IOSS, the Import One-Stop Shop, is the European Union scheme that lets a seller or marketplace charge import VAT at the point of sale on goods shipped from outside the EU in consignments with an intrinsic value of no more than 150 euros, and then report and pay that VAT through one monthly electronic return in a single member state. In cross-border commerce, it replaced the former low-value VAT exemption and turns the customs moment into a fast, prepaid clearance instead of a surprise charge collected from the buyer at the door.
The scheme has applied since 1 July 2021 as part of the EU e-commerce VAT package. Registration is voluntary, but for e-commerce businesses selling small parcels into the EU it has become the main way to offer a delivered price with tax included.
How the Import One-Stop Shop works
The mechanism has four steps. The seller registers in one member state and receives an IOSS identification number that starts with IM followed by ten digits. At checkout, the seller charges VAT at the rate of the buyer’s member state, based on the delivery address. The number travels with the shipment in the electronic customs data, and customs releases the parcel without collecting VAT again.
Each month, the seller files one return listing sales per destination country and rate, and pays the total to the member state of registration, which redistributes the VAT to the other countries. The return and payment are due by the end of the following month, and records must be kept for ten years and made available on request.
| Parameter | Value or rule | Practical effect |
|---|---|---|
| Consignment value limit | Up to 150 euros intrinsic value | Higher-value parcels use normal import VAT |
| Excluded goods | Products subject to excise duties | Alcohol and tobacco cannot use the scheme |
| VAT rate applied | Rate of the destination member state | Prices vary by delivery country |
| Return frequency | Monthly, one return for all states | Single compliance cycle |
| Record retention | Ten years | Order data must be archived and searchable |
Who may register and the role of the intermediary
EU-established sellers can register directly. Most non-EU sellers must appoint an intermediary, an EU-established person who becomes jointly liable for the VAT and files the returns on their behalf. An exception applies to sellers established in a country that has a VAT mutual assistance agreement with the EU, such as Norway.
Electronic interfaces, meaning marketplaces and platforms that facilitate sales, are treated as the deemed supplier for low-value imports in many cases. The marketplace then collects and declares the VAT under its own number, and the individual seller on that marketplace does not need its own registration for those orders.
| Seller situation | Registration route | Who is liable |
|---|---|---|
| EU-established online store | Direct registration in home state | The seller |
| Non-EU store, no agreement country | Through an EU intermediary | Seller and intermediary jointly |
| Store in agreement country | Direct registration possible | The seller |
| Seller on a marketplace | Marketplace uses its own number | The marketplace as deemed supplier |
How IOSS compares with other EU VAT options
The scheme sits beside several other routes, and confusing them is a frequent compliance error. VAT OSS covers intra-EU distance sales and services, while IOSS covers imports only. Sellers that do not register still have the special arrangements or standard import VAT, which shift collection to the carrier or the customer.
| Option | When VAT is collected | Customer experience |
|---|---|---|
| IOSS | At checkout by the seller | Price shown includes VAT, no fee at delivery |
| Special arrangements | At import by the postal operator or courier | Buyer pays VAT and often a handling fee |
| Standard import VAT | At customs clearance | Buyer pays VAT, fees and possible delays |
| Union OSS | At checkout, for goods already in the EU | Not used for imports from outside the EU |
From the shopper’s perspective, the decisive difference is predictability. Unexpected charges at delivery are a common reason for refused parcels and returns, which makes the prepaid model attractive for conversion even when the administrative cost is higher.
Practical setup for an online store
Implementing the scheme touches pricing, checkout, shipping and accounting. The store must determine the destination VAT rate correctly, including reduced rates for categories such as books, and must calculate the intrinsic value per consignment, not per order, when one order is shipped in several parcels.
- Display tax-inclusive prices per EU country and recalculate when the delivery address changes.
- Transmit the IOSS number only to the carrier or customs representative, never on public labels or invoices sent to third parties, to limit misuse.
- Block the scheme automatically when a consignment exceeds 150 euros or contains excise goods.
- Reconcile shipments against returns monthly, and record refunds and returns as adjustments in a later return.
Shipping costs and insurance are excluded from the intrinsic value when they are invoiced separately, but they still form part of the taxable amount on which VAT is charged. This distinction regularly causes errors in checkout calculations.
Common mistakes and ongoing changes
Most problems arise from data quality rather than tax law. Customs systems reject or double-tax parcels when the number is missing, malformed or attached to an ineligible shipment.
| Symptom | Likely cause | Fix |
|---|---|---|
| VAT charged twice | Number not passed in carrier data | Validate data feed before dispatch |
| Parcel held at customs | Value above limit with IOSS claimed | Split logic by consignment value |
| Wrong rate charged | Seller home rate used instead of destination | Use rate tables per member state |
| Number misused by others | Number printed on public documents | Share only through secure channels |
The framework is also changing. The EU has agreed to remove the customs duty exemption for low-value parcels as part of its customs reform, with transitional measures planned before a new customs data hub is in place. Sellers should treat IOSS as one layer of import compliance that will increasingly interact with duty calculation, not as a permanent standalone solution.
Put simply
When a shopper in the EU buys a cheap item from a store outside the EU, tax is due when the parcel enters the EU. Without IOSS, the delivery company usually asks the buyer to pay the tax plus a fee before handing over the parcel.
With IOSS, the store adds the tax to the price at checkout and pays it to the authorities itself. The parcel then passes customs quickly, and the buyer pays nothing extra at the door. It works only for parcels worth up to 150 euros.
In practice
A small fashion brand based in the United Kingdom ships accessories to customers in France, Germany and Italy, with typical orders between 30 and 90 euros. Before registering, many customers received a request for VAT and a handling fee from the delivery company, and a noticeable share refused the parcels, which came back at the brand’s cost.
The brand appoints an EU intermediary, obtains an IOSS number and configures its store to show prices with French, German or Italian VAT depending on the delivery address. Orders above 150 euros are flagged and shipped under the standard import route. After the change, parcels clear customs without buyer charges, refused deliveries fall sharply, and the finance team files a single monthly return instead of handling disputes about unexpected fees.