30 May 2023
In May 2023, the European Commission (EC) proposed what it has called “its most ambitious and comprehensive reform of the EU Customs Union since its establishment in 1968”. If accepted, these changes will be implemented from January 2028 and while most proposals directly relate to changes in customs procedure, there are some that will have VAT implications.
The proposals aim to increase duty revenue as well as avoid fraud by making custom processes easier and uniform. The commission's proposals that will affect VAT include:
Removal of the €150 customs duty exemption - This seeks to abolish the current exemption from customs duty for goods falling below the €150 valuation threshold. This means that customs duty would be owed on all imports into the EU regardless of the import value.
Extension of the Import One-Stop Shop (IOSS) simplification to any value of goods – On 1 July 2021, the EU introduced its new e-commerce VAT reform, allowing sellers to no longer pay import VAT at clearance on low-value consignments. Instead, sellers can opt to charge customers VAT at the point of sale via their own website. This means that sellers will charge VAT at their customer's own country’s VAT rates and will report and pay this via the IOSS VAT return.
The IOSS mechanism is currently limited to imports with a value of €150 or less, however, under these new reforms, this threshold will be removed entirely allowing the use of the IOSS on all sales of goods regardless of value.
Extension of the “deemed seller” regime - Under IOSS, all Online Marketplaces (OMP) such as Amazon and eBay became liable for collecting VAT as the deemed seller on all sales facilitated through their website. This means that the seller’s obligation to charge VAT is removed and instead the OMP is required to include these transactions in their own VAT reporting. By removing both the IOSS low-value threshold and customs duty exemption both set at €150, it will mean the extension of these deemed seller rules for OMPs to cover both the VAT and duty amounts owed by consumers on all sales of goods regardless of value.
For full detail on all reforms as well as comprehensive information relating to how they will be introduced and applied, please visit the European Commission website.
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