Overcharged import VAT recovery via IOSS return gets backing Group on the Future of VAT
May 2023 update: The EC has proposed ending the €150 VAT threshold on consignment stocks from March 2028.
The European Commission’s Group on the Future of VAT has backed double import VAT charge deductions in Import One-Stop Shop returns where Customs incorrectly charges border VAT on B2C consignments not exceeding €150. The problem arises due to some EU states’ Customs authorities not being able to validate the IOSS number of the consignment or it not being properly included with the consignment.
Commission puts forward solution to overcharged VAT
The European Commission (EC) had proposed the solution last month to the problem of double taxation arising on the new Import One-Stop Shop process for declaring VAT on imports not exceeding €150. It suggests allowing sellers or deemed supplier marketplaces to reclaim in subsequent returns any import VAT incorrectly collected at Customs.
VAT charged incorrectly for second time on import
Following the 2021 e-commerce package, import VAT on B2C sales of import consignments not exceeding €150 should be charged by the vendor in the checkout. The vendor – or marketplace – then includes their IOSS number on the package to indicate to Customs that they do not need to charge import VAT.
However, there is a reported number of cases – perhaps 5% – where import VAT is incorrectly charged when it has already been levied in the checkout process. This may be because:
- Seller does not include their valid IOSS number on the customs invoice or declaration
- Customs is unable to validate the IOSS number.
Proposal to allow reclaim of paid import VAT
The EC has therefore proposing that sellers or marketplaces may reclaim any such double taxation through their next return. The seller or marketplace would also refund their customer when they have made the payment to Customs (via delivery agent etc). The advantages of this solution would be:
- Follows common practise and Directive legal basis on being able to correct or offset VAT via VAT returns
- It would provide a clear audit trail within the IOSS reporting ecosystem
- The seller or deemed marketplace will have the data and processes to manage this correction efficiently, refund the customer and reclaim the double tax through their return
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