European Commission 2025 Work Programme, including VAT and customs initiatives
The EC has published its 2025 Commission Work Programme, which includes progressing initiative on VAT and Customs reform – notably the 2028 Customs Reforms which includes and new EU Customs Authority and IOSS reforms.
Below is an expanded overview of these proposals:
1. Amendment of VAT Rules for Distance Sales of Imported Goods
The EU proposes changes to the VAT Directive 2006/112/EC, focusing on taxable persons facilitating distance sales of imported goods. Key aspects include:
-
Import One Stop Shop (IOSS) extension: Currently, the IOSS allows traders to declare and remit VAT on B2C distance sales of goods imported from third countries, applicable to consignments not exceeding €150. The proposal suggests removing this value threshold, enabling the use of IOSS for all distance sales of imported goods, thereby simplifying VAT compliance for businesses.
-
Mandatory IOSS Usage for Platforms: To combat VAT evasion and streamline tax collection, the proposal mandates that online marketplaces and platforms facilitating such sales collect and remit VAT on behalf of sellers. This shift aims to reduce administrative burdens on individual sellers and improve VAT compliance.
-
Special Arrangements for Import VAT Declaration and Payment: For businesses opting out of the IOSS, simplified procedures for declaring and paying import VAT are proposed. These arrangements would allow VAT to be paid upon delivery, facilitating smoother transactions for low-value consignments.
2. Simplified Tariff Treatment and Elimination of Customs Duty Relief Threshold
To address challenges in e-commerce and ensure fair competition, the EU proposes:
-
Introduction of Simplified Tariff Treatment: A simplified tariff system for goods imported under B2C transactions qualifying as distance sales for VAT purposes is proposed. This system aims to streamline customs procedures and reduce administrative complexities for businesses engaged in cross-border e-commerce.
-
Elimination of the €150 Customs Duty Relief Threshold: The current exemption from customs duties for goods valued below €150 has been exploited, leading to unfair competition and revenue losses. The proposal recommends abolishing this threshold, ensuring that all imported goods are subject to appropriate duties, thereby leveling the playing field for EU businesses.
3. Establishment of a New Union Customs Code and European Union Customs Authority
A comprehensive reform of the EU customs framework includes:
-
Creation of the European Union Customs Authority: This centralized body would oversee customs operations across member states, ensuring uniform application of customs rules and enhancing cooperation among national customs administrations.
-
Implementation of a Data-Driven Customs System: Replacing traditional declarations, the new system would utilize advanced data analytics for import supervision, enabling smarter and more efficient customs controls. This approach aims to reduce administrative burdens and expedite the clearance process for compliant traders.
4. Restructuring Taxation of Energy Products and Electricity
To align with the EU’s climate objectives and promote sustainable energy consumption, the proposal includes:
-
Revision of Tax Rates Based on Environmental Impact: Adjusting tax rates to reflect the environmental performance of energy products, incentivizing the use of cleaner energy sources.
-
Encouragement of Renewable Energy Use: Implementing tax incentives and support mechanisms to promote the adoption of renewable energy across various sectors.
5. Regulation of Own Resources Collection from ETS, CBAM, and Reallocated Corporate Profits
To secure sustainable financing for the EU budget, the proposal outlines:
-
Integration of Revenues from the Emissions Trading System (ETS): Channeling proceeds from the ETS into the EU budget to support environmental and climate initiatives.
-
Implementation of the Carbon Border Adjustment Mechanism (CBAM): Introducing a levy on imports of certain goods from countries with less stringent climate policies, aiming to prevent carbon leakage and encourage global emission reductions.
-
Allocation of Reallocated Corporate Profits: Utilizing a portion of profits reallocated under international tax agreements as a new own resource, ensuring that multinational corporations contribute fairly to the EU budget.
These comprehensive reforms aim to modernize the EU’s VAT and customs systems, fostering a fairer and more efficient internal market while supporting the Union’s environmental and economic goals.
