EU Customs Reform: Impact on businesses
The EU is set to overhaul its customs regulations in 2028, with a key focus on modernising e-commerce. From 1 March 2028 the €150 threshold for customs duties and VAT on imported consignments will be removed and a new “deemed importer” concept will be introduced affecting all online marketplaces.
1. A Modern Approach to E-Commerce: Shifting Responsibilities
The most fundamental change is a dramatic shift in responsibility for customs compliance. Under the current system, the onus often falls on individual consumers and carriers. The new reforms place online platforms at the forefront, making them key actors in ensuring that goods sold into the EU adhere to all customs obligations.
What does this mean?
Online platforms will become responsible for collecting customs duties and VAT at the point of purchase. This is a game-changer for consumers, who will no longer face hidden charges or unexpected paperwork when their parcel arrives.
For businesses, it means a more streamlined process, but also new obligations when selling through, or operating an online platform.
2. The End of the €150 Exemption: Closing a Loophole
A further cornerstone of the reform is the abolition of the customs duty exemption for goods valued at less than €150. This threshold has been heavily exploited by fraudsters, with the European Commission estimating that up to 65% of such parcels entering the EU are currently undervalued to avoid customs duties.
From 1 March 2028, the €150 customs duty exemption will be abolished. All goods imported into the EU will now be subject to customs duties, regardless of value.
3. Simplified Duty Calculation: Reducing Complexity
To facilitate the calculation of customs duties, especially with the increased volume of taxable low-value goods, the reform simplifies the process. The current system, with thousands of possible customs duty categories, will be reduced to just four. This simplification will make it much easier for platforms and customs authorities to manage the estimated one billion e-commerce purchases entering the EU each year.
Key Takeaways for Businesses:
- Platform Responsibility is Yours (or Your Partner's): Understand who is the "importer of record" for your sales into the EU. If it's you, prepare for significant changes. If it's a marketplace, ensure they are ready and align your own processes.
- Budget for new duties: Every item, regardless of value, now faces customs duties. Adjust pricing and profit margins accordingly.
- Review supply chains and ERP system: Assess your current e-commerce setup and consider whether your current ERP system can handle upfront duty/VAT collection.
These EU reforms are a big shift. Proactive preparation isn't just about compliance; it's about staying competitive and securing your place in the evolving European e-commerce landscape.
Our Global Indirect Tax Compliance team at Alvarez & Marsal is ready to help you evaluate your exposure and design a future-proof VAT strategy for these changes and to discuss any aspect of your global compliance profile. Contact us to discuss how these changes may affect your business model and compliance obligations.
