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EU import VAT on returned goods – harmonising options

Harmonising import VAT refunds on IOSS and Special Arrangements following 2021 EU e-commerce package

Following the introduction of the new import VAT rules in the July 2021 e-commerce VAT package, the EU is looking to harmonise the treatment returned goods. This requirement for this has arisen due to large new volume of imports subject to VAT, and the alternative ways to declare import VAT. In particular, the treatment of the customs declaration – must it be invalidated – needs to be consistent.

Separately, the EU is also looking at VAT fraud on IOSS reporting, and fixes to prevent IOSS double taxation.

Three import VAT declarations options need harmonising

The e-commerce package made all B2C import sales subject to import VAT – previously there had been an exemption threshold of €22.  There are now three channels for the import VAT to be declared by sellers or deemed supplier marketplaces:

  1. the new Import One Stop-Shop VAT return for consignments not exceeding €150. The import VAT is collected in the checkout process. The IOSS return may be used to correct VAT on returned goods in subsequent returns without the need to invalidate the import declaration
  2. Special Arrangements simplification for postal operators, express carriers and customs agents. The import VAT is collected as an import duty on delivery to the consumer and therefore refund of VAT might only be possible if the import declaration is invalidated
  3. Traditional VAT registration in each country where the VAT is collected at customs clearance. Most countries now permit import VAT to be deferred in the return. it appears that the import declaration may need to be invalidated in order to process a request for a refund of import VAT. Otherwise, where not required to the invalidated, what proof is required to support this.

The European Commission is now reviewing issues around the invalidation of the customs declarations, including:

  • Proof required to make import VAT correct on return goods in the IOSS
  • What happens if the seller decides to destroy the goods
  • Is it possible to refund import VAT arising in relation to the return of goods (when the IOSS is not used) without invalidating the import declaration,
  • Is the reimbursement of VAT possible in situations where the goods remain in the EU and are, therefore, not exported but, instead, are subsequently sold by the supplier in the EU?

EU VAT reforms

Reform (click for details) Update
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2035 Harmonisation of EU e-invoicing and domestic regimes Jan 2035
2030 Digital Reporting Requirements and e-invoicing harmonisation July 2030
Structured e-invoices supercede paper invoices July 2030
EC Sales lists replaced by Digital Reporting Requirements July 2030
2028 EU Customs reforms Published May 2023
€150 import consignment threshold removed Published May 2023
2027 Single VAT Registration in the EU - extension of OSS July 2027
Call-off stock VAT simplification ends July 2027
Harmonisation of B2B Reverse Charge rules July 2027
Proposal for VAT treatment of the platform economy July 2027
2026 DAC8 harmonised crypto asset reporting Approved May 2023
2025 VAT registration thresholds equivalence foreign businesses 1 Jan 2025
Virtual events VAT rule changes 1 Jan 2025
Financial Services VAT exemption reform proposals Consultation complete; proposal awaited
Tour operator margin scheme VAT reforms EC undertaking fresh review
2024 Payment providers' seller transaction reporting and bookkeeping obligations In effect since 1 Jan 2024
2023 DAC 7 - marketplace reporting harmonisation In effect since 1 Jan 2024
2022 IOSS reforms to prevent double taxation On hold
EU reduced VAT rate freedoms Entered into force 6 April 2022
VAT in the Digital Age proposals Published Dec 2022
EU DAC8 cryptocurrency tax reporting proposals Published Dec 2022
VAT Gap Initiative Q3 2022
EU Definitive VAT System On hold
2021 One-Stop-Shop (OSS) single EU VAT return In effect since 1 July 2021
Ending €22 import VAT exemption; new IOSS return In effect since 1 July 2021
Marketplace deemed supplier EU VAT reforms In effect since 1 July 2021
2020 EU four Quick Fixes for VAT In effect
Tax authorities anti-VAT fraud cooperation In effect
Tax Action Plan - 25 VAT and other tax reforms roadmap See 'VAT in the Digital Age' and others
2019 Simplification of e-services VAT compliance and thresholds In effect
Single and multi-use vouchers In effect
2018 Lower e-book and publications VAT rates In effect, although not all EU states have adopted the option


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