EU Proposes VAT Reforms to Boost I-OSS Use and Strengthen VAT Compliance for Imported Goods

May 13, 2025 EU VAT Update

Today, the Council of the European Union published details of a draft directive (8570/25), amending the EU VAT Directive, to tighten VAT rules on distance sales of imported goods. The goal: increase uptake of the Import One Stop Shop (I-OSS) and ensure stronger VAT compliance for non-EU sellers and e-commerce goods entering the EU.

Key VAT Changes

1. Supplier as Importer of Record (IOR)

Under the proposed rules, suppliers (or deemed suppliers) selling goods from outside the EU will become liable for VAT on importation, effectively making them the importer of record for VAT purposes, and liable to VAT register to account for the sale (unless using the I-OSS VAT reporting simplification). This shifts VAT responsibility from customers to sellers, aligning with the EU’s push for greater supplier accountability, and increased use of the I-OSS reporting scheme.

2. Mandatory Tax Representatives for Non-EU Sellers

If a non-EU trader does not use I-OSS and is not based in a country with a mutual assistance agreement, they must appoint a tax representative in the Member State of importation. The representative is liable for the VAT obligations of the seller, and mirrors the role of intermediaries under I-OSS, ensuring equal treatment for those companies currently using the I-OSS.

3. Strengthening I-OSS Incentives

The directive incentivizes I-OSS registration by making non-I-OSS suppliers liable to register and pay VAT in each Member State where goods are delivered. This increases administrative burdens for non-participants and encourages I-OSS use, where VAT is collected once and distributed via the supplier’s Member State of identification.

Additional Provisions

  • Joint and Several Liability: Customs representatives and other parties may be held jointly liable for import VAT where needed to secure revenue.
  • Fallback for supplier Non-Compliance: If the supplier fails to pay import VAT and is unknown at the time of customs clearance, customers may be allowed to pay VAT, though Member States set conditions to avoid abuse.
  • Removal of Special Arrangements: The Special arrangement provisions —under which customers were default VAT payers with payment made through customs / postal operators —is repealed, reinforcing the principle that suppliers should bear VAT liability.
  • Review period: The Commission will evaluate the rules’ effectiveness by March 2032, particularly the fallback mechanisms and tax rep obligations.

Observations

This directive aims to tighten VAT enforcement on e-commerce imports, boost I-OSS adoption, and ensure a fairer, more efficient system by making suppliers fully responsible for VAT at import where the I-OSS is not used for eligible sales.

Although the amendment won’t be effective until 1st July 2028, it should be noted that currently there is currently a lack of consistency across the EU, as to who is responsible for the import of distance sales (where the I-OSS isn’t, or cannot, be used), with many Member States (for example, Germany) already holding the foreign seller as liable for the import, in most cases.

Looking forwards, we expect to have more details on the anticipated removal of the current I-OSS threshold of €150 (proposed alongside wide-ranging EU customs reforms) prior to the implementation of these changes, which will make the I-OSS even more attractive to companies.

If you would like to discuss the VAT aspects of selling into the EU or understand how the I-OSS simplification can be utilised by your business, our expert consultants would be happy to help you. Reach out to us HERE.

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