One of the quirks of drop shipping is that customers often don’t know exactly how much they’re going to end up paying. The courier arrives with your shiny new pair of trainers but then won’t hand them over until you pay a surcharge. Specifically, the courier requires the customer to pay for the VAT outstanding on the goods. In addition, couriers often charge an administrative fee in such cases. Suddenly, an unsuspecting customer needs to manage their own import admin.
Now suppose that instead of placing the burden for dealing with VAT on the customer, VAT was already paid and accounted for at the moment the item was purchased. The new Import One Stop Shop (IOSS) does precisely that.
Don’t lose your competitive edge
Suddenly, online shopping becomes simpler and more convenient – and thus more attractive – for the consumer. In terms of customer service, that’s a good thing in itself. Moreover, if other e-commerce retailers provide a seamless shopping experience but you still require your customers to fork an additional, often unexpected, fee at delivery, you’re putting yourself at a competitive disadvantage.
Import admin is not just about the customer
For many e-commerce retailers, providing a more attractive customer experience would be reason enough to use the IOSS. However, let’s put aside the customer experience. The IOSS provides a number of advantages to drop shipping businesses, making VAT compliance simpler and more efficient. However, when using the IOSS, VAT must be accounted for at the point of sales.
Therefore, even if you were happy, for whatever reason, to shift the administrative burden onto your customer, you may nonetheless have compelling reasons to adopt the IOSS. In which case, charging VAT at point of sale is mandatory.
Import VAT compliance & admin simplified
The IOSS can be used used when you ship goods worth no more than €150 directly from outside the EU to customers in EU states. The IOSS greatly simplifies VAT compliance, enabling sellers to account for VAT on sales throughout the EU on a single return. Using the IOSS, you therefore do not have to register for VAT in multiple countries.
In addition, goods imported using a valid IOSS number will benefit from expedited import procedures.
The IOSS is therefore a much simpler and more efficient way to sell applicable goods.
Better for customers, better for sellers
As we can see, the IOSS makes import admin and VAT compliance simpler and more transparent for all parties. Buyers know precisely how much they are paying, and are not subject to further charges or administrative requirements.
Sellers can enjoy a more efficient import process and much simpler VAT compliance.
Of course, understanding all the minutiae of the new IOSS system is itself fairly technical. And, as discussed, the IOSS only covers specified types of e-commerce sales. In other cases, different VAT compliance mechanisms will be appropriate.
Vatglobal’s expert VAT team is carefully monitoring the new e-commerce regulations. Get in touch to get full clarity on how to optimise your VAT compliance and ensure you provide a seamless experience for your e-commerce customers.