The EU Council approves proposal for changes to legislation relating to EU distance sales made from outside the EU

July 22, 2025 EU VAT Update, Insights

On 18th July 2025, the EU Council approved the proposal for changes to the EU VAT Directive, which will come into force on 1st July 2028, and which make up part of the EU Customs Reform Package. The purpose of these changes is to safeguard VAT collection on distance sales to consumers within the EU, where the goods are located outside of the EU at the time of sale, as well as the sale of such goods where facilitated by a platform.

It is hoped that these steps will further incentivise the use of the Import One Stop Shop (IOSS), which was introduced in July 2021, and which has so far proven to be a valuable scheme for the collection of VAT on low value consignment goods (“LVCG”), as well as levelling out distortion of competition within the EU.

Current position:

Under the current rules, where LVCG are entering the EU for delivery to a private consumer, there are 3 options for these to be cleared for customs:

  • The supplier can use the IOSS for consignments up to a net value of EUR 150, whereby the VAT due is charged at the time of sale, and no customs duties are currently levied
  • The customer acts as importer of record and pays both import VAT and customs duties when the goods are imported.
  • The supplier uses a special scheme where the postal service or a courier pays the import VAT on the customers behalf

What will change?

Once the new legislation comes into effect, the VAT liability on imported goods to consumers in the EU below the EUR 150 threshold will be the responsibility of the supplier, or the platform on which the goods are being sold, meaning that:

  • that the consumer can no longer be named as importer of record for these sales.
  • Special schemes enabling same will cease to exist.
  • The supplier of the imported goods or the platform will either need to avail of the IOSS or will need to be VAT registered in any Member State into which the goods are being imported.
  • For VAT registrations, with the exemption of countries with a mutual assistance scheme with the EU, or those established in a country listed in the Commission Implementing Decision (EU) 2021/9423, non-EU suppliers will need to appoint a fiscal representative, which will potentially require a bank guarantee.
  • Where the supplier or platform fails to meet its VAT obligations in respect of the importation of the goods, EU Member States may still allow the consumer to clear those goods for free circulation under special circumstances, in order to not be disadvantaged.

Benefits of the use of the IOSS

Given the fact that consumers may no longer be named as importer for LVCG, it is hoped that more suppliers of imported goods, and platforms, will adopt the use of the IOSS as the mechanism by which they will report EU import VAT due on their distance sales. The IOSS continues to offer cost savings, due to the single monthly VAT return and payment, and a simplified approach to EU VAT compliance, whilst at the same time guaranteeing increased VAT revenues for the Union.

For companies not yet using the IOSS, it is likely that the financial burden of multiple EU VAT registrations, the potential appointment of fiscal representatives, bank guarantees, and increased administrative costs will act as a deterrent for this approach, and in particular, Third Country suppliers, or platforms, will now seek to use the IOSS.

What does this mean for your business?

If your business already uses the IOSS, then it will continue to benefit from this simplified reporting mechanism for LVCG, excluding excise goods such as tobacco or alcohol.

Where your business has so far chosen to name the consumer as the importer of record, or has used a post office or courier special scheme to enable same, you will now need to revise your sales set up for LVCG being sold to consumers in the EU, by either registering for the IOSS by 30th June 2028, or by VAT registering in any EU Member State into which such goods will be imported, by the same date.

Future steps:

As the next part of the reform, the abolishment of the EUR 150 threshold, and the mandatory use of the IOSS are to be considered for approval.

If your company will be impacted by this update, and you would like our support with preparing for the changes to your VAT reporting, please do not hesitate to contact us.

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