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What is VAT/IOSS? How to Set Declaration with IOSS? | Explanation & Solution

Recently in CJ Facebook group, many drop shippers post questions about VAT and IOSS which took place since July 1st, So this article is going to explain these two concepts again and demonstrate how you can register for IOSS and set your IOSS declaration on CJ.

Recently in CJ Facebook group, many drop shippers post questions about VAT and IOSS which took place since July 1st, So this article is going to explain these two concepts again and demonstrate how you can register for IOSS and set your IOSS declaration on CJ.

We also post a video version of this article:

What is VAT?

To explain VAT (value-added tax), let’s use an example for easier understanding.

If the VAT rate is 10%, a farmer sells 1 bag of apples to a baker for 70 pennies, and the baker made a jar of apple jam and sells it to the customer for 5 pounds. During this process, the baker paid 77 pennies to the farmer, of which 7 is the VAT fee that got paid to the government by the farmer. When this apple jam got on the shelf, the customer needs to pay 5.5 pounds for it, as 50 pennies in which is the VAT fee, and the baker will pay 50-7, 43 pennies to the government.

This is VAT, a consumption tax placed on a product whenever value is added at each stage of the supply chain.

What is IOSS?

IOSS means the Import One-Stop Shop. It is the electronic portal businesses can use since July 1st, 2021, used to comply with e-commerce VAT obligations on distance sales of imported goods.

So, what is the IOSS for? The IOSS allows suppliers selling imported goods to buyers in the EU to collect, declare and pay the VAT to the tax authorities, instead of making the buyer pay the VAT at the moment the goods are imported into the EU as was previously the case.

So when it comes to selling to the EU, there are two occasions:

1. The order values > 150 euros

When the order value is above 150 euros, the recipient will be required to pay VAT and customs duties.

2. The order values <= 150 euros

When the order value is less than or equal to 150 euros, there are three options for CJ users to set the declaration:

(1) Set the declaration without IOSS

In this case, the recipient will be required to pay VAT in order to complete the customer clearance, otherwise, the parcel will be detained or destructed by the customs.

(2) Set the declaration with your own IOSS

If you have your own IOSS ID, you can link it to your CJ account

Click in Profile, then choose IOSS setting and IOSS.

We highly recommend you declare with your own IOSS which is valid and is linked to the destination country in the EU.

So, how to register for your own IOSS?

A business can be registered on the IOSS portal of any EU Member State, if your business is not based in the EU, normally you need to appoint an EU-established intermediary to fulfill their VAT obligations under IOSS.

(3) Set the declaration with CJ’s IOSS

If you are not from an EU country or simply don’t have your own IOSS, you can declare with CJ’s IOSS ID after editing the countries under IOSS Option > Declare with CJ’s IOSS.

CJ’s IOSS ID will not be applicable for orders valued above €150 and orders created manually/via Excel or CSV, and the recipient will be required to pay VAT.

*For regular orders, you will need to pay the VAT and IOSS handling fee (VAT*3%) if you declare with CJ’s IOSS ID when you submit orders on CJ. You can also view the order details below after payment.

If you have any other questions, feel free to post them to our Facebook group or register to CJ and ask for help from your personal agent!

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