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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
2025 VAT registration thresholds equivalence foreign businesses On track
Virtual events VAT rule changes Agreed
2024 Payment providers' seller transaction reporting and bookkeeping obligations On track
Digital Reporting Requirements including EU e-invoicing harmonisation Implementation of VAT in the Digital Age?
2023 DAC 7 - marketplace reporting harmonisation On track
Financial Services VAT exemption reform proposals Consultation complete; proposal 2023
Tour operator margin scheme VAT reforms EC undertaking fresh review
2022 IOSS reforms to prevent double taxation Proposals early 2022
EU reduced VAT rate freedoms Enter into force 6 April 2022
VAT in the Digital Age proposals On track for 7 Dec 2022 publication
Single VAT Registration in the EU - extension of OSS On track for 7 Dec 2022 publication
Proposal for VAT treatment of the platform economy On track for 7 Dec 2022 publication
EU DAC8 cryptocurrency tax reporting proposals On track for 7 Dec 2022 publication
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
EU Generalised Domestic Reverse Charge VAT Mechanism In effect, although no country has adopted this voluntary option
2015 B2C electronic services VAT reforms - MOSS return In effect

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