IOSS Explained: Selling Low-Value Goods Into the EU
If you ship small parcels to EU consumers from outside the EU, the Import One-Stop Shop, or IOSS, decides whether your customer pays VAT at checkout or at the door. This explainer covers how IOSS works, who can use it, what changes in practice and when it is worth the effort. It is general information, not tax advice, so confirm your own position with the European Commission, a national tax authority or a qualified adviser.
Key takeaways
- IOSS covers B2C imports into the EU in consignments of €150 or less.
- You charge VAT at the buyer's country rate at checkout and declare it in one monthly IOSS return.
- Sellers established outside the EU generally need an EU-established intermediary; the UK is not an exception.
- IOSS is optional. Without it, the customer usually pays VAT, and often a handling fee, on delivery.
- Marketplaces that facilitate low-value imports act as deemed supplier and handle the VAT themselves.
Until mid-2021, many small parcels entered the EU without any VAT at all, because imports worth €22 or less were exempt. That gave sellers outside the EU a price advantage over local shops and opened the door to undervalued parcels. The EU closed that gap with its VAT e-commerce package, and IOSS is the tool it created to make collecting VAT on small imports workable.
For a small seller in the UK, the US or elsewhere, IOSS is often the difference between a smooth delivery and a parcel that sits at a depot waiting for the customer to pay. Here is how it works.
Why IOSS exists
Since 1 July 2021, VAT has been due on all goods imported into the EU, whatever their value. Collecting it at the border for millions of small parcels is slow and expensive, and it frustrates customers. IOSS moves the collection point from the border to the checkout.
With IOSS, the seller charges the VAT of the customer's country when the customer pays, at that country's rate. The seller's IOSS number travels with the shipment data. Customs sees that VAT has already been collected and releases the parcel without charging the customer again. The seller then reports and pays all the VAT collected in a single monthly IOSS return.
Who can use IOSS
IOSS is designed for distance sales of goods to consumers where the goods are shipped from outside the EU and the consignment is worth €150 or less. Typical users include:
- Online shops outside the EU shipping directly to EU consumers, such as stores in the UK, the US, Switzerland or Asia.
- EU-based sellers who ship goods to EU consumers directly from stock held outside the EU.
- Marketplaces and platforms facilitating such sales, where they are the deemed supplier.
The intermediary requirement
Sellers established outside the EU generally must appoint an EU-established intermediary to register for and use IOSS. The intermediary is jointly responsible for the IOSS returns, so it will want accurate data from you and usually charges a fee. A few countries with EU mutual assistance agreements on VAT recovery are exceptions. The UK is not one of them, so UK sellers should plan on an intermediary.
What IOSS does not cover
- Consignments above €150. These go through normal import procedures, with import VAT and possibly customs duty.
- Excise goods such as alcohol and tobacco, which follow their own rules.
- B2B sales. IOSS is for sales to consumers.
- Customs duty. IOSS deals with VAT. Duty is a separate customs matter.
Common mistake
Assuming IOSS covers the new low-value customs duty. From 1 July 2026, a temporary €3 customs duty applies to low-value items worth up to €150, charged per tariff category in the parcel. It is declared and paid in the customs process, separately from VAT. Check the Commission's latest guidance on how it is collected for your shipments.
How IOSS works step by step
Once you decide to use IOSS, the day-to-day flow is fairly simple. Most of the work is in the setup.
- Appoint an intermediary (if you are outside the EU). Compare providers on fees, onboarding, data requirements and how they handle returns and refunds.
- Register for IOSS. The registration is made in one member state, usually through your intermediary, and you receive an IOSS identification number.
- Configure checkout. Charge VAT at the rate of the customer's country on eligible orders, and show prices including VAT.
- Check the €150 limit per consignment. Orders above it should not carry your IOSS number and must follow normal import rules.
- Pass the IOSS number to your carrier securely. It goes in the electronic customs data, not printed openly on the parcel.
- File the monthly return. Report VAT collected by customer country and rate, and pay the total by the deadline.
- Keep records. Keep detailed records of each sale so they can be produced if a tax authority asks.
Pro tip
Treat your IOSS number like a password for VAT purposes. If it is misused by someone else, you could be asked to account for VAT on goods you never sold. Share it only with your carrier and intermediary through their systems, not on labels or invoices placed outside the parcel.
