but retailers now have the additional option to register in a single EU member country and remit all taxes from low-value orders (total of goods is less than or equal to €150) going to the EU to that one country.
To read in detail about all of the options, take a look at our EU VAT guide.
Who the EU VAT scheme affects
The end of the €22 de minimis in the EU means that every order regardless of value is subject to VAT. If you are using Landed Cost to calculate duties and taxes into the EU, you don't have to change anything as long as you are sending your shipments with duties and taxes prepaid. Zonos handles your landed cost calculations according to the tax scheme on all of your low-value orders.
If you have an ecommerce business that ships high volumes of low-value goods into the EU, you may choose to switch to the optional method of VAT collection called Import One-Stop Shop (IOSS). If you choose this method, you need to follow the guidelines to get registered for IOSS as outlined in our EU VAT guide. Once you are registered, you need to activate IOSS by adding your EU VAT number in Zonos Dashboard.
For anyone with a high volume of shipments into the EU, Zonos recommends IOSS because this method helps to expedite the clearance process for your international EU shipments, ensures a smoother delivery process, and may eliminate carrier fees for your shipments.
What to expect with IOSS
With your IOSS shipments, you can expect the following:
- You must register for a VAT number in an EU member country
- VAT will be calculated and collected on all low-value orders. These orders are not subject to duty.
- You will retain the money collected in VAT for these low-value orders, which you will remit later.
- Ship these orders with your IOSS number on the commercial invoice which will let customs know that VAT has been collected and to let the package clear.
- Each month, file your taxes with your IOSS number to remit the EU VAT collected on your low-value orders.
Frequently asked questions
What about my high-value orders?
IOSS does not apply to high-value orders(over €150). VAT and duty are still collected on orders over €150 if your store is set to pre-collect duties and taxes. You need to ship these orders with duties and taxes prepaid (DDP/DTP) and bill the duties and taxes back to yourself. You do not need to remit the VAT collected on these high-value orders.
How can Zonos help?
Zonos Landed Cost guarantee - Landed Cost guarantee ensures landed cost accuracy for every international sale and manages non-resident country tax schemes (UK, EU, AU, NZ, NO) by tracking country thresholds and collecting taxes for you only when the threshold is met to avoid over-or-under collecting on taxes. There is no need to register for an IOSS number if you are on Landed Cost guarantee; Zonos' IOSS number will be used.
European IOSS
Learn how to manage the EU low-value VAT scheme.