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VAT in the Digital Age - OSS & I-OSS

Indirect Tax Matters - January 2023

On 8 December 2022, the European Commission published its proposal on ‘VAT in the Digital Age’ which covers VAT policies in a number of areas, including the move to a single EU VAT registration through expanding the scope of the One-Stop-Shop (‘OSS’) and Import One-Stop-Shop (‘IOSS’).

Under the proposal, key changes to the IOSS scheme include the following:

1. Mandatory use of the IOSS scheme for marketplaces from 1 January 2025

Under the proposal, with effect from 1 January 2025 marketplaces who facilitate sales of goods imported from a non-EU country in consignments of a value not exceeding €150 will be obliged to the use the IOSS scheme to account for VAT on these sales. Currently, the IOSS scheme is an optional simplification measure for all businesses, including these marketplaces.

Businesses selling imported goods through their own e-shops are not affected by this change and may continue to use the IOSS scheme on a voluntary basis.

Currently, all businesses who use the IOSS scheme can leave the scheme by way of a de-registration. The proposal provides that from 1 January 2025 marketplaces will not be able to de-register for the IOSS scheme since the use of the IOSS is made obligatory for them.

It is also proposed that marketplaces who persistently fail to comply with the rules relating to the IOSS scheme will incur other sanctions rather than exclusion from the scheme. Currently, businesses who avail of the IOSS scheme will be excluded from this scheme if they fail to comply with the relevant rules – this remains the case for businesses using the IOSS voluntarily post 1 January 2025.

From 1 January 2025, before commencing to use the IOSS scheme, the marketplace or its intermediary must also indicate to the Member State of identification their status of a deemed supplier.

2. No changes to the €150 threshold for IOSS in the near future

Notwithstanding speculation the proposal confirmed that the IOSS will continue to only apply to consignments of €150 or less. Any increase in the threshold is likely to be postponed until the customs processes are reformed. As a result, sale of goods imported from a non-EU country in consignments of over €150 continue to fall outside the scope of the IOSS scheme.

3. Anti-fraud measures to be implemented from 1 January 2025

The proposal introduces special measures to prevent tax evasion or avoidance by better securing the correct use and the verification process of the IOSS numbers of the supplier or its intermediary.

It is proposed that from 1 January 2025, the Member States’ customs authorities will have access to information about the IOSS registered traders including their names, postal and electronic addresses, websites, VAT numbers or national tax numbers and in the case of intermediaries, IOSS intermediary identification numbers.

To enhance controls in the IOSS scheme, it is also proposed that from 1 January 2025 each Member State should store in their national electronic system data of the total value of the goods imported under the IOSS scheme each month per IOSS identification number per Member State of consumption.

If you have any queries regarding the updated position please reach out to Patrick Doran, Elly Cai, or any of our team below.

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