The European Union’s proposed changes to customs and value-added tax (VAT) rules will have a significant impact on e-commerce platforms. These changes, which will be implemented gradually from 2028, aim to reform the EU Customs Union and introduce new VAT regulations by 2025.
The exponential growth of e-commerce has resulted in a surge in low-value goods entering the EU through small packages. Since 2021, each of these packages requires an individual customs declaration. While VAT is applicable to all imported goods, parcels valued up to 150 euros ($165) are exempt from customs duties.
Under the current regulations, platforms are only considered “deemed importers” for goods valued under 150 euros imported into the EU. In all other cases, EU consumers are labeled as importers and are responsible for paying import VAT and customs duties on online purchases.
Proposed measures for e-commerce platforms include:
- Platforms will become deemed importers: Starting from March 1, 2028, e-commerce platforms will be responsible for ensuring that customs duties and VAT are paid on sales facilitated by them when goods are imported into the EU. The VAT and duties will become due when the platform receives payment for the goods, and these costs should be included in the price at the point of sale. This change will provide EU customers with transparency regarding the full cost of their online purchases.
- VAT and customs duties become due by fiction: Currently, platforms can be held liable for VAT on sales when they are considered the seller through a fictional arrangement. Even if the platform is not a party to the supply contract, it may be responsible for collecting VAT on behalf of non-EU businesses using their platform to sell goods. The proposed changes would solidify this liability and make the platform obligated to collect VAT on these transactions.
- Removal of customs duty relief: The current exemption from customs duty for goods valued at less than 150 euros will be abolished from March 1, 2028. Platforms will need to log their sales into the new centralized online system, the EU Customs Hub, which will replace national systems gradually. This system will allow for simplified clearance, eliminating the need for a declaration for each specific parcel.
- Changes to the import one-stop shop scheme (IOSS): The threshold of 150 euros under the IOSS will be eliminated, enabling consignments above this value to be reported within the IOSS. The IOSS, which currently allows for the collection of payable VAT at the point of sale, will become mandatory for platforms facilitating low-value imports into the EU from January 1, 2025.
- Simplified duty calculation for business-to-consumer sales: From 2028, a simplified tariff treatment will be available for B2C sales of imported goods. Operators will have the option to choose between the standard/preferential or a simplified duty calculation method based on a bucketing system with ad valorem duty rates for different goods.
It is crucial for importers, carriers, and other entities to assess the potential impact of these proposed measures and:
- Evaluate the effects of new obligations for platforms, such as deemed seller status in 2025 or deemed importer status from 2028.
- Assess the implications of the removal of customs duty relief from 2028.
- Determine the advantages of the simplified duty calculation for B2C sales.
Verify the accuracy of their data.
- Evaluate the readiness of their systems to exchange data.
Implement any necessary changes to their systems.
- Automate their business processes further.
- While these proposals still require approval from the European Parliament and national governments, it is crucial to prepare for these forthcoming changes, which are expected to take effect in stages starting from 2025.
(Disclaimer: This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.)
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