The European Council formally adopted new value added tax (VAT) rules that make non-EU sellers and online platforms liable for VAT on imported goods sold to EU consumers, in a significant shift intended to strengthen tax compliance across the single market amid heating global trade tariff conflicts.

Suppliers, not shoppers

Under the revised directive, VAT liability has been moved from EU consumers to the suppliers of imported goods, typically located outside the bloc. According to the European Council, this change is expected to improve VAT collection by encouraging non-EU businesses and digital platforms to use the existing Import One-Stop Shop (IOSS) for reporting and remitting VAT.

The IOSS allows importers to register in a single member state while selling goods throughout the EU, streamlining their VAT obligations. The directive is designed to reduce administrative burdens for compliant traders while removing loopholes that previously allowed non-EU sellers to avoid VAT registration or shift the tax collection burden onto consumers.

Expanding the IOSS framework

The European Council stated that platforms or suppliers that do not use the IOSS will now be required to register separately in every EU member state where they sell goods. By contrast, those who opt into the IOSS can fulfil their VAT obligations through a single registration, reporting and payment interface, which covers the entire EU market.

The move is intended to improve compliance at the point of sale by ensuring VAT is paid up front rather than at the border. This method, according to the council, will enhance tax revenue protection for member states and eliminate delays and confusion for consumers, who were previously required to pay VAT upon delivery or customs clearance.

Focus on third-country traders

The directive applies specifically to distance sales of goods imported into the EU from third countries. These include low-value consignments, which have been a longstanding challenge for VAT enforcement. By making foreign sellers and platforms directly liable for VAT in the member state of final destination, the council aims to align the rules more closely with the realities of cross-border e-commerce.

The reform represents a tightening of EU oversight over digital commerce, particularly as sales by non-EU entities continue to grow. It follows broader efforts to modernise VAT frameworks across the union and improve cooperation between tax authorities in different jurisdictions.

The council concluded that the new rules would incentivise more foreign traders to register through the IOSS, reduce the burden on consumers, and provide a more consistent and efficient mechanism for collecting VAT on imports.

The directive has now entered into force following its formal adoption and will apply across all EU member states.