Early 2025 agreement on proposed March 2028 digitalisation of EU customs union; withdrawing VAT and customs import threshold
EU closes on agreement on 3 strands of reforms to Customs Union and IOSS VAT
The early 2025 Polish presidency of the Council of the EU is to seek agreement on the 2028 Customs reform package following a meetings round of EU Working Parties on customs and tax issues. At the 10th December ECOFIN finance ministers meetings, member states called for immediate action, raising concerns on overwhelming unfair competition on imports by Chinese sellers on marketplaces such as Shein and Temu.
Germany and others’ reluctance for a single customs authority is the only major friction to a quick deal.
Separately, the EU is to propose on 5th February a customs levy on imports to compensate for lost import taxes and flouting of goods standards.
The 3 reforms are:
- Creation of a single Customs authority to strengthen policing of the goods border. The remains the more controversial strand with key member states challenging the centralisation of obligations, roles and funding;
- Establish Customs Data Hub which appears to enjoy support across the board, but needs further definition.
- Eliminating the €150 customs duties and VAT threshold on low-value consignments, which has strong support. But some states would like to bring the go-live date forward from 2028. The includes incentives to encourage non-EU digital platforms adopt IOSS returns.
5 VAT changes on €150 import consignment threshold
The proposals include 5 reforms for VAT following changes to the €150 import consignment threshold from March 2028:
- Withdrawing the VAT €150 import consignments threshold introduced in July 2021. Therefore all VAT and customs (including on consignments above €150) would have to be collected in the checkout.
- The Import One-Stop Shop IOSS return will be available for sellers and facilitating marketplaces for reporting customs and VAT collected. IOSS fiscal representation may be imposed on non-EU sellers or deemed suppliers where they do not use IOSS.
- Marketplaces facilitating the sales will be responsible for the customs collections – as they are today for VAT on consignments not exceeding €150.
- New concept of the ‘deemed importer‘ to enable reporting of customs being collected in the checkout via the IOSS
- The e-commerce package optional Special Arrangements for parcel delivery services will be extended to consignments above €150, too.
This €150 threshold is heavily exploited by fraudsters. Up to 65% of such parcels entering the EU are currently undervalued, to avoid customs duties on import.
Marketplaces responsible for all customs and VAT collections
For e-commerce online platforms facilitating sales, from 2028 they will be considered the importer and takes care of all customs formalities. Online sellers will have to charge customs duties (in the same way they do today for VAT on consignments not exceeding €150 (note this threshold may be withdrawn too)) in the checkout.
Platforms will be responsible for ensuring that customs duties and VAT are paid at purchase, so consumers will no longer be hit with hidden charges or unexpected paperwork when the parcel arrives. With online platforms as the official importers, EU consumers can be reassured that all duties have been paid and that their purchases are safe and in line with EU environmental, safety and ethical standards.
Marketplaces will also be responsible for any goods they are selling comply with EU standards of safety and sustainability.
Currently, marketplaces under the 2021 e-commerce package are responsible as deemed supplier for the VAT collections on parcels not exceeding €150. By abolishing the €150 customs and VAT threshold, this would remove the barrier to raising the marketplace deemed supplier VAT threshold. The EC has looked at doing this as part of the VAT in the Digital Age reforms, but concluded it wouldn’t be possible until the Customs threshold was raised or scraped too.
Under 2025 ViDA VAT reforms, Marketplaces become deemed suppliers for their EU sellers’ B2C goods sales across EU borders. They already carry this responsibility for non-EU sellers. This is on top of the July 2021 e-commerce VAT obligations for marketplaces.
The implementation timeline is as follows:
- 2028 E-commerce businesses access the EU Customs Hub
- 2032 All businesses voluntary access to Hub
- 2038 mandatory use of the Hub
Other reforms: Single EU customs body, simpler declarations and customs calculations
Other reforms include: new, single EU Customs Authority to oversee single customs hub for importers; ending traditional customs declarations; reduced duty categories for easier calculations; ‘Trust and Check‘ qualification for importers to get quick release on goods, building on Authorised Economic Operators (AEO) programme. The whole package now goes to the European Parliament and the Council for review and agreement.
Simplified Customs calculations
The reform also simplifies customs duty calculation for the most common low-value goods bought from outside the EU, reducing the thousands of possible customs duty categories down to only four. This will make it much easier to calculate customs duties for small parcels, helping platforms and customs authorities alike to better manage the one billion e-commerce purchases entering the EU each year. It will also remove the potential for fraud. The new, tailor-made e-commerce regime is expected to bring additional customs revenues to the tune of €1 billion per year.
Ending traditional customs declarations
the reform will cut down on cumbersome customs procedures, replacing traditional declarations with a smarter, data-led approach to import supervision. At the same time, customs authorities will have the tools and resources they need to properly assess and stop imports which pose real risks to the EU, its citizens and its economy.
New EU Customs Data Hub
In the reformed EU Customs Union, businesses that want to bring goods into the EU will be able to log all the information on their products and supply chains into a single online environment: the new EU Customs Data Hub. This cutting-edge technology will compile the data provided by business and – via machine learning, artificial intelligence and human intervention – provide authorities with a 360-degree overview of supply chains and the movement of goods.
At the same time, businesses will only need to interact with one single portal when submitting their customs information and will only have to submit data once for multiple consignments. In some cases where business processes and supply chains are completely transparent, the most trusted traders (‘Trust and Check’ traders) will be able to release their goods into circulation into the EU without any active customs intervention at all. The Trust & Check category strengthens the already existing Authorised Economic Operators (AEO) programme for trusted traders.
