How to determine whether the value of a shipment is eligible for settlement under the IOSS procedure

Last July, regulations of mail order trade, for both the intra-Community and the import of goods to natural persons, or so-called e-commerce, have been changed.
Author:
Gerard Goliasz
TAX Specialist

Apart from the change of the threshold beyond which one should register in the country where  goods are being delivered, and the introduction of simplifications in the settlement of such sales, i.e. One Stop Shop (OSS), the provisions introduce several conditions that must be met in order to benefit from these simplifications.

One of these, which we will focus on in this article, is the introduction of an exemption for imported shipments with a value which does not exceed the equivalent of 150 EUR. It should be noted here that this exemption does not apply to goods subject to excise duty.

Import VAT exemption for shipments with a value not exceeding 150 EUR applies provided that:

  • the tax or value added tax is to be declared under the Special Procedure for Distance Selling of Imported Goods (IOSS), or on terms corresponding to these regulations,
  • upon import of the goods, the customs authority has been provided with a valid VAT identification number, assigned to IOSS, or on terms corresponding to these regulations.

However, while both of the aforementioned conditions are clear, it can be quite difficult to determine the value of the shipment.

Taxpayers, especially those starting their business, have a problem with sales management. How to determine the value of a single shipment each time? Does its value need to be determined at the time of delivery, or maybe the time of shipment? How is the taxpayer to know its value when selling it in a currency other than the euro? Finally, what comprises the value of this shipment? I will try to answer these and other questions later in the article.

The VAT exemption covers imported parcels with a real value not exceeding 150 EUR.

What is real value?

Real value of goods of a commercial nature means: the price of the goods themselves sold for export to the customs territory of the European Union, contained in a single shipment, excluding transport and insurance costs, unless they are included in the price and not invoiced separately, and with the exclusion of any other taxes and charges which the customs authorities may establish on the basis of the relevant documents.

Any other related costs, in addition to transport and insurance costs, which do not reflect the value of the goods themselves, must also be excluded from the actual value whenever they are separately and clearly indicated on the invoice (e.g., tooling costs, license fees, export tax, etc.).

Simply put, the real value is the value of  goods included in a single shipment, and any costs which are included in the price of the goods and are not  separately documented on the invoice.

How to determine the value of the shipment?

The method for determining whether the value of  a shipment does not exceed the equivalent of150 EUR is determined by the currency in which the value of the shipment is expressed, i.e., the currency in which the transaction was settled.

The biggest problem in determining its value is the use of the correct exchange rate and the method of its conversion.

If the transaction is denominated in EUR, we have no problems with determining whether it meets the condition concerning its value.

After that, the maximum actual value of the shipment is 150 EUR

What if the payment is in a currency other than EUR?

If its value is expressed:

1. In PLN currency

To determine whether the sale can be settled at the one-stop shop for import (IOSS), verify that the actual value of the shipment in Polish currency (payment amount) does not exceed the equivalent of150 EUR.

Pursuant to the provisions of the VAT Act, the amount expressed in euro is converted using the exchange rate applicable on the first business day of October of the previous tax year, published by the European Central Bank, and the amounts expressed in PLN resulting from the conversion are rounded to the nearest full PLN.

According to the rules above, the value of 150 EUR converted into PLN, after rounding to the nearest number, is 687 PLN and is applicable till the end of 2022.

The value of687.00 PLN (before rounding) was included in the Table of the Polish zloty equivalents of amounts in EUR, specified in customs regulations for purposes other than determining the tariff classification of goods or customs duties (Article 53 (2) of the EU Customs Code), which is developed and published every year on the website of the Ministry of Finance: https://www.podatki.gov.pl/clo/kursy-walut/#kursy-dla-warto%C5%9Bci-celnej

This means that if we make mail order sales from third countries into the EU, and their value is expressed in PLN, and the goods are imported to Poland, the value of the shipment  cannot exceed the amount of 687 PLN.

On the other hand, if the import is in another EU country, in accordance with Directive 112/2006, the rate is in principle the same, but the Member States have some leeway. For example,  if they so decide, they do not have to round to the nearest amount, or they can use the same value the following year if, after recalculation under   new exchange rates, the amount has not changed by 5%. Therefore, when importing to a member country other than Poland, you should check how to calculate the value of the shipment, in accordance with the regulations in force locally.

2. In a foreign currency other than EUR (i.e., other than PLN and EUR)

If the value of the shipment is expressed in a foreign currency other than EUR, verification that the shipment does not exceed the threshold of150 EUR takes place after the value of the goods is converted into PLN using the conversion method according to customs regulations. Pursuant to Art. 11 of the Polish Customs Law in connection with article 146 of the Commission Implementing Regulation (EU) 2015/2447, for this purpose, the current average exchange rates of foreign currencies announced by the National Bank of Poland published on the penultimate Wednesday of the previous month should be used. These rates are valid for the entire next calendar month, e.g. the current average rates published by the National Bank of Poland on the penultimate Wednesday of February are valid in March. If there is no current average exchange rate published on the penultimate Wednesday of the previous month, the last published exchange rate should be used. The exchange rate to be used is that in force on the date of acceptance of the customs declaration.

To determine whether the delivery can be settled in the IOSS procedure, the value of the shipment calculated This way should be related to the equivalent of PLN 687.00, referred to in point 1.

In a situation where the import of the shipment takes place in a country other than Poland, it is first necessary to verify whether, as it is the case in Poland, the conversion of the tax base of VAT for import is made according to customs regulations. If so, the procedure should be analogous, the only difference being that in this case, the rate set by an authorized bank in the relevant EU Member State where the import takes place should be applied.

To sum up

Depending on the currency in which the value of the shipment is expressed, we must take other steps to determine whether our shipment can be settled in the IOSS procedure:

  • if the value of the shipment is expressed in EUR, it  cannot exceed the amount of EUR 150;
  • if the value of the shipment is expressed in PLN and the shipment is imported into Poland, its value is determined every year and is applied from January 1 to December 31, according to the ECB exchange rate in force on the first business day of October of the previous year, rounded up to a full zloty. In 2022, this value is PLN 687.
  • if the value of the shipment is expressed in a currency other than EUR or PLN (when it is imported to Poland), then we use the average exchange rate of the currency announced by the National Bank of Poland, published on the penultimate Wednesday of the previous month (if there is no such exchange rate - the last published exchange rate) and we compare the value so determined up to the amount of PLN 687.

In case of any doubts in e-commerce matters, please contact us.

Order online advice

Pursuant to the Personal Data Protection Act of 29 August 1997 (Journal of Laws Dz.U. 2016 item 922, as amended), I consent to receive commercial and marketing information from KR Group sp. z o.o. sp. k. with its registered office at ul. Skaryszewska 7, 03-802 Warsaw, and to introduction into the database and processing by KR Group sp. z o.o. sp. k. of my personal data provided in this form. I also acknowledge that my consent is voluntary and that I have the right to review, correct or remove my data.

usersearthmagnifiercrossmenuarrow-right