EU finance ministers have reached a significant agreement on a new approach to Value Added Tax (VAT) focusing on e-commerce imports and the taxation of distance sales of imported goods.
The directive seeks to improve the collection of VAT on imported goods by making suppliers liable for the VAT paid on imports, which is likely to encourage them to use the VAT Import One-Stop Shop (IOSS) by simplifying VAT declaration and payment, reducing administrative burdens for EU importers, and further improving the fight against VAT fraud.
By incentivising wider adoption of IOSS, the EU intends to simplify the processing of small packages and ensure VAT payments are consistently collected on online sales to EU consumers.
Under the new rules, a wider number of suppliers selling goods worth up to €150 will be responsible for paying import VAT, and therefore be encouraged to use IOSS.
While using IOSS remains voluntary, suppliers who choose not to participate face the risk of complicated and costly multiple VAT registrations across EU member states. In cases where a supplier fails to comply, a fallback procedure allows member states to permit the customer to pay the VAT directly in order to release and deliver the goods.
By reinforcing the use of IOSS, the new directive streamlines the VAT process for imports and marks a significant step towards broader customs reforms, ensuring a more efficient and compliant trading environment across the European Union.
In 2024, an estimated 4.6 billion packages entered the EU from non-EU countries, equating to approximately 12 million parcels per day. In 2023, VAT declarations through the IOSS system reached over €26.3 billion, marking a 35% year-on-year increase.
