Let us review two import modes: IOSS and outside of the EU.
- IOSS mode
Until June 30 2021, the buyer has to pay VAT on imported goods from third countries, if the value of each item is higher than 22 EUR. Goods, with the value not exceeding 150 EUR, are exempt from customs duties.
Starting July 1, 2021, the VAT exemption for the imported goods priced up to 22 EUR has been canceled!
Goods, with the value not exceeding 150 EUR (exceptions are alcoholic beverages, perfumes, eau de toilette, tobacco and tobacco products), will continue to be exempt from customs duties.
How to pay VAT in the country of consumption?
Based on a power of attorney from a buyer and during the process of goods’ customs clearance by a logistics company in the country where the delivery is finalized. This is the only option for goods with a value that is higher than 150 EUR or goods that are subject to excise tax.
Registration to OSS mode (new alternative). It could be used provided that the warehouse is located in the European Union (the goods have already been customs cleared).
Registration to IOSS mode (new alternative). A special registration number will be assigned, which has to be indicated in a customs clearance declaration.
From all sales the calculated VAT will be paid. In order not to lose customers, non-EU sellers can change their business model and exempt their goods’ buyers from the VAT payment during import procedures. To simplify the VAT payment for the distance sales of goods imported from non-EU countries, a new special taxation procedure IOSS (Import One Stop Shop) is introduced from July 1, 2021. When using the IOSS import mode, the supplier pays VAT instead of a buyer of goods (the end consumer).
The IOSS import mode is used to pay VAT on imported goods that are:
• shipped from the third country (i.e. USA, China, Russia, etc.) by or on behalf of the Supplier to private buyers located in the European Union
• not subject to excise tax
• not exceeding 150 EUR value (low value goods)
IOSS import mode can be used by taxpayers:
- with a legal address in the Czech Republic
- with a registered office in the Czech Republic (in Czech: provozovna)
- who do not have a legal address in the Czech Republic nor have a registered representative office (in Czech: provozovna) through a representative. Such sellers cannot use the import mode independently on their own, but can fulfill their obligations through an authorized intermediary. The intermediary fulfills the obligations in the same way as if he/she would be selling the goods (which includes the IOSS Registration + registration number for each client, whose interests he/she represents).
Registration process, VAT reporting and VAT payment in the IOSS mode
- In the Czech Republic, the IOSS mode is provided by the Tax Office of the South Moravian Region in Brno (Finanční úřad pro Jihomoravský kraj v Brně). Registration is carried out exclusively in electronic format on the Tax Office Portal (Daňový portál Finanční správy ČR).
- Condition of registration with IOSS: the registration subject has to be a VAT payer or an Identified Person (identifikovaná osoba) to VAT.
- Registration within 10 days of a month consecutive the month when the 1st delivery of goods took place.
- IOSS declaration is submitted electronically through the electronic portal.
- The VAT report filing and VAT payment period is no later than the end of the calendar month immediately following the obligation tax period. If the special IOSS mode is applied, the VAT tax period is one month.
- In case of failure to submit a VAT declaration: fines and penalties according to the national taxation rules of the consumption state will apply.
- Payment is in EUR currency directly to the Tax Office of the South Moravian Region in Brno. Then the Tax Office independently redistributes the paid VAT between the EU countries.
- Outside of the EU Mode
The outside of the EU mode in the Czech Republic can only be used by:
• Individuals who do not have a legal address or permanent establishment on the territory of the European Union (i.e. non-EU residents) and who do not use this taxation mode in one of other EU countries.
Within ‘outside of the EU’ mode, it is possible to declare and pay VAT on sales for:
• providing services to end consumers from the European Union (individuals) with a place of VAT responsibility in one of the EU countries.
Questions and Answers:
1. Can a company with a legal address in the Czech Republic or with a representative office in the Czech Republic (provozovna) use the import mode through a registered intermediary? – Yes, such companies can use the IOSS import mode either independently or through an intermediary.
2. What if a supplier does not use the IOSS import mode? – If the supplier does not use the import mode for VAT payment on distance sales of goods then VAT is usually paid by a buyer (customer) of the goods directly to a Customs (or a Customs agent) by means of standard customs procedures or to a representative who is using a special mode for importing of low value goods (i.e. a post office or courier company).
3. Which operations are not covered by the IOSS import mode? – The import mode cannot be used for goods with value exceeding 150 EUR, and for goods that are subject to excise duty (i.e. still wine, beer), as well as for a standard import of goods by a taxpayer.
Read also our articles on OSS modes:
• EU mode
If you have further questions, please contact DoMyTax specialists. Our team has been engaged in accounting services, tax consulting and optimization in the Czech Republic for over 10 years.