Major EU reforms for customs and import VAT in the pipeline

Main aims and features of the EU Customs Reform 

• The reform aims to respond to the huge increase in trade volumes (particular in consignments sold online (e-commerce), a rapidly growing number of EU standards (e.g., rules on environmental protection, forced labour and firearm control) whose compliance must be checked at the border. The reform is also needed because of changing geopolitical circumstances and to effectively enforce EU sanctions. 
• The changes aim to reduce fraud and simplify customs processes, particularly for ‘Trust and Check’ (‘trusted’) traders. The reform would mean less declarations and checks for businesses. Trusted traders will be able to import goods with no active customs intervention needed. 
• EU-level governance will be introduced by establishing the new EU Customs Authority and the new EU Customs Data Hub to perform customs clearance and post-clearance, as well as anti-fraud actions. 
• The reform also introduces tailor-made import processes for e-commerce. 

We'll look at all above measures and take a closer look at new processes and other changes planned for e-commerce. Furthermore, we'll provide a timetable and expected next steps. 

Main measures of the EU Customs Reform 

1. Single EU interface
   Businesses will provide the information to customs directly via one single interface - the new EU Customs Data Hub (‘Hub’). The Hub will replace the existing customs IT infrastructure in EU Member States. It allows for multiple-filing and stable information can be provided once and reused for subsequent imports or exports. Although technical details of the Hub have not been published yet, the objective of the Hub is to simplify or even remove altogether the need for customs declarations by using data-driven artificial intelligence (AI).
2. Customs checks at EU level
   More collaboration between customs authorities at EU level will be introduced, allowing them to pool resources and expertise and exchange information in real-time via the Hub. The EU Customs Authority will monitor and analyse the data in the Hub using AI and recommend Member States which goods posing a risk should be stopped at the border. 
3. Tailor-made import process for e-commerce 
   Online platforms will be considered importers instead of the individual consumers. The online platform itself will be made responsible for ensuring compliance with customs obligations and various product standards such as EU environmental, safety and ethical standards. Online sellers will need to charge customs duties upfront so EU consumers can be sure that they cannot be hit by hidden charges such as unpaid customs duties and VAT when the parcel arrives.
4. A simplified method to calculate duties for low value goods
   A new optional system for low-value consignments will be introduced that simplifies the classification and valuation of low-value goods, see more details below.
5. Other customs changes 
   • Introducing the legal definition of ‘importer’ while abolishing the notion of ‘declarant’
     Currently, import/export formalities are usually taken care of by a declarant, who is not necessarily the importer or the exporter. In the new system, each single consignment will be linked to one single operator, who will be liable for compliance with duty payments and product rules. Importers and exporters will be responsible for paying the applicable duties and taxes and ensuring compliance with the various procedural and legislative requirements. 
   • The imported goods must comply with EU standards
     In order to bring goods in free circulation, goods must comply with the relevant EU legislation, such as various EU standards.
   • Simplified clearance for trusted traders
     ‘Trust and Check traders’ (built on the current AEO status) will benefit from further reductions in the physical and document-based controls. They will have one single customs administration while operating across the EU. They need to provide real-time data on the movement of their goods. These goods will be able to move via ‘green lanes’ without formal customs interaction and free of administrative burden, while customs will request a control only if necessary. 
   • Easier to amend customs data
     Importers/exporters can amend one or more particulars of the data provided for placing the goods under a customs procedure. In addition, the importer and the exporter can invalidate the data provided for placing goods under a customs procedure as soon as it comes to their knowledge that the goods will not be imported or exported.
   • No longer necessary to file a declaration for temporary storage
     Non-Union goods shall be considered in temporary storage after the carrier has notified the arrival of the goods in the EU.
   • Non-criminal sanctions for customs infringements
     The proposal qualifies the sanctions as non-criminal sanctions, in matters for which the Member States have jurisdiction. 

