The European Union’s VAT in the Digital Age (ViDA) reform is poised to reshape the landscape of cross-border retail, particularly for e-commerce businesses reliant on low-value imports. The EU has announced this summer that it will abolish the €150 threshold for VAT and Customs Duty exemptions on imported goods, essentially enforcing greater use of the Import One Stop Shop (IOSS) scheme and its associated special arrangements. This move signals a broader global trend toward tightening controls on low-value consignments, one that echoes recent developments in U.S. tariff policy and growing scrutiny of Chinese e-commerce exports.
€150 threshold: what’s changing in the EU?
Under current rules, goods valued at €150 or less imported into the EU from non-EU countries benefit from simplified VAT treatment via the IOSS scheme. Sellers can collect VAT at checkout and remit it through a single EU portal, bypassing customs delays and reducing administrative friction. Postal operators also enjoy special arrangements to collect VAT on delivery when sellers don’t use IOSS.
The changes announced will impact both mechanisms from March 2028:
- IOSS extended for all goods: Sellers will no longer be able to use IOSS only for consignments under €150. All imports will require full customs declarations and standard VAT procedures, although businesses can seek Authorised Trader status which would significantly minimise intervention at the point of import.
- Special arrangements terminated: Postal and courier services will lose the ability to collect VAT on delivery. Import VAT must be paid or deferred through formal channels.
This change is driven by persistent under-declaration of goods, avoidance of IOSS registration, and the need to harmonise VAT and customs procedures across all import values. It also aligns with the EU’s broader customs modernisation efforts and aims to close compliance gaps that have allowed certain sellers – particularly from China – to exploit loopholes.
US tariffs and the de minimis debate
The EU’s move mirrors growing pressure in the United States to reform its own low-value import regime. Under Section 321 of the Tariff Act, goods valued under $800 can enter the US duty-free,a threshold significantly higher than the EU’s former €150 limit. This has led to a surge in direct-to-consumer shipments from Chinese platforms like Temu and Shein, which often avoid tariffs and customs scrutiny.
In response, the US has proposed tightening the de minimis threshold or excluding certain countries from eligibility. The Import Security and Fairness Act, for example, seeks to bar non-market economies like China from using the $800 exemption. The goal is to level the playing field for domestic retailers and address concerns over forced labour, counterfeit goods, and tax leakage.
Global implications for retailers
The convergence of EU and US policy signals a global recalibration of low-value import treatment. Retailers, especially those operating cross-border e-commerce models, must prepare for:
- Increased compliance burden: Full customs declarations, VAT registration in multiple jurisdictions, and more complex checkout systems.
- Higher costs: Loss of VAT exemptions and simplified procedures will raise operational costs and potentially impact pricing strategies.
- Marketplace liability expansion: Under ViDA, platforms facilitating sales will become the deemed supplier, liable for VAT and customs duties, even for consignments above €150.
These changes will require robust tax technology, real-time transaction tracking, and strategic supply chain adjustments. Retailers may need to shift fulfillment closer to end markets, renegotiate logistics contracts, and reassess product pricing to absorb new tax liabilities.
Strategic response: from compliance to competitive advantage
While the removal of the €150 threshold and tightening of low-value import rules may seem punitive, they also offer an opportunity for retailers to differentiate through transparency, reliability, and customer trust. Investing in automated VAT engines, customs integration, and marketplace partnerships can turn compliance into a competitive edge.
As the EU and US clamp down on low-value import loopholes, the era of frictionless cross-border retail is evolving. Retailers who adapt early, by embracing digital tax infrastructure and rethinking global logistics, will be best positioned to thrive in this new regulatory environment.
Next steps
If you or your organisation are affected by these changes, reach out to Dougie Todd, Partner and Co-Head of VAT, to discuss your best options.
