Council agreement increases pressure to use IOSS – with broad implications for e-commerce businesses

The Council of the European Union has adopted its position on the proposed amendment to the EU VAT Directive [1]. The reform targets the collection of VAT on low-value goods imported into the EU and introduces a stricter framework for businesses established outside the Union [2]. It is planned to take effect on 1 July 2028.

1. What is changing?

The legislative proposal does not expand the scope of the Import One-Stop Shop (IOSS), but it significantly increases the pressure on non-EU businesses to adopt it by making alternatives more burdensome:

• Mandatory IOSS or local registration: Non-EU sellers must either register under the IOSS or register in each Member State of destination and appoint a tax representative (unless an exemption applies).
• Tax representative requirement: Sellers from third countries that are not part of an administrative cooperation agreement must designate a tax representative when not using IOSS.
• Liability for indirect customs representatives: Member States may hold customs agents jointly and severally liable when they act as indirect representatives.
• Abolish special arrangement scheme: Sellers will no longer be able to shift the import VAT responsibility to the customers via the scheme which was only introduced with the EU VAT eCommerce Package in July 2021.

These measures aim to increase compliance but also shift operational responsibility closer to the point of sale and declaration.

2. Business model impact

Direct-to-consumer webshop shipping from non-EU countries

• Obligation: Must use IOSS or register in all Member States of import. Not able to shift import VAT liability to customer.
• Tax representative: Required if the seller is not resident in the EU, Switzerland, Norway or the UK.
• Operational impact: High compliance burden without IOSS.
• Recommendation: Strong incentive to adopt IOSS and control its use internally.

Marketplace sales shipping from non-EU countries

• Obligation: Marketplace typically deemed supplier under existing rules. Not able to shift import VAT liability to customer or seller.
• Risk: Platforms face increased exposure if sellers misuse IOSS or fail to comply.
• Operational impact: Need for enhanced monitoring of seller compliance and transaction data.
• Recommendation: Platforms should evaluate liability scenarios and strengthen due diligence mechanisms.

3. Assessment and next steps

While the reform does not address existing weaknesses in the IOSS system – such as the lack of verification mechanisms and missing links between customs and sales data – it increases the number of businesses depending on this structure. The result: more pressure on companies to adopt a system with limited built-in safeguards.

From a legal perspective, the Council’s agreement marks a decisive step. The European Parliament will be consulted next, but no major amendments are expected. Further amendments to the IOSS scheme are expected to be included in the EU Customs Reform which is currently in the making [3].

Key takeaways:

• The reform significantly raises the compliance bar for online retailers and marketplaces shipping from non-EU countries.
• Businesses should anticipate more scrutiny from customs and tax authorities.
• Platforms must prepare for increased accountability under the deemed supplier rules.

Our Indirect Tax team at Alvarez & Marsal is ready to help you evaluate your exposure and design a future-proof VAT strategy.

Contact us to discuss how these changes may affect your business model and compliance obligations.

[1] General Secretariat of the Council, Interinstitutional File: 2023/0158 (CNS) dated 8 May 2025, https://data.consilium.europa.eu/doc/document/ST-8570-2025-INIT/en/pdf.

[2] Council of the European Union, press release dated 13 May 2025, https://www.consilium.europa.eu/en/press/press-releases/2025/05/13/vat-rules-council-agrees-position-on-directive-simplifying-tax-collection-for-imports/.

[3] European Commission, information website on EU Customs Reform, https://taxation-customs.ec.europa.eu/customs-4/eu-customs-reform_en.