A tailor-made VAT and Customs regime for e-commerce 

Background and current situation 

The rapid growth of e-commerce has led to an exponential number of small packages of low-valued goods entering the EU, each of which needs to be accompanied by an individual customs declaration since the entry into force of new VAT rules for e-commerce in 2021. VAT is applicable on all imported goods, while parcels valued up to € 150 are relieved from customs duties.  

Currently platforms are only considered deemed importers if the goods valued under €150 are imported into the EU. Otherwise, EU consumers are currently considered the importers.  

The proposed directive includes following measures for e-commerce from 1 March 2028 

1. Online platforms will become ‘deemed’ importers
   Platforms instead of EU consumers will be responsible for ensuring that customs duties and VAT are paid on the sales facilitated by them when goods are imported into the EU. The platforms need to include the customs duties and import VAT in the price at the point of sale. EU customers will have transparency on the full cost of their online purchase and pay for it in one go instead of being faced with hidden charges when the parcel arrives. 
2. Removal of the customs duty relief
   The current exemption from customs duty for goods valued at less than €150 will be abolished from 1 March 2028. From 2028, platforms will be the first sector to log their sales into the Hub. This will mean that there will be no need for a customs declaration for each specific parcel.
3. The current threshold of €150 for the import one-stop shop (IOSS) scheme will be eliminated
   This means that the consignments with a value above this threshold could also be reported in the IOSS. The IOSS is currently only available for distance sales of imported goods with an intrinsic value not exceeding EUR 150. The ViDA proposal makes use of the IOSS mandatory for platforms. See more details here.
4. Simplified duty calculation for distance sales
   A simplified tariff treatment will be introduced for goods imported B2C (distance sales for VAT purposes). The operator will be able to choose between the traditional calculation method or a simplified method, based on a  bucketing system with respective ad valorem duty rates of 0% (e.g. for books, printed materials, works of art); 5% (e.g. for toys, musical instruments, metal cutlery), 8% (e.g. for silk and cotton products, ceramics), 12% (e.g. leather articles, bags, clothes) and 17% (e.g. for footwear, glassware).
   The proposal foresees further simplifications in relation to tariff classification, customs value and origin for determining the customs duty for the goods imported under distance sales. The simplified tariff treatment is to be applied on a voluntary basis by the (deemed) importer. Therefore, if the (deemed) importer wishes to benefit from preferential tariff rates by proving the originating status of the goods or from conventional or applicable lower autonomous duty rates, that person can do so by applying the standard procedures.
5. Extension of special arrangements postal operators
   The special arrangements allow postal carriers, couriers, customs agents and other operators to declare and pay the collected VAT on a monthly basis for imports on behalf of their customers. Under this proposal the EUR 150 threshold, which currently applies to the special arrangements, will be removed.  

Timeline

The reform will be rolled out in steps over the coming 10 to 15 years.  

From 2028 

• The centralized clearance for imports of Trust & Check traders  
• Platforms will get more obligations when selling imported goods to EU customers 
• The Hub will open for e-commerce 
• The duty relief for the import of goods with a total value up to EUR 150 per consignment will be eliminated 
• Importers may opt for the use of the simplified tariff treatment for the calculation of the customs duty 
• The IOSS will be extended to all B2C sales of imported goods, regardless of their value. 

From 2032 

Traders may start using the Hub on a voluntary basis  

From 2038 

Using the Hub becomes mandatory 

Next steps 

The proposal will be discussed by national governments and parliaments to reach a consensus and progress with the proposal. 

The European Parliament and the Council of the EU still need to approve the proposals.  

The new legislation is expected to come into effect by 2025.  

Actions for businesses 

• Businesses need to assess the potential impact of the proposed measures, for example: 
• Assess the effects of new obligations for platforms or simplified duty calculation  
• Evaluate the effects of the removal of the customs duty relief 
• Assess possible benefits of the ‘Trust and Check’ trader status  
• Evaluate relevant data in an ERP/accounting system  
• Assess readiness of the systems to exchange data 
• Implement changes in the systems if necessary 
• (Further) automate business processes 

Would you like to have more information on these developments?

Contact your tax advisor