EU Council Approves Regulation to Simplify VAT Collection in E-Commerce

The Council of the European Union (EU) has reached an agreement on a regulation aimed at simplifying value-added tax (VAT) collection in e-commerce transactions. The regulation will remove the €150 threshold under the one-stop tax payment system used for imports and expand the tax obligations of online marketplaces based outside the EU. Following consultation with the European Parliament and formal adoption by the Council, the rules are expected to apply from July 1, 2028.

€150 Threshold to Be Removed from VAT System

The regulation announced by the EU Council expands the scope of the Import One Stop Shop (IOSS) system, which applies to online sales from outside the bloc. Under the current framework, sellers and e-commerce platforms based outside the EU can declare and pay VAT through IOSS on sales of goods valued at no more than €150. The system allows businesses to register in just one member state for their transactions across all EU countries. Under the new regulation, this system for VAT declaration and payment is expected to cover all imported goods, regardless of their value. As a result, the same mechanism will also be available for sales of higher-value products.

Goods Held in Customs Warehouses Will Also Be Included in the System

The regulation will also cover e-commerce sales of goods stored by businesses based outside the EU in customs warehouses located within the bloc. E-commerce platforms can import products into the EU in bulk, store them in customs warehouses, and distribute them as individual shipments based on consumer orders. According to the Council, bringing these transactions within the scope of IOSS could reduce the number of individual shipments processed by customs authorities and facilitate the administration of tax collection. The regulation aims to make it easier for businesses to meet their VAT obligations and reduce the administrative burden on tax and customs authorities.

VAT Responsibilities of E-Commerce Platforms to Be Expanded

Under the new rules, online marketplaces based outside the EU will be considered deemed suppliers for VAT purposes for all products they sell to consumers in the bloc, regardless of value, starting July 1, 2028. Under this arrangement, platforms will be required to collect and remit taxes to the relevant authorities on behalf of sellers. The Council envisages that platforms will include applicable tax and customs obligations in the final prices displayed to consumers at checkout. The EU Council considers these changes part of a comprehensive reform aimed at improving tax compliance in e-commerce and modernizing customs procedures.

Regulation Scheduled to Take Effect on July 1, 2028

The regulation agreed upon by the EU Council has not yet completed the legislative process. The text will be submitted to the European Parliament for its opinion and will subsequently be formally adopted by the Council. Irish Finance Minister Simon Harris stated that the agreement represents one of the final stages in the comprehensive transformation of the EU customs system, noting that the regulations would simplify procedures for suppliers and customs authorities.

The EU had also decided to abolish the customs duty exemption for goods valued below €150 as part of the customs reform adopted in September 2026. The latest VAT regulation aims to align tax collection on imports with this reform.