EU VAT Shake-Up: What Businesses Need to Know About the 2025 Adoption and 2028 Enforcement of IOSS Rules

Introduction

The European Union (EU) is implementing one of the most significant VAT reforms in recent years through the VAT in the Digital Age (ViDA) package. Designed to modernize tax collection, simplify compliance, and close loopholes in cross-border e-commerce, this reform will impact all businesses selling goods into the EU — especially non-EU sellers and marketplaces.

The reform process has two key milestones: the adoption of new Import One-Stop Shop (IOSS) rules in July 2025, and their full legal enforcement starting July 2028. Understanding these phases is essential for businesses to prepare effectively, avoid penalties, and leverage the changes for growth.

The First Phase of the EU VAT Reform (2025)

In March 2025, the EU formally adopted the VAT in the Digital Age (ViDA) package. Among its most important changes are updates to the VAT treatment of goods imported from outside the EU. By July 2025, several provisions came into effect:

Clear liability for VAT on imports: Non-EU sellers and digital marketplaces are now explicitly responsible for charging and remitting import VAT on goods sold to EU consumers valued up to €150. This shifts VAT responsibility away from consumers and customs carriers, aiming for greater transparency. (EU Council Press Release)
Encouragement, not obligation, to use IOSS: The Import One-Stop Shop (IOSS) remains voluntary but strongly encouraged for most sellers shipping low-value goods. IOSS enables sellers to file a single monthly VAT return covering all 27 EU member states, significantly reducing administrative burdens.
End of the low-value VAT exemption: Previously, goods imported with a value below €150 were exempt from VAT, creating unfair competition between EU and non-EU sellers. This exemption was abolished, ensuring VAT is charged uniformly regardless of parcel value. (VAT Update on 2025 Amendments)

While these changes are legally adopted, enforcement at this stage remains flexible. The July 2025 milestone marks a transition phase — a period to adapt your pricing, logistics, and VAT compliance systems in preparation for full implementation.

July 2028: Full Legal Enforcement — Compliance Becomes Mandatory

Starting 1 July 2028, the new VAT rules become legally binding across the EU with stronger enforcement and expanded scope:

IOSS becomes mandatory for low-value imports: Using IOSS will be the standard method for collecting and remitting VAT on goods valued up to €150 imported into the EU. Sellers or marketplaces that fail to register for IOSS will need to register for VAT separately in every EU country where they sell goods, increasing complexity and compliance costs. (VAT Compliance 2028 Guide)
Abolishment of special arrangements: The old system where postal services or couriers collected VAT at the point of delivery (sometimes called “special arrangements”) will no longer be valid. All VAT must be collected upfront, streamlining customs clearance and ensuring VAT is paid promptly.
Marketplaces bear increased liability: Digital platforms and marketplaces will be treated as “deemed suppliers” in certain cases, making them co-responsible for VAT collection and remittance. This aligns their accountability with their role in facilitating sales, reducing VAT evasion. (Alvarez & Marsal on IOSS Reform)
Stronger customs enforcement: Customs authorities will require valid IOSS numbers and VAT documentation to clear shipments smoothly. Failure to comply could result in delays, increased inspections, or penalties. (Global VAT Compliance)

These changes are part of the broader VAT in the Digital Age (ViDA) framework, which also includes mandatory e-invoicing and real-time VAT reporting to improve transparency and compliance.

What Businesses Should Do Now

The two-step implementation requires businesses to act proactively:

Review and update pricing: Incorporate VAT and related handling costs into product pricing upfront to maintain profitability and avoid unexpected charges to customers.
Plan VAT registration strategy: Begin evaluating if and how to register for IOSS or local VAT in EU member states, especially if your business ships frequently or has multiple EU customers.
Assess marketplace agreements: If selling through platforms, understand how VAT liability is shared, and ensure your contracts reflect new obligations.
Optimize logistics: Consider EU warehousing to minimize customs delays and reduce the impact of handling fees. This also improves delivery times and customer experience.
Partner with VAT and tax experts: Stay informed on regulatory updates and leverage specialized advisors to avoid costly compliance mistakes.

How We Support Your Compliance Journey

At CompyCo, we work with trusted accountants and tax advisors across the EU who assist our clients with IOSS registration, VAT filing, and customs compliance. This collaboration ensures you:

Navigate complex, evolving VAT regulations with confidence
Maintain seamless cross-border trade and customer satisfaction
Avoid penalties, shipment delays, and costly administrative burdens

Our network of experts is well-versed in the 2025 and 2028 reforms, ready to support you throughout this transition.

Additional Resources

For businesses and tax professionals eager to learn more, here are valuable resources to explore:

Conclusion

The EU’s VAT reforms usher in a new era of transparency, fairness, and digital innovation in cross-border trade. The July 2025 adoption signals the path forward, while the July 2028 enforcement phase demands full compliance, with tighter customs scrutiny and broader seller obligations.

By understanding these key milestones and preparing accordingly, businesses can transform regulatory changes into opportunities — improving customer trust, accelerating growth, and simplifying cross-border operations across the entire EU market.

If you want expert assistance navigating these changes, remember that we partner with specialized accountants and tax advisors throughout Europe to support your compliance and expansion goals.

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