Ecofin report on EU VAT reforms

VAT‑Related Measures

1. Incentivisation of the Import One‑Stop‑Shop (IOSS)

• As part of the “Customs Union reform” package, the Council adopted a Directive amending VAT rules to incentivise the use of IOSS for distance sales of imported goods. Initially proposed in May 2023, the text was finalized and adopted on 18 July 2025, and published in the Official Journal on 25 July 2025. [data.consi….europa.eu]
• This aimed to enhance the efficiency of cross-border e‑commerce VAT collection by encouraging e‑commerce operators to use IOSS.

2. Removal of the €150 Threshold

• The reform also sought to eliminate the €150 import threshold currently used for customs and IOSS purposes. This aligns VAT and customs rules by ensuring all goods, regardless of value, are subject to VAT reporting through IOSS. [data.consi….europa.eu]
• The provision was discussed during the Belgian and Hungarian Presidencies; however, due to interactions with the Customs Code reform, clarity was delayed until final trilogue results.

3. Extension to Customs Warehouses

• The proposal included extending the definition of “distance sales of imported goods” to include supplies from customs warehouses, allowing these sales to also use the IOSS schema and benefit from customs control adjustments. [data.consi….europa.eu]
• Delegations raised concerns about IOSS scalability and fraud risks, given higher‑value items would now be encompassed.

4. VAT Package – “Digital Age” Adoption

• On 11 March 2025, the Council adopted legislative acts under the “VAT in the Digital Age” framework. These covered:
  • Updated VAT rules for digital transactions
  • Enhanced VAT administrative cooperation, including digital enforcement and data-sharing mechanisms. [data.consi….europa.eu]

Context & Rationale

• These EU VAT reforms form part of a broader “Customs Union” modernization strategy to support the internal market, tackle VAT fraud, and streamline cross-border e‑commerce VAT processes.
• Measures are expected to increase VAT compliance, simplify seller obligations, and expand VAT net coverage, while preserving customs controls via warehouse integration.