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.
customs duty = €3 × number of different product types (since 1 July 2026)
VAT = (goods + shipping + duty) × 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 and duty.
The €3 customs duty on low-value parcels
Until July 2026, parcels worth up to €150 entered the EU free of customs duty. Since 1 July 2026 the EU charges a flat €3 per tariff classification in each low-value parcel. It is counted by product type, not quantity: a parcel of five identical T-shirts pays €3, while a parcel with T-shirts and a watch pays €6. The seller or importer declares and pays it through customs, so IOSS sellers normally build it into the checkout price. The EU describes it as a temporary measure ahead of wider customs reform (European Commission announcement).
Worked example
An €80.00 order shipped to Germany (19%): under the threshold, so VAT of €15.20 is charged at checkout (plus the €3 duty for one product type, and VAT on that duty) and the parcel clears customs with nothing more for the buyer to pay. 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.
Frequently asked questions
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%. Reduced rates can apply to qualifying goods such as books.
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?
Yes, since 1 July 2026. The EU now charges a flat €3 customs duty on low-value parcels up to €150, counted per tariff classification rather than per item: five identical T-shirts carry one €3 charge, but T-shirts plus a watch carry €6. Before July 2026, parcels under €150 were duty-free.
Sources
Scheme rules: European Commission — Import One-Stop Shop. Rates: European Commission TEDB via the MIT-licensed vatnode dataset (version 2026-10-06), last checked 2026-10-07.