Proposed EU changes to payment of VAT on distance sales of imported goods and use of IOSS scheme

On the 13th of May 2025 the Council of the European Union reached agreement on the position of the Member States regarding the future rules for the so-called distance sales of imported goods and import VAT with a view to incentivising the use of the EU special scheme called Import One Stop Shop (IOSS).

What is IOSS scheme? 

The IOSS (Import One-Stop Shop) is an EU system that lets sellers—including online platforms—report and pay VAT for B2C sales of low-value goods (worth €150 or less) imported into the EU, by filing in just one EU country, even if the goods are sold to customers across all 27 Member States.  The tax authorities of the EU country where the supplier is registered for IOSS then transmits the relevant VAT to the tax authorities of the appropriate EU country of consumption (i.e. the country, to which the goods are to be delivered to the customer). The IOSS is therefore a great simplification option for online distance sellers of imported goods, who sell low-value goods on a ‘clear of customs duties and import VAT’ basis to their EU consumers, as it does not require traders to VAT register in each of the 27 EU countries separately.

Moreover, under the IOSS scheme, the VAT due on the supply in the EU Member State of consumption is charged by the supplier already at the point of sale and, as long as all other conditions are met, the goods are then exempt from the border collection of import VAT, which in practice makes the consignment transit through EU customs on a ‘fast-track’ basis.

Current rules concerning the use of IOSS scheme and payment of import VAT on distance sales of imported goods 

Firstly, currently the IOSS is an optional scheme.

Secondly, and most importantly, distance sellers of goods imported from outside the EU are only liable for the payment of the import VAT in the EU Member State of consumption in so far as they are designated or recognised as a person liable by that Member State of consumption.   Broadly speaking this is dependent on the terms on which the goods are delivered (Incoterms). Therefore, in principle, it is possible that the seller designates the EU buyer as the person responsible for paying the import VAT (and, if applicable, customs duties).  Nevertheless, such delivery terms are generally not considered good practise since the buyer experience is undesirable (i.e. consumers don’t want to have to pay extra fees on VAT and duty to obtain the goods they have already paid for).

The use of the IOSS scheme not only simplifies and facilitates VAT compliance with EU obligations concerning VAT on distance sales of imported low-value goods, but – based on the EU Commission statistics – it also secures higher VAT revenues to EU Member States from this type of trading model.  As a result, the Council of the EU would like to incentivise the use of the IOSS scheme by eligible traders and it has therefore put forward the following amendments to the current rules concerning the payment of the import VAT in the scenarios at issue.

Proposed changes from 1 July 2028 

In order to achieve the objectives mentioned above, it is proposed that traders who are not registered in the IOSS scheme but who are making supplies falling within the scope of the IOSS-reportable transactions, should – as a rule – be made liable for import VAT, and VAT on the distance sales of imported goods in the EU Member State of consumption, which would require VAT registration in each of the Member States, to which the goods will be delivered to the buyer. In other words, in respect of the supplies within the scope of the IOSS, the Incoterms would no longer matter, and the supplier would no longer have the possibility of escaping the import VAT payment obligations by designating the EU recipients of the goods as the persons liable for the settlement of the VAT on importation.

Additionally, it is proposed that the suppliers or deemed suppliers who are not registered for the IOSS scheme and who are based in non-EU countries with which there is no mutual assistance agreement in place, will have to appoint a tax representative in the Member State of importation as the person liable for payment of VAT on importation.

It is expected that the proposed changes above will naturally incentivise in particular the non-EU sellers to sign up for the EU IOSS scheme and declare and pay the VAT of the EU country of consumption via a single point of contact with the 27 EU tax administrations, i.e. via the IOSS VAT registration in just one EU country.

Next steps 

The next steps will be for the European Parliament to be consulted on the agreed text of the proposed changes to the EU Principal VAT Directive and then to be formally adopted by the Council of the European Union.

Due to the fact that it is thought that the proposed changes in relation to the payment of import VAT on distance sales of imported goods and the incentivised use of the IOSS scheme will clear the path for the ongoing negotiations concerning the Union Customs Code reform (with the latter having become a burning issue for implementation), it is expected that the draft VAT changes above will be approved and implemented without major changes to it and in accordance with the proposed go-live date of 1 July 2028.

Essentia provides IOSS VAT registration and filing services therefore please do not hesitate to get in touch with us at contact@essentiaglobalservices.com should you wish to discuss your particular circumstances and get ready for the upcoming changes.