Crack-Down on lost VAT: How the EU Is Tackling Undervalued Import Parcels

Introduction:

Since 1 July 2021, import VAT is due on all commercial imports, regardless of their value. However, non-EU suppliers and marketplaces who have signed up to use the Import One-Stop Shop (IOSS) can avail of VAT exempt imports, on the basis that they charge their B2C customers output VAT on their purchases at the time of sale, where the net value of the consignment is below EUR 150. This VAT is then declared by the supplier via a single, monthly IOSS declaration. Customs duties have till now not applied on these consignments, although customs declarations must be filed. This allows for a simplified procedure for low value consignments by avoiding complicated border procedures.

This more recent change was aimed to close a long-abused “de minimis” VAT exemption (formerly EUR 22), ensuring that import VAT is due from the first Euro.

Undervaluation of Parcels and VAT Risk

In order to get around these measures, many low-value deliveries are being declared at an undervalued price on customs declarations. According to the EU Council, up to 65% of small parcels entering the EU are declared at artificially low values, an approach being used to avoid or reduce both customs duties and VAT.

The main consequences of this tactic include a loss in revenue for the EU, an uneven playing field between EU and non-EU vendors, and increased fraud challenges, since with millions of small consignment packages arriving into the EU from non-EU suppliers every day, it is impossible for customs authorities to verify them all.

Stronger measures to be enforced

In order to close this loophole and strengthen compliance, the EU Council has agreed to abolish the EUR 150 threshold, meaning that customs duties will apply to all packages arriving into the EU, irrespective of value.

This new rule will become effective once the planned EU Customs Data Hub is operational (currently expected by 2028). The hub will enable customs authorities to assess customs duties on a per-item basis using better data.

The EU Commission and the EU Council have also committed to developing a temporary solution for collecting customs duties on e-commerce parcels from as early as 2026, a measure which has been endorsed by the European Parliament in its resolution dated 9th July 2025, regarding product safety and regulatory compliance in e-commerce and non-EU imports. The acceleration of these plans has been caused by large increased volumes of goods arriving in the EU from non-EU suppliers.

In addition, the EU Council reached a decision in June 2025 to collect a flat e-commerce handling fee of 2 Euros, starting in November 2026.

Increased use of the IOSS

Following the abolishment of the EUR 150 low value consignment threshold, customs duties will be due on all B2C packages. In addition to closing the current VAT gap on such deliveries, it is hoped that this move will incentivise non-EU suppliers and marketplaces (deemed suppliers) to use the IOSS to declare and pay any VAT due on goods entering the EU, irrespective of their value. Where the supplier wishes to avoid having the customer pay the VAT and customs duties upon receipt of the goods (only upon agreement), any parties not using the IOSS will have a requirement to be VAT registered in each Member State into which they import goods. The IOSS offers a reduced administrative and compliance burden. Any customs duties due will be collected at the time of import of the goods.

The aim of the measures

These steps are aimed at creating fairer competition for EU eCommerce vendors, by increasing costs for non-EU suppliers, many of whom flood the EU markets with inexpensive goods, which are impossible for EU companies to match. Furthermore, by removing the threshold, and making all goods now also subject to customs duties regardless of their value, the current financial loss caused by the undervaluing of goods should be addressed. It should also level out the imbalance between those companies who carry out bulk imports versus those making single smaller value direct imports.

If your business is based outside of the EU and you will be impacted by these changes, please feel free to reach out to us, and one of our consultants will be happy to support you.