EU VAT Threshold Changes: How Regulations May Impact E-commerce Giants

With Chinese e-commerce giants like Temu, Shein, and Aliexpress rapidly expanding their influence in the European market, the urgency for EU governing bodies to address these issues and implement regulations is more pressing than ever.

One attempt to set an equal playing field between EU and non-EU e-commerce platforms and businesses, especially Chinese, was abolishing the EUR 22 threshold and introducing the EUR 150 threshold. However, it seems that this was not enough.

Political Pressure to Abolish EUR 150 Threshold

Germany is emerging as a leading advocate within the EU for abolishing the EUR 150 threshold for low-valued goods imports, with the German Retail Association, or Handelsverband Deutschland (HDE), leading this push. In their recent press release, they stated that online platforms like Temu adn Shein are using this threshold as a competitive advantage and that EU online platforms cannot compete with platforms from the Far East.

Additionally, the HDE gave positive feedback regarding the latest action plan for e-commerce published by the Federal Ministry of Economics, which included the abolition of the threshold.

In addition to competitiveness, EU officials might remove the EUR 150 threshold for several other reasons, such as stopping poor-quality products from entering EU markets, ensuring ESG standard compliance, or increasing customs revenue.

In addition, in 2023, a study accompanying the ViDA initiative showed that removing the EUR 150 threshold would reduce business administrative costs. Furthermore, it included the proposal to remove this threshold by 2028.

Conclusion

The European Commission has already given positive feedback on removing the EUR 150 threshold for the Import One Stop Shop (IOSS) scheme. Now, with more political pressure, it remains to be seen how EU officials will react to this pressure and the timeline for removing the threshold.

Although Chinese e-commerce companies are one cause of this policy change, other e-commerce giants such as Amazon and eBay will also face the consequences of new import rules for low-value goods. Finally, as a company that wants its share of the market, TikTok will have to adjust to new regulations once they are in place.

Source:  Reuters - EU takes aim at China's Temu and Shein, Reuters - Germany backs ending EU tax break, HDE, European Parliamentary Research Service  - Proposal to simplify VAT rules for e-commerce