The scheme aims to simplify the declaration and payment of value-added tax when importing goods into the European Union.
The second package of measures was adopted by the European Council in 2017 December, and extended the VAT system change to distance sales and any types of cross-border service provided to a final customer in the EU.
Thus, under the IOSS the buyer is no longer obliged to pay VAT themselves at the time of importing the goods into the EU, as was the case before (for products over 22 euros).
IOSS thus facilitates the collection, declaration and payment of VAT for third-country sellers making distance sales of imported goods to buyers residing in the EU.
However, if the third-country seller is not registered with the IOSS (which is voluntary), the buyer will still have to pay VAT and possibly a customs duty levied by the transport company (e.g. post office) at the time of importing the goods into the EU.
If a company is not based in the EU, it must also use an EU-based intermediary (a fiscal representative) to meet and guarantee its VAT obligations under the IOSS.
A seller which does not participate in IOSS must fulfill any customs and tax obligations separately in each EU member state to which they delivers, which may include registering there.