What was the problem?
On 1 July 2021, the EU e-commerce package came into operation. EU Import One-Stop Shop (IOSS) scheme is a simplification available for declaring VAT on low-value imports (consignments not exceeding 150 euro).
However, in practice, the double taxation when IOSS has been opted for has occasionally occurred.
What causes double taxation when importing goods of low value?
Two primary causes of double taxation are identified as a result of:
- Non-communication of the supplier’s IOSS number when clearing the goods.
- Customs is unable to validate the IOSS number in a full customs declaration (H1).
Despite the fact that IOSS goods are subject to VAT at a point of sale (POS), VAT on the importation of IOSS goods also arises where the trader’s valid IOSS number is not taken into account or validated on the import declaration.
The double taxation has been identified as a critical issue that requires a workable solution.
When does the proposed solution apply?
The proposed solution covers the reclaim of VAT in the subsequent IOSS VAT return. This solution will apply equally to both cases above as the trader actually supplies its IOSS number, however, it is either not transmitted, or cannot be validated in the H1 customs declaration due to technical issues in the EU Member State of importation.
Who reclaims when?
If a customer has been charged import VAT, then the supplier should refund the customer the VAT that was charged at the point of supply.
The refund of the VAT by the supplier to the customer could be done through a credit note. This credit note (or any other agreed practice), along with the proof that import VAT was paid, will evidence the supplier’s entitlement to make the corresponding correction in its IOSS VAT return.
The supplier should not reflect the supply in his or her IOSS VAT return if the sale of goods and refund of VAT occur in the same IOSS VAT return period.
If the refund of VAT occurs in a period following the original sale, the supplier should make the correction in the subsequent IOSS VAT return for the period in which the refund was made. As the correction is made in the IOSS VAT return, the VAT on importation will be upheld, therefore, there is no need to invalidate the import declaration.
Do you have questions about this solution?
If you have any questions please always contact one of our advisors. So you avoid double taxation when importing goods of low value.