Import One Stop Shop (IOSS) in Germany

The EU’s One Stop Shop (OSS) systems simplify the value-added tax (VAT) processing of cross-border B2C sales in the EU. In addition to the OSS, the Import One Stop Shop (IOSS) is also a key pillar of the system, as it centralizes the reporting of low-value goods.

In this article, we explain what the IOSS is, how it works, and how it differs from the OSS. You will also learn about the obligations and benefits for online businesses and the customs issues that need to be considered in the IOSS process.

What’s in this article?

• What is IOSS?
• How does IOSS work?
• What’s the difference between OSS and IOSS?
• Which companies can use IOSS?
• What obligations do online retailers have when using IOSS?
• What are the advantages of IOSS?
• What are the customs considerations for IOSS?

What is IOSS?

IOSS stands for Import One Stop Shop and is an EU-wide electronic procedure that simplifies cross-border business. It was introduced in July 2021 as part of the European VAT reform. IOSS is aimed at businesses that sell goods imported from non-EU countries with a real value of up to €150 to private individuals in the EU. IOSS is, therefore, limited to B2C supplies.

Until the introduction of the IOSS, retailers from countries outside the EU were able to deliver goods worth up to €22 to private individuals in the EU without paying customs duties and import VAT. However, this arrangement put EU retailers at a competitive disadvantage and proved susceptible to fraud. With IOSS, the exemption limit has been abolished. All B2C supplies from non-EU countries are now subject to import VAT in the destination country from the first euro. The prerequisite for paying VAT is VAT registration in the respective country.

The IOSS procedure was introduced to avoid the need for online businesses to register in different EU member states. It provides for a one-time registration on a digital platform, which is also used to settle the VAT liability. However, the IOSS can only be used for distance sales with a material value of €150 or less.

How does IOSS work?

A one-time registration is required to use the IOSS. EU-based retailers register in their home countries. In Germany, the Federal Central Tax Office (BZSt) provides a digital platform. Retailers from non-EU countries are free to choose which EU member state they wish to register in. A one-time registration is also sufficient for them to submit regular reports and settle VAT liabilities in all EU countries.

After registering for IOSS in an EU member state, companies receive a unique IOSS identification number. This number is used for each sale to ensure VAT is correctly calculated and paid. Retailers collect VAT directly at the time of purchase and submit it monthly to the tax authorities of the country of registration through the IOSS portal. The calculated tax liability must also be paid monthly. The tax paid is then distributed to the EU member states where the goods were delivered.

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What’s the difference between OSS and IOSS?

The EU currently operates three OSS systems: the EU OSS, the Non-EU OSS, and the IOSS.

• EU OSS: The EU OSS allows businesses to centrally report services to individuals, cross-border online sales within the EU, and certain platform sales.
• Non-EU OSS: The Non-EU OSS is intended for businesses from countries outside the EU that provide services to individuals in the EU.
• IOSS: The IOSS is suitable for online sales of low-value goods to private individuals in the EU. Both EU and non-EU businesses can use the IOSS to declare import VAT.

Which companies can use IOSS?

The IOSS can be used by online retailers who are:

• Residents of non-EU countries
• Based in the EU and deliver goods from a warehouse in a non-EU country

EU retailers who first ship goods from a country outside the EU to a European warehouse for distribution to customers should not use the IOSS.

The following conditions determine whether use of the IOSS is permitted:

• The goods must be delivered directly to private customers.
• Transportation of the goods begins in a non-EU country.
• The transport of the goods ends in the EU.
• The actual value of the goods does not exceed €150.

What is the material value?

Material value is the intrinsic or actual value of a good. This value is calculated by subtracting certain items from the gross selling price of a product. These include domestic and foreign taxes and other costs that do not directly reflect the true value of the goods, such as royalties. Insurance and transportation costs are also not included in the material value if they are listed separately on the invoice.

What obligations do online retailers have when using IOSS?

Use of the IOSS comes with some obligations for online retailers. These must be fulfilled in order to comply with the legal requirements.

The basic requirements begin with registration in the IOSS system. After registration, companies must calculate the VAT for each IOSS-relevant order directly at the time of sale and apply the appropriate VAT rate of the destination country. The material value limit of €150 per delivery must not be exceeded. Invoices issued must clearly and transparently show the amount of VAT collected. Finally, the tax paid must be reported monthly in an IOSS tax return and paid to the competent authority in the country of registration.

In addition, it is important that shipments processed through the IOSS are clearly identifiable as such. For this purpose, it is necessary to indicate the IOSS identification number on the shipping documents to ensure smooth processing at customs.

Compliance with accounting obligations is also a requirement. Retailers must keep detailed records of all transactions processed through the IOSS. These records must include information such as the value of the goods, the amount of tax collected, and the destination country. All relevant documents must be archived for a period of 10 years.

What are the advantages of IOSS?

The IOSS procedure offers a number of advantages to retailers, customers, and tax authorities. Here is an overview of the most important ones:

Advantages for businesses

• Simplified tax processing: Businesses only need to register for the IOSS system in one EU member state and can centrally invoice VAT on all relevant sales throughout the EU.
• Bundled tax payment: With IOSS, businesses make a bundled tax payment to the relevant tax authority. As the tax authority distributes the amounts to the target countries, companies do not have to pay the taxes due to the authorities of several countries on their own.
• Time and cost savings: Centralized processing simplifies accounting and saves companies time and money.
• Simplified compliance: The clear specifications and standardized processes of the IOSS procedure make it easier for retailers to comply with tax regulations in individual EU countries. It also reduces the risk of penalties and fines due to inadvertent errors.

Advantages for customers

• No unexpected costs: Customers pay VAT directly at the time of purchase. There are no additional import fees or duties. This increases transparency and can make the purchase decision easier.
• Faster delivery: Since customs clearance is simplified by providing the IOSS identification number, shipments usually arrive faster.

Advantages for tax authorities

• Better control: Centralized collection and reporting of transactions gives tax authorities a better view of cross-border trade and the VAT collected. All data can be centrally collected and quickly verified when needed.
• More efficient tax collection: National tax authorities receive tax revenues centrally through IOSS. This reduces the administrative burden for all authorities involved.

What are the customs considerations for IOSS?

The IOSS procedure involves VAT and customs laws. In the case of distance selling from non-EU countries, goods must first be released for free circulation in the EU, which requires an electronic customs declaration by retailers or their representatives. As of July 1, 2021, this is mandatory for all commercial shipments, regardless of the value of the goods.

A simplified procedure applies for shipments with a material value of up to €150. The customs declaration requires less data—such as a six-digit customs tariff number—and can be processed through the import clearance of postal and courier shipments (ATLAS-IMPOST). In order to use the IOSS procedure, the valid IOSS identification number must be indicated in the customs declaration. This requirement allows the exemption of import VAT if all other conditions are met.

Customs and tax authorities cooperate closely. The customs authorities record all imports using the IOSS identification number and create overviews of the total value of shipments per identification number. This data is passed on to the tax authorities who use it to verify IOSS reports and prevent tax fraud. All valid IOSS identification numbers are stored in an EU-wide database. When an IOSS identification number is provided as part of a customs declaration, customs will automatically check that the number exists and is valid in the database. The import VAT exemption can only be granted with a valid identification number, which ensures the smooth running of the IOSS procedure.