Brexit brought about a lot of changes for companies trading with the European Union, but are you aware of the changes coming soon for exporters to the European Union?
In terms of VAT, the United Kingdom is now classed as a third country and from the 1st of July, the VAT exemption that existed for sending goods to the European Union for under €22 has been removed. All exports to the European Union are now subject to VAT.
This will affect all B2C sellers and it is important to know the rules surrounding your businesses exports to any countries in the European Union. Here at Abbeygate Accountancy, we are happy to provide a breakdown of the benefits and potential drawbacks all whilst offering a service that will implement this new system effortlessly and leave you feeling in control of your business and its processes.
What is VAT?
VAT is a tax levied on the value-added at each stage of the production and sale of goods. It is a cost that is generally borne by the end consumer but collected by the seller.
As a seller, you have 3 options when it comes to the collection of VAT. You can:
- Add the VAT onto a sale and make a declaration for the countries that you are exporting to manually (which is time consuming and labour intensive!).
- Do not add VAT to the goods and leave the VAT payment in the hands of the customer upon receipt of the goods.
- Use the Import One-Stop Shop (IOSS) which gives you the benefits of option 1) without the need for extensive paperwork or the personnel!
What is the IOSS?
The Import One-Stop Shop is an electronic portal business created by the European Union specifically for declaration and payment of VAT. It is a simplified way for the United Kingdom and sellers from other third countries to declare and pay VAT in the EU.
IOSS can be used for any sales that are less than €150 into the European Union, any goods that are over this value will be subjected to standard VAT import rules. Therefore, the application of the IOSS is best suited to businesses which frequently sell low value goods to the European Union. Those who sell items with a value of greater than €150 may wish to seek alternative schemes.
Is The Import One Stop Shop the right choice for you?
The IOSS is not mandatory for any sales under €150 and you have the option to collect the import VAT the traditional way from the buyer via postal courier. If you choose to stick with the old-school method it will result in a more complicated customs clearance procedure, more paperwork and even longer transit times which is never good for customers.
This is not to mention the bad reputation and perceived unfairness of hidden import taxes that become associated with your brand. IOSS is therefore for companies, large or small, who wish to streamline their processes, improve their perception with customers and ensure that no additional work is being asked of the recipient of your goods or packages.
No more hidden fees for your customers
A secondary advantage of using IOSS is that buyers do not have to worry about any unexpected customs fees upon the delivery of your goods to them.This is because the IOSS incorporates the taxes into the checkout process and as a result, reduces frustration at hidden fees. This puts customers at ease and leaves them feeling satisfied that their package will arrive without any additional effort.
You only need to register in one EU country
The tertiary benefit is that the IOSS VAT declarations are made for all European Union countries on one form, even though you only register in one European Union country. The ramifications of this are that you can export to anywhere within the European Union without having to change your checkout process to match the requirements of individual nations. You can choose any country in the European Union to register, even if it is not a nation you ship to. This change particularly helps the United Kingdom who formally withdrew from the customers union 2 years ago.
Which country should you register in?
With the IOSS it is assured that the VAT is paid correctly, securely and to the right people at the right time. Overall the IOSS is set to offset most of the negative impacts of the United Kingdom leaving the customers union, at-least for businesses and their logistics/operations departments. The one thing of note with the IOSS is the fact that you may require an intermediary in the country which you initially choose to facilitate your VAT return. For businesses based in the United Kingdom, you may want to consider choosing this country based on where you send the majority of your goods although this is not necessary. A country where you already have connections or speak the language may be a preferable choice for your company.
Still feeling unsure on IOSS? If you would like to have a competent, professional and diligent team set up the entire process for you, contact us! Not only do we boast an impressive 5 star service, but we also promise to combine outstanding people skills with technology to ensure you are left feeling knowledgeable about your business and operations.