EU VAT with IOSS in WooCommerce

Update 16 December 2021: we have added a useful reference table describing how to deal with VAT, IOSS and VOEC to our knowledge hub.

As of 1 July 2021, the EU is changing the way it charges VAT on cross-border transactions. These sweeping changes will affect most e-commerce businesses operating in the EU. If you sell to EU consumers or import goods from outside the EU for sale, these changes will affect you.

Angry Creative can help WooCommerce stores with these new VAT changes.

One important change is the introduction of IOSS – Import One Stop Shop. This is a service that allows merchants to charge, declare and pay VAT. Until 1 July, goods under €22 were exempt from VAT – an exemption that will no longer apply. Traders are now responsible for charging, collecting and paying VAT on all goods, with one exception.

The exemption applies to individual shipments to a single customer of one or more items totalling more than €150. In this case, traders can choose not to charge VAT at the time of sale and instead leave the responsibility to pay the VAT to the customer upon importation. Traders can choose to collect VAT on all goods to simplify and clarify cash flow. This avoids surprising their customers when they need to pay VAT.

To summarise:

• If a trader sends a consignment with a value of less than €150, they must charge VAT at the time of sale.
• For single shipments of more than €150, a merchant can choose to charge VAT at the time of sale or not.

By default, WooCommerce allows merchants to charge VAT on all purchases. Angry Creative’s solution is for WooCommerce stores that choose not to charge VAT on shipments of >150 EUR. Here’s how it works:

• The extension works with any WooCommerce store.
• It uses the cart value before tax but including shipping costs. There is an option that lets you choose to include shipping or not.
• If the cart value is less than 150 EUR, the add-on applies VAT. This limit of 150 EUR can be configured if merchants want to play it safe by setting a limit of 140 EUR for example.
• Supports any currency by converting the shopping cart value to EUR.
• Can display a configurable message to the user in the shopping cart if it is under/over limit. E.g. ‘You are under the VAT limit, we don’t charge tax, you must declare your goods
• Also includes this message on the customer invoice and waybill. Supports the following extensions, WooCommerce PDF Invoices & Packing Slips and PDF Invoices.
• Works with product inventory including/excluding VAT (this is a configuration option in WooCommerce).

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IOSS is not the only VAT-related change coming into effect on 1 July 2021, but it’s the one that will have the biggest impact on cash flow for consumers. Our solution is cost-effective and helps traders comply with IOSS rules.

You might also be interested in checking out the One Stop Shop for WooCommerce add-on that can help with the reporting aspect of the OSS system.

The extension will be open source as soon as possible, but at the moment it needs configuration and documentation at developer level and thus we are not able to release or distribute it for free yet. Please contact us for more information. Use [email protected] or our contact form.

Do you have questions or need help with implementing settings in WooCommerce?