If you’re selling goods to customers in the European Union (EU), understanding value-added tax (VAT) is essential. VAT is a consumption tax applied to the sales of goods and services within EU member states, and failing to comply with VAT regulations can lead to costly delays, unexpected charges, and frustrated customers.
In July 2021, the European Commission introduced a major VAT reform to streamline taxation for businesses selling into the EU. One of the biggest changes was the launch of the Import One Stop Shop (IOSS), designed to simplify the payment of VAT for businesses shipping consignments valued at less than €150 to the EU. The IOSS scheme allows businesses to register in a single EU member state, use IOSS to charge VAT at checkout, and submit a monthly IOSS VAT return, eliminating the need for multiple VAT registrations across countries.
Why does this matter? Many businesses shipping internationally face unexpected VAT fees, tariff complications, and abandoned carts due to unclear VAT obligations. Without a proper system in place, customers might be forced to pay VAT and handling fees upon delivery, leading to frustration and lost sales. This guide will help you navigate VAT due and how to use IOSS effectively.
What Is an IOSS Number and Who Needs It?
An IOSS number is a unique identifier assigned to businesses that register under the Import One Stop Shop scheme. It allows sellers to collect and remit VAT at checkout, ensuring a seamless buying experience for EU customers.
Businesses that benefit from IOSS registration include:
- Online marketplace sellers shipping goods valued at less than €150 to EU customers.
- eCommerce retailers using platforms such as Shopify to sell internationally.
- Marketplaces facilitating EU sales for third-party merchants.
- Logistics and fulfillment providers handling VAT on behalf of sellers.
Using an IOSS number offers key advantages:
- Prepaid VAT, which eliminates surprise fees, improves the customer experience and reduces cart abandonment.
- Faster customs clearance, since IOSS-registered shipments bypass import VAT collection at the border.
- Simplified compliance, as businesses can register in a single EU member state rather than multiple VAT registrations.
How Does IOSS Work?
The IOSS scheme centralizes the payment of VAT for businesses selling into the European Union. Here’s how it works step-by-step:
- Business Registers for IOSS
- Sellers must register for IOSS VAT in an EU member state.
- UK VAT registration is separate due to Brexit, so businesses shipping to the UK must comply with separate rules.
- VAT Charged at Checkout
- The seller calculates VAT due based on the destination country’s VAT rate.
- Customers see the total price up-front, reducing abandoned carts and surprise bills.
- IOSS VAT Return Is Submitted Monthly
- Businesses file an IOSS VAT return with the tax authorities in the EU country they registered in.
- The VAT collected is then distributed to the appropriate EU member states.
- Shipments Clear Customs Quickly Customs Clearance
- IOSS-registered consignments bypass import VAT collection at the border.
- Avoiding delays caused by excise duties or additional tariff charges enables speedier customs clearance so that goods reach customers quicker.
- With VAT prepaid, customers do not have to pay extra fees upon delivery.
What Are the VAT Rates in the EU?
One of the biggest challenges for businesses selling to the European Union is understanding the VAT obligations across countries. Each EU member state sets its own VAT rate, meaning that the total price customers pay varies depending on the country of their purchase.
Why Do VAT Rates Vary?
Local economic policies, public funding needs, and industry exemptions determine each country’s VAT rates. Standard VAT rates apply to most goods and services, while rates are reduced for essential goods such as food, medicine, and books. Exemptions apply to certain industries, such as education and financial services.
Here’s a look at current standard VAT rates across some of the most popular EU member states for ecommerce shipments:
- Belgium – 21%
- France – 20%
- Germany – 19%
- Ireland – 23%
- Italy – 22%
- Netherlands – 21%
- Spain – 21%
- Sweden – 25%
How Do VAT Rates Affect Pricing?
For eCommerce sellers, VAT directly impacts pricing strategies and total costs. When using the IOSS scheme, sellers must charge the correct VAT due based on the customer’s location. Failing to adjust prices accordingly can eat into a seller’s profits and put the company at risk of being charged by tax authorities with non-compliance.
If you’re selling through Shopify or another online marketplace, ensure that your pricing settings automatically calculate the correct IOSS VAT.
What Happens If You Don’t Register for IOSS?
IOSS VAT is optional, but highly beneficial. Businesses that choose not to use IOSS must rely on alternative VAT collection methods, which can lead to delays, extra costs, and lost sales.
Option 1: Delivery at Place (DAP) / Delivered Duty Unpaid (DDU)
With DAP/DDU, the customer pays VAT, duties, and fees upon delivery.
Drawbacks of this method:
- Higher cart abandonment rates, as buyers may be deterred by unclear final costs.
- Delayed deliveries if customs holds shipments until VAT is paid.
