UK and non-EU e-commerce sellers face challenges implementing the EU’s new IOSS (Import One-Stop Shop) tax regime, effective July 1, 2021. The system requires charging destination country VAT rates on sales under €150, while sales above this threshold remain VAT-free until delivery.
I made sure I have the correct information before getting back to you.
As a Support Advisor, we don’t have updates from our developers yet on the upcoming new tax rules, so I went ahead and reached out to our Tax Support to check if they have further information on this.
According to our team, Shopify will continue to support you and other merchants through this change. What they can suggest is to wait for our developers to complete the update then we will let you know whether you need to hire an IOSS intermediary to help you pay taxes. Don’t worry, Shopify will make sure to notify you about this and you’ll have enough time to prepare before the implementation of these changes. All we ask from you is your patience and understanding.
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Don’t hesitate to ask for further assistance on this.
I am going through this thread because I am finding out what the VAT implications mean for clients, which have the same issues as reported here.
ShavingTimeDave has rightly pointed out that Shopify is responsible for VAT on parcels under €150. I have not seen any movement on this from the side of Shopify. They should offer sellers the possibility that Shopify deals with VAT on parcels under €150, but this is probably new for their business model and they are figuring out what to do with this obligation, if they are aware of this at all.
I understand that they are building the infrastructure for sellers to use IOSS, which is good, albeit late. But as said, sellers will need to have the choice whether they register for IOSS or not if selling low-value items.
Another thing that I saw somewhere in this thread:
€10,000 sales threshold - this is for OSS and not IOSS. It doesn’t apply to third-country sellers, which is the UK. EU VAT applied on all UK->EU sales at local rates.
This is my interpretation of the EU guidance, but I have to say that this is not a clear-cut case. The EU doesn’t talk about market places but about ‘electronic interfaces’ that ‘facilitate sales’. Shopify is not a market place indeed but it is an electronic interface facilitating sales. I advise my clients to register for IOSS and we have to wait and see how Shopify interprets the rules and what the EU thinks of the type of services that they provide, and whether this is challenged by either the EU or someone else. Let me know if you find something in the EU rules that excludes Shopify from their VAT responsibility for low-value parcels.
I spoke to Shopify support on this issue yesterday and they told me the changes would be released into Shopify on July 1st and there would be instructions a few days beforehand.
I would be helpful if Shopify communicated right now what the changes will be. People have to anticipate what the changes mean for their margins, plan optimal customer journeys and inform their clients.
I’m very confuse with this new rules in-place, since English isn’t my first language. Can anyone correct me if I’m wrong?
From my understanding a US selling will have to collection VAT if the order amount is lower than Euro150 or this is optional?
If US seller will have to collection VAT, then we will also need to register IOSS charge VAT at the check out and then pay the VAT to EU? How does this even work?
And orders above Euro150, the customers will have to pay for the VAT when the item arrived to the destination country. That means that as a US selling we don’t have to do anything?
I’m also consider listing on marketplace like eBay since they will provide their own IOSS.
Registration to IOSS is optional. If you do NOT register, you send items to EU customers WITHOUT VAT tax, and then those customers will have to pay Import VAT and postal admin charges for parcel clearance. These postal admin charges can be very high in some EU countries like Belgium (it is Eur 20 for post office charge). So some customers get deterred with this.
If you do register for IOSS, the EU states that you would need to register with a financial intermediary based in an EU state who will then submit your monthly VAT statements to the EU for payment. This is why it is complicated and expensive for small businesses.
Matt, My understanding as a UK based e-commerce business selling items into the EU is that you don’t have to use an intermediary. You do need to register for IOSS in an EU country, but you can do that directly and mange it all without using an intermediary company.
Hi Max1957. We cannot find anywhere on how to register directly to the IOSS even on the EU portal. How would a UK business submit the monthly VAT statements to the EU then? (At present we use Quickbooks for our digital UK VAT submission to HMRC). That is our dilemma. We would have no issue registering and submitting the EU VAT returns ourselves. The service plans being offered by some “financial intermediaries” are exorbitant to say the least.
I use Xero. My understanding is that in the accounting software that each European sale would be posted to a VAT free account - eg Sale to Germany. At the end of the month you would have to manually export all EU sales, account for the different VAT rates, and somehow submit a report into the EU IOSS portal. Then account for the VAT to be paid… Messy at the very least and I am still pondering whether to register or not. I will read up on the documentation over the weekend that Shopify has just released to better understand how Shopify is going to handle all of this eg at the moment my pricing in Euro on my website is VAT free, and I am not sure how that will change with IOSS - will product prices stay tax free and VAT be applied (or not) at checkout dependent upon the 150 Euro threshold…
Our accountant has advised us to wait before registering. This is because it may be possible to register for IOSS through the HMRC portal and submit through there. But it does state that the system might not be ready by 1 July.
Shopify seems to have set up the taxes/shipping solution with the £135 threshold for EU countries. It requires the EU VAT IOSS registration number so we ourselves will not implement it as yet until things are clearer.
Yesterday we received an email from Shopify notifying us about these new tax settings update. Here it is:
As of July 1st, 2021, the European Union (EU) is making changes to tax regulations for eCommerce purchases made within the EU. These changes include the elimination of minimum sales thresholds, updated value-added tax (VAT) rates, and a choice of how to remit taxes. We’ve added options to the tax settings in Shopify to help you comply with these changes. It’s important that you take the time to understand how these changes impact your business and update your tax settings in Shopify before July 1st. You can find more information on the EU’s One Stop Shop VAT site and in our recent blog article on the topic, but we recommend consulting a tax professional to learn what is right for your business.
Tip: Based on our records, you currently ship products to the EU from countries outside of that region. When buyers in the EU purchase from your store, they will be required to pay VAT and/or duties upon delivery. You can choose to charge VAT on orders up to €150 to simplify the buying and shipping experience on those orders. To do this, you’ll need to provide us with your Import One Stop Shop VAT number which will enable you to submit a single VAT remittance for all of the EU.
Update your tax settings in Shopify based on the choice that makes the most sense for your business.
Update tax settings
To learn more about the tax setting options available, visit our help centre.
Hmmm…well that facility doesn’t appear in my store. I wonder if you need to be on the Advanced plan for this or whether all EU countries need to be in one shipping zone. Lumping all EU countries into one EU shipping zone wouldn’t work for my store as courier shipping prices vary so much across the EU.
On the Royal Mail website there is an integraton called taxamo which looks like it will take the place of an EU intermediary and handle all the ioss for you.
Yes we have seen that but at £2.00 per parcel (+ VAT on the parcel order), it can still be expensive on a monthly basis. It will all depend on the number of EU parcels sent monthly.
I agree, if not I believe simplyvat can do everything for £175 per month. Alot of our eu sales went through marketplaces so not sure if simplyvat is worth it for us.
I am sure more services will be rolled out shortly.