Setting Order Limits and Complying with IOSS VAT Regulations in Dash Checkout
As businesses increasingly ship products internationally, it's crucial to stay compliant with various tax regulations. For UK-based businesses selling to the EU, post-Brexit VAT rules under the Import One-Stop Shop (IOSS) scheme require careful management of order values to ensure proper VAT collection. This guide will help you understand how to set order limits in the Dash Checkout Order Limits App and comply with IOSS regulations when selling to EU countries.
What is the IOSS (Import One-Stop Shop)?
The IOSS is a VAT collection mechanism introduced by the European Union to simplify the collection and payment of VAT for sellers shipping goods from non-EU countries to the EU. Since Brexit, UK-based businesses shipping goods to the EU are considered exporters, and the IOSS provides a streamlined way to handle VAT at the point of sale for lower-value shipments.
For goods valued at €150 (£135) or less, VAT must be collected at the time of sale if the seller is registered with the IOSS. This system ensures that the buyer does not face additional charges at the time of import, making it easier for customers to complete their purchases smoothly.
However, for goods valued above €150, VAT and customs duties are applied upon importation, and the buyer becomes responsible for paying these charges.
Threshold for VAT Collection (€150/£135)
Under the IOSS scheme, UK businesses need to be aware of the €150 (£135) threshold when selling to customers in the EU:
- For orders up to €150 (£135): VAT must be collected at the point of sale by the seller, provided they are registered with the IOSS.
- For orders above €150 (£135): The seller cannot charge VAT. Instead, the customer will be responsible for paying VAT and any applicable customs duties when the goods enter the EU.
This threshold helps determine whether VAT should be collected at checkout or whether import taxes will be levied upon delivery.
How to Set Order Limits in Dash Checkout to Comply with IOSS
To ensure compliance with the IOSS and VAT collection regulations, it’s essential to limit the order value for non-UK customers in the EU. Here's how you can easily configure these settings using the Dash Checkout Order Limits App:
Step 1: Set Maximum Order Value
- Navigate to the Order Limits section within the app.
- Create a new rule to set a maximum order value. For IOSS compliance, this value should be €150 (or approximately £135).
Step 2: Set Grouping Options
- In the Grouping Options section, select Any item. This ensures that the order limit applies to any combination of products in the cart.
Step 3: Configure Market Eligibility
- In the Market Eligibility field, specify the market regions from Shopify Markets, focusing on the non-UK EU regions. You can use Shopify's Market Regions configuration to define these areas.
- Input the relevant EU countries as comma-separated values or select them from Shopify's defined markets (e.g., "France, Germany, Spain, Italy").
Step 4: Set Product Eligibility
- In the Product Eligibility field, select All products. This ensures that the rule applies universally to all products sold in the EU markets.
Step 5: Save the Rule
- After configuring the order limit, market eligibility, and product settings, save the rule. This will ensure that any order from an EU market exceeding €150 will be restricted at checkout.
Why You Need These Limits
By setting this order limit, your business can ensure that it correctly charges VAT under the IOSS scheme, avoiding potential compliance issues and unexpected costs for your customers. Orders exceeding €150 should not allow for VAT at checkout, preventing legal complications and ensuring a smooth transaction process for EU customers.
Important Notes:
- IOSS Registration: To collect VAT for orders up to €150, you must be registered for IOSS. You can register directly with a member state of the EU or use an intermediary. Make sure you have an IOSS number to include with all EU-bound shipments.
- Currency Considerations: The €150 threshold is a fixed value, but since you are a UK-based business, the approximate equivalent is £135. Make sure to keep up with exchange rate fluctuations if pricing products in Euros or other currencies.
Resources for Further Reading:
By setting up these order limits and staying compliant with IOSS, you ensure smooth cross-border transactions, help your customers avoid extra charges at delivery, and ensure your business is VAT compliant.