Navigating EU customs requirements for online sellers and platforms
On July 1, 2021, the European Union implemented sweeping changes to how it handles ecommerce imports. Known as the "EU Ecommerce Package," these reforms fundamentally changed the customs and VAT landscape for online sellers shipping to European consumers. Understanding these rules is essential for any business selling goods to EU customers from outside the European Union.
The reforms were driven by two main objectives: leveling the playing field between EU and non-EU sellers (who previously benefited from VAT exemptions on low-value shipments) and addressing VAT fraud that had become endemic in cross-border ecommerce. The changes affect everyone in the supply chain, from online marketplaces to small independent sellers to the consumers who buy from them.
Before July 2021, goods valued under €22 could enter the EU without paying VAT. This exemption was widely exploited through undervaluation and splitting of shipments. The new rules eliminate this loophole entirely: all goods imported into the EU are now subject to VAT, regardless of value. This represents a significant compliance and cost change for businesses built on the previous exemption.
The Import One-Stop Shop (IOSS) is a simplified VAT reporting mechanism that allows sellers to collect VAT at the point of sale and remit it through a single monthly return covering sales to all EU member states. Goods shipped using IOSS are identified at the border and cleared without the customer needing to pay VAT on delivery. This creates a smoother customer experience and more predictable pricing.
IOSS is available for goods valued up to €150 that are shipped directly from outside the EU to consumers within the EU. It covers business-to-consumer (B2C) sales only—business-to-business shipments require different procedures. Excise goods (alcohol, tobacco) are excluded from IOSS regardless of value.
Non-EU sellers must register for IOSS through an intermediary established in the EU. EU sellers can register directly. Registration provides a unique IOSS number that must be communicated to customs for shipments to benefit from the simplified procedure.
IOSS registrants must charge VAT at the rate applicable in the customer's country, submit monthly IOSS returns detailing sales to each member state, pay collected VAT to the member state of registration, and maintain records for ten years. The IOSS return is due by the end of the month following the reporting period.
For sellers not using IOSS, postal operators and couriers can clear goods for customs using a "special arrangement" that allows them to collect VAT from the recipient on behalf of customs. This ensures VAT is paid but results in the customer facing charges on delivery—potentially leading to delivery refusals and customer service issues.
While the VAT exemption was eliminated, the customs duty de minimis of €150 remains. Goods with an intrinsic value of €150 or less are exempt from customs duties (though still subject to VAT). This applies only to goods without excise products. Above €150, full customs duties apply based on the HS classification of the goods.
Online marketplaces (platforms that facilitate sales between third-party sellers and consumers) are now "deemed suppliers" for VAT purposes in certain circumstances. When a marketplace facilitates the sale of goods from a non-EU seller to an EU consumer, the marketplace is treated as having purchased the goods from the seller and sold them to the consumer. The marketplace becomes liable for collecting and remitting VAT.
This rule applies regardless of goods value when the seller is established outside the EU. For EU sellers, marketplace liability applies only when goods are imported from outside the EU. The rule aims to ensure VAT collection on all ecommerce sales by placing the obligation on parties with established presence in the EU.
Sellers operating through platforms like Amazon, eBay, and others may find that the platform handles VAT collection for their EU sales. This simplifies compliance but also reduces seller control over pricing. Sellers should understand which sales are covered by marketplace facilitation and which remain their direct responsibility.
Customs authorities scrutinize ecommerce shipments for undervaluation. Declaring accurate values is essential—goods repeatedly entering at suspiciously low values may be detained for examination or assessed at higher values by customs. Penalties for intentional undervaluation can be severe, including seizure of goods and fines.
Every shipment requires an HS code on the customs declaration. Incorrect classification affects both duty rates and statistical reporting. While the duty de minimis means many low-value shipments don't incur duty, classification is still required and affects other aspects of customs compliance.
Even low-value shipments require proper commercial invoices showing the seller, buyer, goods description, quantity, value, and country of origin. Electronic advance data (EAD) requirements mean this information must often be transmitted before goods arrive at the EU border.
Handling returns on cross-border ecommerce presents particular challenges. When customers return goods originally imported with VAT and/or duty paid, reclaiming those charges requires documentation and customs procedures. Sellers should factor return handling costs into their business models and communicate clearly with customers about the process.
For non-IOSS shipments where customers refused delivery due to unexpected charges, sellers bear the cost of return shipping and may struggle to recover the original shipping costs. This underscores the value of transparent pricing through IOSS or similar arrangements.
For more information, see our guides on import VAT rates, Amazon FBA customs, and restricted product categories.