IOSS vs letting the customer pay on delivery
IOSS is optional. The main alternative for low-value parcels is to ship without collecting EU VAT and let the carrier or postal operator collect VAT and any charges from the customer at import. Here is how the two compare from the customer's side and yours.
| Aspect | With IOSS | Without IOSS |
|---|---|---|
| When VAT is paid | At checkout, as part of the price | At import, before delivery |
| Who collects it | You (declared monthly through IOSS) | The carrier or postal operator, from the customer |
| Extra fees for the customer | Generally none for VAT | Often a carrier handling fee on top |
| Delivery speed | Usually smoother customs clearance | Parcel may wait until the customer pays |
| Admin for you | Intermediary, monthly return, records | Less admin, more customer friction |
Surprise charges on delivery are a common cause of refused parcels and returns. If many of your orders go to EU consumers and stay under €150, IOSS usually improves the customer experience. If EU orders are rare, buyer-paid import VAT with very clear messaging at checkout may be enough for now.
Benefits of IOSS
- Customers pay one clear price at checkout
- Fewer refused parcels and complaints
- One monthly return for VAT across EU countries
- Easier to compete with sellers inside the EU
Things to watch
- Intermediary fees for non-EU sellers
- You must track VAT rates for many countries
- Monthly filing and detailed record keeping
- Only covers consignments of €150 or less
Marketplaces and the deemed supplier rule
If you sell through an online marketplace, IOSS may already be taken care of. When a marketplace facilitates the sale of low-value imported goods to EU consumers, it is treated as the supplier for VAT purposes, the "deemed supplier". In that case the marketplace charges and declares the VAT, often using its own IOSS number, and you do not include those sales in your own IOSS return.
Many sellers use both channels: a marketplace for some sales and their own store for others. Keep the two clearly separated in your records, so you do not pay VAT twice or miss VAT on your own store's orders.
Example
Imagine a small Canadian jewelry maker. It sells on a marketplace and through its own online store. Marketplace orders to EU consumers under €150 are handled by the platform as deemed supplier. For its own store, it appoints an EU intermediary, registers for IOSS and charges each customer's local VAT at checkout. Its monthly IOSS return only includes own-store orders. The business is invented, but the split is a common setup.
Practical issues to plan for
Returns and refunds
EU consumers have a 14-day right of withdrawal for online purchases. When a customer returns goods and you refund them, the VAT you collected may need adjusting in a later IOSS return. Ask your intermediary how it handles refunds and make sure your records link each refund to the original sale.
Mixed and split orders
The €150 limit is tested per consignment, which is not always the same as per order. If an order is split into several shipments, or a large order goes over the limit, the treatment can change. Set clear rules in your store and check edge cases with your intermediary.
Currency and rates
VAT rates differ by country and by product type, and they change. Your checkout must apply the correct rate for the customer's country. If you price in a currency other than euros, follow the rules on conversion for your returns.
Your IOSS action plan
- Estimate how many EU consumer orders you send under €150
- Check whether your marketplace sales are already covered as deemed supplier
- Compare EU intermediaries if you are established outside the EU
- Set up checkout to charge VAT at each customer country's rate
- Agree with your carrier how the IOSS number is passed securely
- Add the monthly IOSS return deadline to your calendar
- Plan how refunds and returns are reflected in later returns
- Review the new €3 low-value customs duty separately from VAT
Frequently asked questions
Is IOSS mandatory?
No. IOSS is optional. Without it, VAT on low-value imports is collected from the customer at import, often with a carrier handling fee. Many sellers choose IOSS to avoid that friction.
Can a UK seller use IOSS without an intermediary?
Generally no. Sellers established outside the EU usually need an EU-established intermediary, and the UK does not have the type of agreement that removes this requirement.
Does IOSS replace the OSS?
No. The OSS covers intra-EU distance sales and certain services. IOSS covers imports of low-value goods from outside the EU. Some businesses use both.
What happens to orders over €150?
They follow normal import rules. Import VAT is collected at import, and customs duty may apply depending on the product's classification and origin.
Related reading
The bottom line
IOSS takes VAT on low-value imports out of the customer's doorstep experience and puts it into your checkout. For non-EU sellers with regular EU orders under €150, that usually means fewer refused parcels and happier customers, at the cost of an intermediary, monthly returns and careful records.
This is general information, not tax advice. VAT rules and customs measures, including the new low-value duty, keep changing. Check the European Commission's guidance and your national tax authority, or speak to a qualified adviser, before you register.
