On 17 May 2023, the European Commission put forward proposals for the comprehensive reform of the EU Customs Union. The proposals include the establishment of a new EU Customs Authority to oversee an EU Customs Data Hub as well as ‘a more modern approach to e-commerce'.
The Customs Proposals also include some important VAT related changes which build on the July 2021 e-commerce VAT package changes and are consistent with the VAT in the Digital Age (“VIDA”) proposals which aim to modernize and reshape the EU VAT system for the digital era, reduce the VAT compliance burden for business and, strengthen the fight against VAT fraud and in turn reduce the VAT Gap.
VAT elements of the proposal
The VAT changes under the Customs Proposals, effective from 2028 onwards, can be briefly summarised as extending the following:
- the application of the “Deemed Supplier” rule for electronic platforms to distance sales of qualifying imported goods exceeding €150;
- the IOSS scheme (i.e. Import One Stop Shop scheme) to distance sales of qualifying imported goods exceeding €150;
- the special arrangements for postal operators, express carriers etc. to consignments of qualifying goods exceeding €150.
The proposed reforms include the abolition of the exemption for small consignments and introduce the so-called ‘Deemed Importer’ regime for platforms. They will be liable for both VAT and customs duties upon import. For low value goods a simplified tariff treatment applies. Within this simplified tariff treatment, the deemed importer can select one of the predefined "bucket" tariffs to apply to the customs value.
The proposed VAT changes are extensive and complex and will take some time to fully digest. They are however to be very much welcomed and if approved in their current state will certainly further help to achieve the principle aims of the VIDA proposals as outlined above.
How can we help?
To note, the proposed measures must be unanimously approved by all EU member states to become effective (which will be challenging), so they will be subject to robust debate during 2023 and possibly further revised. However, affected businesses should begin to familiarise themselves with the proposals so they can assess the likely impact on their business. If you have questions on the impact of the proposal on your business or would like to get more information, you are welcome to contact us.