European Council approves VAT simplification for online sales

The Council of the European Union has agreed on further measures to improve VAT collection on online sales in the EU. According to their proposal, the digital VAT Import One Stop Shop (IOSS) will need to be expanded. In the future, platforms and suppliers will be able to account for VAT on high value goods on this system as well.

This was announced in a press release yesterday. Earlier this year, the Council also approved new customs rules for imported parcels. As of July 1^st this year, parcels valued at up to 150 euros are now paying customs duties. Now, the Council also wants to improve VAT collection. This could lead to better tax compliance and collection.

IOSS for all goods

Currently, non-EU online sellers can use the IOSS for the VAT they need to pay on sales into the EU. They only need to register in one member state, not in all countries where they sell to. With the IOSS, they can take care of their VAT obligations for the entire EU. This system can only be used for parcels with a lower value than 150 euro.

Non-EU sellers only need to be registered in one member state in the EU for the IOSS

The Council now wants to extend the use of the IOSS to all goods, irrespective of their value. If Parliament approves, businesses will be able to use the IOSS for parcels with values higher than 150 euros as well.

Sales of goods in customs warehouses also covered

Additionally, the VAT IOSS will also cover online sales of goods that are already stored in customs warehouses in the EU, by non-EU sellers. These warehouses are often used by platforms outside the EU to import goods in bulk, before repackaging them for individual sale to consumers in Europe. This would help streamline customs procedures, as the number of individual consignments that need to be processed will be reduced.

Platforms responsible for collecting and paying VAT

Platforms will become responsible for collecting VAT on behalf of the underlying seller and consumer, and for paying it to the relevant authorities. Because of that, platforms need to display and include all VAT and customs due in the final price at check-out, before an EU consumer pays.

‘This represents the final building block of our fundamental overhaul of the EU’s customs framework’

“I welcome today’s agreement on VAT collection, which represents the final building block of our fundamental overhaul of the EU’s customs framework. These measures will go a long way to simplify life for both suppliers and customs authorities, while ensuring that our treasuries can more easily collect the tax revenues which support our public services”, said Simon Harris, Tánaiste and Minister for Finance of Ireland about the new rules.