The EU Council has agreed further measures to improve value-added tax (VAT) collection on e-commerce sales into the EU, aligning the framework for collecting this VAT with recent reforms in the EU’s customs system.
Currently, non-EU online operators may use the digital VAT Import One Stop Shop (IOSS) to account for the VAT they need to pay on their sales into the EU. This means that they only have to register in one member state to take care of their VAT obligations for the entire EU. However, under current rules, the IOSS can only be used for parcels valued at under €150.
The new package extends the use of the IOSS to all goods irrespective of their value, thereby enabling suppliers and platforms to account for VAT on higher value goods via the VAT IOSS. This will help businesses to meet their obligations and will improve VAT compliance, while lowering the administrative burden for tax and customs authorities.
Ireland’s finance minister Simon Harris, speaking for the EU presidency, welcomed the agreement on VAT collection: “These measures will go a long way to simplify life for both suppliers and customs authorities, while ensuring that our treasuries can more easily collect the tax revenues which support our public services.”
The VAT IOSS has been extended to cover e-commerce sales of goods stored in customs warehouses in the EU by non-EU operators. Customs warehouses are often used by platforms to import goods in bulk, before repackaging them for individual sale to EU consumers. It is expected this will help streamline customs procedures by reducing the number of individual consignments that need to be processed.
The agreement means that with the launch of the EU customs data hub from 1 July 2028, non-EU online platforms will be treated as the deemed supplier for VAT purposes for all goods they sell into the EU, regardless of value. In practice, this means that the platform itself is responsible for collecting VAT on behalf of the underlying seller and the EU consumer and paying it to the relevant authorities. In general, online platforms should therefore display and include all VAT and customs due in the final price paid by EU consumers at check-out.
The European Parliament still needs to be consulted on the new rules, ahead of their formal adoption by the Council. They will then be applied from 1 July 2028.
Simplification measures for VAT on online sales – Compromise text
