IOSS scheme: removing the EUR 150 threshold

IOSS scheme: the EUR 150 threshold

The proposed reform of the customs framework aims to eliminate the threshold of EUR 150 which currently limits the application of the IOSS to distance sales of imported goods of an amount not exceeding EUR 150.  That proposal introduces the concept of a ‘deemed importer', who is any person involved in distance sales of goods to be imported from third territories or third countries and who is authorised to use the IOSS. Such persons will incur a customs debt when the payment for the distance sale is accepted and will be able to apply a ‘simplified tariff treatment for distance sales' when determining the appropriate customs value.

Under the simplified tariff treatment, the deemed importer can apply one of the ‘bucket' tariffs to the customs value. The deemed importer will therefore have all the information required, including the duties due by reason of importation, to properly calculate the taxable amount upon which VAT must be applied. Therefore, it is opportune to amend Council Directive 2006/112/EC by deleting the EUR 150 threshold that applies to the IOSS. 

The purpose of removing the IOSS threshold of EUR 150 from the fact that it will help support the objective of a single VAT registration in the Union, enabling IOSS registered traders to declare and remit the VAT due on all their eligible supplies of IOSS assets, regardless of their value.

While the removal of the IOSS threshold is not dependent on the implementation of the customs reforms, it will, nevertheless, support the reform of the customs framework as it will maximise the benefits that the customs oriented simplifications will create for the calculation of VAT on distance sales of imported goods. As the deemed importer, an IOSS registered trader will have all of the information needed to calculate the correct amount of VAT payable on all their eligible distance sales of imported goods. This measure will therefore also help to prevent undervaluation in relation to distance sales of imported goods as the correct amount of VAT will be collected at the time of supply, which is when the payment for the e-commerce transaction is accepted.

Moreover, this proposal aims to further reduce the compliance burden faced by traders making distance sales of imported goods by also extending the simplification known as the ‘special arrangements'.

When certain conditions are met, the special arrangements allow postal operators, express carriers, customs agents and other operators who fulfil the customs import declarations on behalf of the customer to declare and remit the collected VAT on those imports on a monthly basis. The special arrangements are an optional simplification and apply, subject to conditions, to the importation of goods with an intrinsic value not exceeding EUR 150, excluding excise goods. Under this proposal the EUR 150 threshold, which currently applies to the special arrangements, will also be removed. This iniatitve will further ease the compliance burden and costs associated with the importation of goods above EUR 150.

In addition to the IOSS simplification and the special arrangements, the e-commerce package also provided for the deemed liability of marketplaces and platforms, where they facilitate distance sales of goods imported into the EU with an intrinsic value not exceeding EUR 150. The ‘deemed supplier' regime is a key reform that is designed to mitigate the risk of non-payment of VAT. Where this regime applies, individual sellers on marketplaces do not have to register for VAT in respect of supplies covered by the deemed supplier rule.

This particular measure removes the compliance burden from sellers who operate via marketplaces. It also bolsters compliance as it streamlines the VAT obligations of thousands of underlying sellers by deeming the marketplace as the person liable to declare and pay the VAT due on those supplies. This initiative proposed the removal of the EUR 150 threshold to further expand the scope of the deemed supplier regime to cover all distance sales of imported goods into the EU, irrespective of their value. Consequently, this proposal also aims to reduce the compliance burden for taxable persons making distance sales of imported goods into the EU via marketplaces, which is in line with the key objectives of the VAT in the Digital Age (ViDA) proposal. 

Building on the moment of the VAT e-commerce reforms, the Commission adopted the VAT in the Digital Age (ViDA) proposal in December 2022, as announced in the 2020 Action Plan for fair and simple taxation supporting the recovery. 

This current proposal seeks to further adapt the EU VAT framework by expanding the range of supplies covered by the IOSS, Special Arrangements and deemed supplier regime. Under this proposal, the IOSS could be used to declare and remit the VAT due on all distance sales of imported goods into the EU, irrespective of their value, but not including products subject to excise duties, which remain excluded from the scheme. Likewise, both the speical arrangements and the deemed supplier regime will be extended by removing the EUR 150 threshold, which currently limits their appication and effectiveness. This initiative will further stengthen the concept of a single VAT registration in the EU.

Therefore, this proposal is coherent with the ViDA proposal and its objective to reduce the compliance burden for taxable persons, as it will remove the multiple registration obligations that persons making distance sales of imported goods above EUR 150 may otherwise face.

Amendments to Directive 2006/112/EC

The proposal to amend the VAT Directive will touch three articles, in detail:

In Article 14a, paragraph 1 is replaced by the following:

“1. Where a taxable person facilitates, through the use of an electronic interface such as a marketplace, platform, portal or similar means, distance sales of goods imported from third territories or third countries, that taxable person shall be deemed to have received and supplied those goods himself.”.

In Article 369l, the first paragraph is replaced by the following:

“For the purposes of this Section, distance sales of goods imported from third territories or third countries shall not include products subject to excise duty.”.

Article 369y is replaced by the following:

“Where, for the importation of goods, except products subject to excise duties, the special scheme in Section 4 of Chapter 6 is not used, the Member State of importation shall permit the person presenting the goods to customs on behalf of the person for whom the goods are destined within the territory of the Community to make use of special arrangements for declaration and payment of import VAT in respect of goods for which the dispatch or transport ends in that Member State”.