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EU addresses misuse of IOSS identification numbers in VAT fraud – VAT in the Digital Age

VAT in the Digital Age (ViDA) package tackles abuse of Import One Stop-Shop numbers and import VAT evasion

Included within the EU VAT in the Digital Age reforms package announced on 8 December 2022, is a measure to help prevent abuse of Import One Stop-Shop IOSS numbers and import VAT evasion. This arises from fraudulent online sellers using others’ IOSS numbers on imported consignments to evade paying EU import VAT.  The European Commission is now proposing a unique import consignment number to be linked to an IOSS number to monitor VAT collections and avoidance.

Update: the EU is proposing the €150 threshold for use of IOSS be withdrawn from 1 March 2028.

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 in ViDA

The Commission, with VAT, customs and other authorities consulting, has proposed in VAT in the Digital Age package 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.

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 B2C own stock movements 2025: Following the 1 July 2021 introduction of the One Stop-Shop (OSS), extended to cover movement of own stocks prior to cross-border B2C to reduce the foreign, non-resident VAT registrations & returns. Plus to movements of own stock with ending of 'call-off' stock burden
More details on Single VAT Registration in the EU
Marketplaces deemed supplier for EU sellers
EU IOSS mandated for marketplaces
EU tackles misuse of IOSS numbers
Quick fixes to existing e-commerce VAT rules
Call-off stock VAT simplification ends
Harmonisation of B2B Reverse Charge rules
2. Digital Reporting Requirements; e-invoicing 2028: Mandatory digital reporting of intra-community transactions; obligation to be able to issue and receive intra-community e-invoices; member states free to impose own e-invoicing or real-time reporting but most conform to EU e-invoice standard EN 16931
Read more about EU Digital Reporting Requirements (DRR)
E-invoices mandated intra-community supplies 2028
EC Sales lists replaced by Digital Reporting Requirements
2014 EU legal permissions for e-invoicing lifted
3. VAT treatment of the platform economy 2025: Travel & accommodation sharing platforms to become deemed supplier / liable to users' VAT. New definitions of the roles of providers, users and platforms to avoid double and no-taxation
Read more - Travel & accommodation platforms deemed suppliers for EU VAT

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