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EU addresses misuse of IOSS identification numbers in VAT fraud

Commission explores remedies for abuse of Import One Stop-Shop numbers to avoid import VAT payments

The European Commission is looking at a number of ideas to stop the potential misuse of Import One Stop-Shop IOSS VAT numbers.  This includes online sellers using others’ IOSS numbers on imported consignments to illegally avoid paying EU import VAT.

IOSS identification issue

IOSS was introduced in July 2021 as part of the e-commerce package reforms. It allows sellers and deemed supplier marketplaces to report in a single return sales VAT charged in the checkout on import B2C consignments not exceeding €150 being imported. It covers imports into any of the EU 27 member states.  Sellers or marketplaces register in any EU state – country of identification – for IOSS. They are allocated a unique IOSS number, which must be displayed on consignment paper work to indicate that VAT has been charged in the checkout and not due in the customs clearance process.

It is apparent, without any reliable estimates of the extent of the fraud, that some sellers are fraudulently declaring other sellers’ IOSS identification number on their parcels, thus avoiding any sales tax.

IOSS misuse resolutions

The Commission, with VAT, customs and other authorities consulting, has proposed a number of potential remedies:

  1. Introduce a system of unique transaction numbers for each import which must be included on the consignment with the IOSS number.  This would have to be exchanged with the customs authorities and require QR code.  The Commission will commence a pilot with e-commerce marketplaces in the first instance.
  2. An upgrade of the IOSS monthly tax authorities listing to include the country of destination. This could then be compared with the actual IOSS return, submitted by the seller or marketplace at month end.
  3. Share access with customs for the IOSS database.  The current check is just if it’s a valid IOSS identification number; not if it’s being use by the right seller.

EU VAT in the Digital Age reforms

EU VAT in the Digital Age
3 reforms to improve efficiency of VAT for all and reduce fraud
1. Single VAT registration in the EU; extension of OSS to all B2C and certain B2B Following the 1 July 2021 introduction of the One Stop-Shop (OSS), can this be extended to cover further cross-border B2C and all / any B2B transactions (e.g. movement of own stock across borders) to reduce the foreign, non-resident VAT registrations and returns burden
More details on Single VAT Registration in the EU
2. Digital Reporting Requirements; e-invoicing What options are there to harmonise the digitisation of transaction reporting amongst the member states. The EU is looking at: Continuous Transaction Control (CTC) e-invoicing, live reporting; or Periodic Transaction Controls (PTC) invoice listings. Also if at a country, EU or hybrid-level.
Read more about EU Digital Reporting Requirements (DRR)
3. VAT treatment of the platform economy How can EU member states adapt their tax systems to reflect the new role taken on by Electronic Interfaces - platforms and marketplaces which have enabled millions of private individuals to provide services and goods for the first time. How should the VAT Directive be modified to capture the new dynamics created in the gig and sharing economies, including imposing full deemed supplier VAT obligations on platforms as with 2021 e-commerce package for goods.
EU VAT Treatment of Platform Economy update

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