EU agreement on new rules to increase use of the IOSS

22 May 2025| CATEGORIES: e-Commerce, IOSS| TAGS: e-commerce, EU, foreign businesses, new VAT rules, platform economy

The European Commission has announced an agreement among EU finance ministers to reform the VAT rules relating to distance sales of imported goods. The aim is to reinforce the collection of VAT and incentivise increased use of the Import One Stop Shop (IOSS) by foreign traders and platforms.

Incentivising supplier participation

The reform encourages the broader adoption of the IOSS, an electronic portal that was introduced in July 2021. The IOSS simplifies the declaration and payment of VAT on goods imported into the EU in consignments valued up to €150, since it is only necessary to register in one Member State to account for the VAT due on sales throughout the EU. By encouraging suppliers to utilise the IOSS, the EU aims to ensure consistent VAT collection on online sales to EU consumers and reduce the need for multiple VAT registrations across Member States.

While use of the IOSS will remain voluntary, the new approach provides incentives for suppliers to register. Suppliers that do not use the IOSS will be liable for VAT on imports in the Member State where the goods are delivered to the final consumer and the VAT due on the supply to the consumer. Suppliers not using the IOSS therefore face complex and costly VAT registration processes in multiple EU countries (wherever their goods are delivered to the customer). In most cases non-EU suppliers will need to register via a tax representative.

If a supplier fails to comply, as a fallback Member States may introduce procedures to enable the customer to pay the VAT due from the seller or platform in order for the goods to be released.

Increase in e-commerce imports

The EU has witnessed a substantial increase in e-commerce imports, with approximately 4.6 billion packages entering from non-EU countries in 2024—equating to about 12 million parcels per day. This surge underscores the need for a more efficient VAT collection system to manage the growing volume of low-value imports and to combat VAT fraud effectively. As the IOSS enables VAT payments up front (when the consumer purchases the item) rather than at the border, it protects Member States’ tax revenues and increases VAT compliance for imports.

Implications for stakeholders

• For Non-EU Suppliers: Registering with the IOSS simplifies VAT obligations, allowing for a single VAT registration to cover all EU sales. This reduces administrative complexities and enhances compliance.
• For EU Consumers: The reforms aim to create a more transparent purchasing process, minimizing unexpected VAT charges upon delivery and ensuring that VAT is included at the point of sale.
• For EU Member States: The streamlined VAT collection process is expected to increase VAT revenues and reduce the administrative burden associated with processing a high volume of low-value imports.

After obtaining an opinion from the European Parliament and a final unanimous vote by the ECOFIN, the Directive will take effect on 1 July 2028.

For further information, see the European Commission’s announcement.  The draft Directive can be viewed here.