EU VAT & Customs Reform: IOSS extended to goods of all values

The EU takes another significant step towards simplifying VAT collection on cross-border e-commerce, agreeing changes to the operation of the IOSS scheme and the removal of the current €150 threshold, from 1st July 2028.

 The European Council has agreed further measures to modernise VAT collection on e-commerce sales into the EU, marking another important milestone in the ongoing reform of the EU’s customs and VAT framework.

For businesses selling goods into the EU, particularly non-EU sellers and online marketplaces, these changes will have significant implications.

Importantly, these latest VAT developments should be considered alongside the wider EU customs reforms, which are fundamentally changing how goods are imported into the EU, how customs duties are collected and who is responsible for meeting the associated obligations.

Below we look at what is changing and what it means for businesses:

 IOSS: Removal of the €150 threshold

The most significant change is the extension of the Import One Stop Shop (IOSS) to cover goods of all values. Under the existing rules, IOSS is available for distance sales of imported goods in consignments with an intrinsic value not exceeding €150.

This has meant that businesses selling higher-value goods into the EU have needed to rely on alternative VAT arrangements. The agreed changes remove this restriction, allowing suppliers and platforms to use IOSS to account for VAT on higher-value goods as well.

The intention is straightforward:

• Simplify VAT compliance for businesses selling into the EU.
• Reduce administrative complexity for tax authorities.
• Improve VAT collection and compliance.
• Create a more consistent approach to VAT on imported goods.

For non-EU e-commerce businesses, this will represent a significant simplification of their EU VAT operating model, providing access to a single, simplified VAT reporting mechanism for imported goods irrespective of consignment value.

• IOSS extended to goods held in EU customs warehouses

Another important development concerns goods stored in customs warehouses within the EU. The new rules extend IOSS to cover e-commerce sales of these goods by non-EU businesses.

Rather than processing numerous individual low-value imports, businesses can utilise bulk import arrangements in customs warehouses, whilst still benefiting from the IOSS scheme.

• Online platforms will become responsible for VAT collection

From 1 July 2028, ViDA provisions, combined with the removal of the €150 threshold, will expand deemed supplier responsibility to online platforms facilitating all import goods sales, irrespective of value.  Consequently, platforms, rather than underlying sellers, will be responsible for collecting and accounting for VAT on all sales made by non-EU businesses to EU consumers.

This represents a further shift towards placing VAT collection responsibility on the platforms facilitating sales, in both the 2021 e-commerce reforms and planned ViDA changes.

• Seller responsible for importation in all cases

Customs changes also clarify that the seller will be viewed the Importer of the goods, meaning they will be responsible for clearance & payment of associated duties and taxes in all cases.

Therefore, non-EU businesses will no longer be able to name their EU customer as importer to avoid direct VAT payment and compliance – they will instead need to either use the IOSS simplification, or register for VAT locally in each EU member state, to report & pay VAT on their import sale.

The 1 July 2028 date: should businesses take it as guaranteed?

The new measures are due apply from 1 July 2028, aligning their implementation with the planned launch of the EU Customs Data Hub. However, implementation is dependent on the wider EU customs reform programme, including the Data Hub, revised customs processes, and supporting infrastructure.

Accordingly, while 1 July 2028 remains the current target, businesses should be aware that any delays to the customs reform is expected to impact on this date.

Implications for Businesses

The changes will surely be welcomed by e-commerce businesses & platforms currently using the IOSS, who face Customs & VAT compliance complexities within the current ‘two-tier’ approach. The new rules will allow these businesses to streamline their VAT compliance & customs operations, ensuring that all import sales are subject to the same process, thus maximising the benefits of an IOSS registration.

However, non-EU businesses who currently avoid EU VAT compliance by naming their customer as importer of record today, will need to assess how they will comply with their EU VAT reporting obligations as of July 2028.

The direction of the recent e-commerce VAT and customs reforms should also be welcomed by EU sellers, who have faced unfair competition from non-EU counterparts under the existing import rules and current customs duty threshold. Recent measures, including the EU customs handling fee and temporary flat-rate duty, have already sought to level the playing field, and, as the latter is replaced with the EU Customs Data Hub, in combination these reforms, will ensure non-EU businesses face comparable duties and taxes, and can no longer avoid displaying these charges upfront to customers.

If you wish to discuss the impacts of these changes, or understand the benefits of the IOSS and how Meridian can support you with same, please contact us at http://www.meridianglobalservices.com