- Increased returns, as many customers refuse to pay unexpected fees, even if they are small.
Option 2: Delivered Duty Paid (DDP)
With DDP, the seller pays VAT up-front.
Drawbacks of this method:
- Requires multi-country VAT registrations, increasing admin work.
- Higher costs for businesses managing various VAT rates.
Who Needs an IOSS Intermediary?
For non-EU businesses, registering for IOSS VAT isn’t as simple as signing up online. Under the IOSS scheme, companies based outside the European Union must appoint an EU-based intermediary to handle VAT compliance. (Businesses registered in the UK must also appoint an intermediary to handle UK VAT separately due to Brexit.) If you’re selling through an online marketplace, Shopify and other platforms might already collect and pay VAT on your behalf. However, if you sell directly to consumers, an IOSS intermediary is essential for compliance.
What Does an IOSS Intermediary Do?
An IOSS intermediary acts as your business’s official VAT representative, ensuring that you properly pay VAT and submit an accurate IOSS VAT return each month.
Key Responsibilities of an IOSS Intermediary:
- Handles VAT due filings with tax authorities.
- Ensures compliance with EU VAT regulations.
- Assists with VAT number registration.
- Manages integrations with customs and payment systems.
How ePost Global Helps with IOSS and VAT Compliance
Navigating VAT obligations, IOSS VAT return processes, and EU tax authorities’ regulations can be overwhelming for eCommerce businesses. With ever-changing rules across the European Union, businesses need a reliable partner to ensure compliance, reduce costs, and streamline shipping.
At ePost Global, we make IOSS VAT compliance simple. Our expert team helps businesses:
- Register for IOSS and manage their identification number for seamless VAT processing.
- Calculate VAT due in real time, preventing unexpected costs for customers.
- Improve customs clearance by ensuring each country receives accurate tariff and duty data.
- Optimize shipping routes with international integrations, making EU deliveries faster and more efficient.
Why Choose ePost Global?
With more than 25 years of experience in cross-border logistics and payment of VAT solutions, ePost Global has built strong partnerships with major online marketplace carriers to ensure seamless international shipping. Our expert VAT support helps businesses navigate complex IOSS scheme regulations, including post-Brexit compliance, so they can focus on growth without the hassle of tax and customs challenges.
Whether you’re expanding into the EU market or optimizing your current operations, ePost Global provides the tools, knowledge, and IOSS integrations you need to ship efficiently while staying compliant.
Contact us today to simplify your IOSS VAT process and grow your eCommerce business with confidence.
Common VAT and IOSS FAQ for eCommerce Businesses
1: Is registering for IOSS mandatory for eCommerce businesses?
No, registering for IOSS VAT is optional. However, it significantly simplifies payment of VAT, reduces customs delays, and improves the customer experience by ensuring buyers don’t face unexpected VAT due charges upon delivery.
For businesses using Shopify or another online marketplace, IOSS may already be integrated into the platform, but sellers managing their own logistics will benefit from IOSS registration.
2: Does IOSS cover all imported goods?
No, the IOSS scheme applies only to consignments valued at less than €150. Any shipments exceeding this threshold must follow standard import VAT and customs regulations set by EU tax authorities.
Additionally, IOSS does not apply to goods subject to excise duties—such as alcohol, tobacco, and fuel—which must be handled separately under EU law.
3: Do I need separate VAT registrations for each EU country?
No, IOSS VAT registration allows businesses to pay VAT in one EU member state, and it covers all sales of goods to customers across the entire EU.
Alternatively, businesses that sell goods within the EU (rather than import them) can use the One Stop Shop (OSS) system, which also simplifies VAT obligations but applies to intra-EU transactions rather than imports.
4: What happens if a seller charges the wrong VAT rate?
Charging the incorrect VAT rate can lead to:
- Fines and penalties from tax authorities.
- Delayed shipments, if customs flags incorrect VAT due amounts.
- Legal issues if businesses fail to comply with EU tax regulations.
To avoid errors, sellers should use VAT calculation tools, integrate IOSS VAT return automation into their systems, and work with experienced logistics providers to ensure accurate tariff classification.
5: Can businesses opt out of IOSS and use a different VAT method?
Yes, businesses can choose not to use IOSS and instead rely on:
- Delivery at Place/Delivery Duties Unpaid (DAP/DDU) – The customer pays VAT due and customs fees upon delivery. This often leads to high cart abandonment rates and returns due to unexpected costs.
- Delivered Duties Paid (DDP) – The seller prepays VAT obligations, but this requires multicountry VAT registrations and additional administrative work.
While opting out is possible, IOSS integration simplifies VAT compliance, improves shipping speed, and enhances customer satisfaction by eliminating surprise fees at delivery.
