How IOSS works
Since July 2021 there is no VAT exemption for small parcels entering the EU — every import carries VAT. IOSS lets a non-EU seller (or the marketplace) charge that VAT at checkout and remit it through a single monthly return in one member state, instead of the buyer being stopped at customs to pay VAT plus a carrier "presentation fee" that often exceeds the VAT itself. The scheme covers consignments up to €150 intrinsic value — the goods value excluding shipping, insurance and the VAT itself.
VAT = (goods + shipping) × destination rate ÷ 100
Note the asymmetry: the threshold is tested on the goods value alone, but once eligible, VAT is charged on the total including shipping.
Worked example
An €80.00 order shipped to Germany (19%): under the threshold, so VAT of €15.20 is charged at checkout and the parcel clears customs with no charges to the buyer. The same goods sent without IOSS would arrive with ~€15.20 VAT collected by the carrier plus a handling fee of typically €5–15 — and a much less happy customer.
Marketplace or direct seller?
If you sell through a marketplace that's a "deemed supplier" (Etsy, Amazon, eBay), the marketplace charges and remits the VAT under its own IOSS number — you don't register; you just pass the marketplace's IOSS number to your carrier with each shipment. Direct sellers (your own Shopify or website) must register for IOSS in one member state — non-EU businesses generally need an EU intermediary — or leave VAT to be collected from the buyer at import. Orders over €150 can't use IOSS at all: standard import VAT (and possibly customs duty) applies.
FAQ
Is the €150 threshold per item or per parcel?
Per consignment — the whole parcel. Two €90 items shipped together (€180) exceed it even though each item alone would qualify. Splitting orders into separate consignments to stay under is treated as avoidance if artificial.
Which country's VAT rate applies?
The buyer's country — an IOSS sale to France carries French VAT (20%), to Hungary 27%, to Luxembourg 17%. This calculator loads each of the 27 member states' standard rates from the Commission's database. Reduced rates can apply to qualifying goods (books, for instance).
Does IOSS cover the UK?
No — IOSS is an EU scheme. The UK has its own parallel rule: for consignments up to £135, the seller (or marketplace) charges UK VAT at the point of sale and accounts to HMRC.
Do I still pay customs duty under IOSS?
No — goods up to €150 are duty-free anyway; only VAT applies. Above €150 both import VAT and (product-dependent) customs duty can apply, outside IOSS.
Sources
Scheme rules: European Commission — Import One-Stop Shop. Rates: European Commission TEDB via the MIT-licensed vatnode dataset (version 2026-08-23), last checked 2026-08-23.