VAT rules: Council agrees position on directive simplifying tax collection for imports

The Council reached agreement on the position of member states (the so-called 'general approach') on the directive on value added tax (VAT) rules for distance sales of imported goods and import VAT.

The directive seeks to improve the collection of VAT on imported goods by making suppliers liable for the VAT paid on imports, which is likely to encourage them to use the VAT import one-stop-shop (IOSS).

'VAT collection on imports through the import one-stop-shop is beneficial to the member states' public purse and will clear the path for the ongoing negotiations on the Union Customs Code reform, which is a key priority for our presidency.'

Andrzej Domanski, Polish minister for finance

Import one-stop-shop (IOSS)

Foreign traders or platforms will be made liable for import VAT and VAT on the distance sales of imported goods in the member state of the final destination of the goods. This will encourage use of the IOSS, as foreign traders or platforms that do not use it will need to be registered in each member state.

The IOSS serves as a point of contact for importers of goods from third countries into the European Union. It aims to simplify the declaration and payment of VAT when importing goods into the EU, since it is only necessary to register in one member state even when making sales throughout the EU.

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. It also shifts the burden for VAT collection from customers to platforms, something which the Council hopes to achieve for customs duties in its Union Customs Code reform.

Next steps

The directive is subject to a special legislative procedure and agreement on the draft law requires unanimity within the Council. The European Parliament will be consulted on the agreed text and asked to deliver its opinion. The text will then need to be formally adopted by the Council before being published in the EU's Official Journal and entering into force.

Background

On 17 May 2023, the European Commission published a customs reform package consisting of three legislative proposals, one of which was the Council directive on VAT rules for distance sales of imported goods and import VAT. Among other things, the original proposal contained provisions on removing the customs exemption for goods worth up to a threshold of €150.

However, the Council decided to set these original provisions aside and to discuss them in the context of the ongoing customs reform negotiations. The text of the directive on which member states today reached a general approach focuses on measures to encourage use of the IOSS.

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