Cross Border Tax Compliance under Marketplace Proxy Address Relays
Proxy address relays obscure final cross-border destinations, shifting uncollected import VAT and sales tax liabilities directly back to marketplace sellers.
IOSS Triangulation
Meaning
A triangulation VAT procedure simplifies the tax treatment of cross-border online sales where three different parties in different countries are involved in the transaction. Through IOSS triangulation, a non-European seller can use the Import One Stop Shop scheme to manage VAT when goods are shipped directly from a third-country manufacturer to a European consumer via an intermediary. This removes the need for the merchant or the buyer to register for VAT in every European country where goods are delivered.
Operational Flow
Online customers pay the tax at the point of sale, and the seller registers this transaction under their IOSS identification number. The seller then instructs the manufacturer to ship the goods directly to the customer, and the shipping company presents the IOSS number to customs to secure tax-free entry at the border.
Financial Benefit
Direct shipping speeds up customs clearance and prevents the end customer from being surprised by unexpected delivery fees or administrative charges when their package arrives. It also reduces shipping costs by allowing direct delivery, which lowers the capital needed to run the supply chain.
Compliance Requirement
Merchants must submit a monthly tax return and keep detailed records of all transactions, including proof of payment.