VAT on Exports for D2C Sales (IOSS)

Major changes to EU VAT implemented on July 1st 2021 dramatically altered the rules around sales taxes on physical goods destined for EU-based customers. This included the abolition of the low value consignment relief threshold which previously allowed the majority of D2C vinyl and CD orders shipped from the UK to enter the EU without attracting EU VAT.

https://ec.europa.eu/taxation_customs/business/vat/ioss_en

Under the new rules, consignments of any value are subject to VAT at the rate determined by the destination country. However, for consignments valued under 150 EUR, a new scheme (IOSS) allows the VAT to be collected by the seller at the checkout and paid directly to the relevant tax authority (much like domestic sales), rather than having the customer receive an unexpected bill at the point of delivery.  Where sales are made through an online marketplace such as Bandcamp or Discogs, it is the responsibility of the marketplace to collect VAT from the customer and remit it to the relevant authorities via the IOSS scheme.

Kudos accepts D2C orders through Bandcamp (for labels who have opted-in), Discogs and Amazon Marketplace, as well as our own online store.  We ship D2C orders via Royal Mail and UPS.  Our systems supply these couriers with customs information electronically when we create the shipping labels to ensure IOSS compliance.

• Harmonised tariff codes
• IOSS number (provided by the marketplace)
• Country of origin code
• Item weights
• Declared item value

As kudosrecords.co.uk is not a marketplace, there is no obligation to charge VAT to EU customers at the point of sale.  However, to avoid EU customers facing VAT and import charges on receipt we have integrated a third-party service which effectively acts as a marketplace intermediary for EU sales.  This allows us to pre-pay the VAT on those orders and ship them with an IOSS number.  Products are priced with VAT included so, when accounting sales to labels, the appropriate VAT element is retained (just like UK sales).  This means the net value of each sale will vary slightly depending on the VAT rate that applies in the customer’s location.  The intermediary charges a small fee per order which we account for in the shipping costs so this is paid by the customer.

Bandcamp does not display VAT or localised sales taxes until the point of checkout.   As a marketplace, Bandcamp is required to add taxes on sales from non-EU sellers to an EU buyer (though they actually only do this for sellers on the Enhanced Payments system where they act as the payment processor).  The taxes are retained by Bandcamp and are remitted directly to the relevant authorities.  On all stores where Kudos is acting as the seller for fulfillment purposes, products are priced net of VAT so that the cost is not inflated by EU taxes added at checkout.  Sales to UK customers also have GB VAT added at 20% which is collected and remitted to HMRC by Kudos.  When shipping Bandcamp orders to the EU, we supply Bandcamp’s IOSS number to the courier with the customs declaration when creating shipments.  More information about how Bandcamp handles taxes can be found here. 

Discogs is also an IOSS-registered marketplace and the appropriate VAT is automatically added to EU orders, which then ship with the Discogs IOSS number.  Unfortunately, it’s not currently possible to use net pricing and have GB VAT added on UK sales (as we do on Bandcamp) so our prices on Discogs have to be set inclusive of GB VAT.  This means EU buyers pay slightly more as EU VAT will be charged on top.  However, when EU Discogs sales are accounted to labels, no retention is made for GB VAT because they are zero-rated exports and the label benefits from the sale being accounted at the full retail price.

Amazon collects and remits VAT for all sales through it’s Marketplace service. and provides an IOSS number for shipping EU orders.

It may be the case that this was a nominal customs handling fee which is at the discretion of the local sorting office. Please forward any customer queries to warehouse@support.kudosdistribution.co.uk so we can clarify.

We are legally required to declare the true value of all items. The low-value consignment stock relief threshold ended 1st July, 2021.