Notes on EU VAT Rules and VAT Pre-payment for Cross-Border B2C E-commerce Orders (IOSS Scheme)

Notes on EU VAT Rules and VAT Pre-payment for Cross-Border B2C E-commerce Orders (IOSS Scheme)

TL;DR: These notes summarise the EU VAT rules that came into force on 1 July 2021 for cross-border B2C e-commerce orders shipped into the European Union. The historical 22 EUR low-value VAT exemption was removed, and all imported goods are now subject to VAT regardless of declared value. For consignments...

Common Applications

These notes summarise the EU VAT rules that came into force on 1 July 2021 for cross-border B2C e-commerce orders shipped into the European Union. The historical 22 EUR low-value VAT exemption was removed, and all imported goods are now subject to VAT regardless of declared value. For consignments with an intrinsic value at or below 150 EUR, sellers registered under the Import One-Stop Shop (IOSS) collect VAT at the point of sale and remit it through a single EU registration, so the customer is not charged again at delivery. Consignments above 150 EUR have VAT and any customs duties collected by the carrier or customs at import.

Frequently Asked Questions

Q: Why does my EU order show VAT charged at checkout?

A: Because the IOSS scheme requires sellers to collect VAT at the point of sale on consignments at or below 150 EUR, so the parcel can clear EU customs without an extra charge to you.

Q: What happens if the order value is above 150 EUR?

A: VAT and any applicable customs duties are typically collected by the carrier or customs at import, not at checkout, and may include a small handling fee from the carrier.

Q: What was changed by the 1 July 2021 rules?

A: The 22 EUR low-value VAT exemption was abolished, IOSS was introduced for consignments at or below 150 EUR, and marketplaces were made deemed suppliers for VAT on certain imports.

Q: Does the VAT rate depend on the destination country?

A: Yes. The VAT rate applied is the standard rate of the customer's EU country of delivery, which ranges from roughly 17 percent (Luxembourg) to 27 percent (Hungary).

Q: Is IOSS mandatory?

A: No, IOSS is optional, but without it the customer pays VAT to the carrier at delivery and usually a customs handling fee on top, which slows clearance.