Do I need an IOSS intermediary?

If you’re a non-EU business to consumer (B2C) seller, it’s time to consider your options.

Incorporating the introduction of the Import One-Stop-Shop (IOSS), the EU VAT reform, which came into effect July 1, 2021, requires sellers or facilitating marketplaces to report VAT charged at the point-of-sale on distance sale import consignments not exceeding €150.

With many questions around what this change means for businesses trading within the bloc, here we explore the role of an intermediary and whether you’re likely to need one.

Who will need to appoint an IOSS intermediary?

Non-EU based businesses who are hoping to take advantage of IOSS are required to appoint an EU-resident intermediary, a type of VAT agent, to represent them.

In addition, the decision to impose guarantees on intermediaries is left to the member states where the intermediary is resident and registered. It is expected it will reflect the VAT Fiscal Representative country rules.

This applies to both direct sellers and facilitating marketplaces from countries without a ‘mutual assistance’ EU agreement, who decide to use IOSS. To date, the only country with such an agreement in effect for VAT is Norway.

Following the end of the UK’s Brexit transition period, the UK is now considered a non-EU country. However, as part of the Brexit Trade and Cooperation Deal, the UK and EU included a ‘mutual assistance’ clause on tax.

Generally, this removes the need for EU states to impose Fiscal Representative obligations on third-country states. Despite the agreement, some Member States, such as Poland or Sweden, have already indicated that they will still require UK businesses to appoint a fiscal representative. Therefore, it is likely that such countries will also require an intermediary for IOSS.

Understanding the role of the intermediary

The Intermediary shares responsibility for returns submissions and VAT payments.

The intermediary needs to be a taxable person established in the EU. He has to fulfil all the obligations laid down in the import scheme for the supplier or electronic interface that appointed him, including the submission of IOSS VAT returns and payment of VAT on the distance sales of imported low value goods. However, the supplier or the deemed supplier who appointed an intermediary remains jointly liable for the VAT obligations, including the payment of VAT. In practice, Member States will attempt to recover the VAT from the intermediary and if this attempt fails Member States can try to recover VAT from the supplier. It must be pointed out that the intermediary is not necessarily the person that lodges the customs declarations for release in free circulation.

Matt Harrison, one of Avalara’s VAT solution specialists says: “The intermediary will have responsibility for registering the name of all sellers and marketplaces they represent with their home tax office, and in return, will receive a IOSS VAT identification number for each seller. While utilising the IOSS is not compulsory, as a non-EU seller, you will need an intermediary if you wish to use IOSS”.

Identifying the right intermediary partner for you

We know that as well as trying to understand what the EU VAT reform changes mean to your business, you might also be considering what type of intermediary is right for you.

If you are already working with an intermediary, or are exploring your options, here are some suggestions to help you understand what an effective intermediary partnership should be like and how to make sure both partners realise the benefits.

Tips for choosing an IOSS intermediary

• Check they are correctly registered: Your intermediary should be registered with the tax authorities of their country of establishment in order to obtain their unique identification number to use with customs clearance processes.
• Scalable support: The introduction of the IOSS presents several benefits, all of which are likely to support the growth of your business. The support you need now, may be different in months or years to come. Look for a supplier who can offer different service levels depending on your business needs.
• Don’t just look for a local provider: Look at the human factor. Do you like and trust the people who are helping you and your business? It’s what they know, not where they are.
• Look for evidence of proactivity in their work and services: Can they share examples of where they’ve actively supported a client through their growth?
• Know what it is you need an intermediary for: There remains a lot of complexity around the IOSS. Having some clarity on what your needs are will help ensure your partner is meeting your specific requirements to help your business grow.
• Global reach, local expertise: A provider which draws on local expertise is likely to have its finger on the pulse. Look for a partner that has someone ‘on the ground’ in the markets in which you operate.
• Open package policy: An intermediary should provide you with a clear breakdown of what is included within your package, and what isn’t. Don’t be afraid to ask questions about what you’ll get for your investment.

Our IOSS service has been designed for those businesses selling directly from their own ecommerce sites to customers in the EU. If you’re selling exclusively via an online marketplace instead, there are different rules for you to consider. Our VAT solution for marketplace sellers may be the better option for you. Contact Avalara today for details of our intermediary and other Fiscal Representative services.