EU VAT for Online Sellers: The OSS Scheme Explained

If you sell online to consumers in more than one EU country, VAT stops being a simple home-country matter. The One Stop Shop, or OSS, lets you report and pay VAT due in other member states through a single portal at home. This explainer covers how it works, who it is for and what you need to track. It is general information, not tax advice, so confirm the details for your situation with the European Commission, your national tax authority or a qualified adviser.

Large blue euro sign sculpture surrounded by yellow stars standing in front of tall glass office buildings — Since July 2021, one portal can handle VAT on sales to consumers across the EU.

Key takeaways

Once your cross-border B2C distance sales within the EU pass €10,000 a year in total, VAT is generally due in each customer's country, not yours.
The OSS lets you declare and pay that foreign VAT through one quarterly return in a single member state, instead of registering in every country.
Import OSS (IOSS) covers goods imported into the EU in consignments worth €150 or less.
OSS is optional but usually far simpler than multiple registrations. Good records of each customer's location are the foundation.

Before July 2021, each EU country had its own distance selling threshold, and many small sellers either ignored them or ended up registered for VAT in several countries. The reform replaced that patchwork with one EU-wide threshold and a single reporting route. For a small online shop, a course creator or an app developer selling to consumers across Europe, it changed the paperwork a great deal.

This article explains the logic first, then the practical steps. VAT rules are detailed and they change, so treat it as a map, not a final answer.

The basic idea: VAT follows the customer

For sales to other businesses (B2B) within the EU, the customer usually accounts for VAT through the reverse charge, so the seller often does not charge VAT at all. OSS is not about those sales. It is about sales to private consumers (B2C).

The guiding principle for B2C sales across EU borders is that VAT should be paid where the goods or services are consumed. If you are based in Ireland and sell a jacket to a consumer in Spain, the starting point is Spanish VAT at the Spanish rate. The question is how a small seller can collect and pay the VAT of many countries without registering everywhere. That is the problem the One Stop Shop solves.

Which sales are in scope

Intra-EU distance sales of goods. Goods shipped from one EU country to a consumer in another, such as orders from an online store.
Certain services to consumers in other EU countries. These include telecommunications, broadcasting and electronically supplied services such as downloads, streaming, online courses delivered automatically and software subscriptions, along with other B2C services taxed where the customer is.
Some sales through online marketplaces, where special rules can make the platform responsible for the VAT instead of you.

The €10,000 threshold explained

There is one EU-wide threshold for small sellers established in a single member state. It applies to the total of your cross-border B2C distance sales of goods and the in-scope services to consumers in other EU countries, added together across all those countries.

€10,000 EU-wide annual threshold for cross-border B2C distance sales of goods and certain services, above which the VAT of the customer's country applies EU VAT e-commerce rules, in force since 1 July 2021

Below the threshold, you can generally keep charging your home country's VAT on those sales. Above it, the VAT of each customer's country applies. Two points catch people out:

It is one total, not one per country. Selling a little to many countries adds up quickly.
Crossing it mid-year matters. Once you exceed the threshold, the sale that takes you over and the sales after it are generally taxed in the customer's country. You do not wait until the next year.

The threshold applies to sellers established in only one EU member state. Sellers based outside the EU do not benefit from it, which is one reason non-EU businesses often need OSS or IOSS from their first sale.

Common mistake

Counting only the biggest export market against the threshold. The €10,000 figure covers your combined cross-border B2C sales to all other EU countries, so ten small markets can push you over just as fast as one large one.

How the One Stop Shop works

The OSS is an online portal run by each member state's tax authority. You register in one country, usually the one where you are established, called your member state of identification. You then file one OSS return each quarter listing your in-scope B2C sales by customer country and the VAT due at each country's rate. You pay the total in one payment, and your tax authority passes the money on to the other countries.

There are three schemes inside the One Stop Shop, and each fits a different seller:

Scheme	Who it is for	What it covers
Union scheme	Businesses established in the EU, plus some non-EU sellers shipping goods from stock inside the EU	Intra-EU distance sales of goods and B2C services supplied in a member state where the seller is not established
Non-Union scheme	Businesses not established in the EU	B2C services supplied to consumers in the EU
Import scheme (IOSS)	Sellers and marketplaces importing goods into the EU, often through an intermediary for non-EU sellers	Distance sales of imported goods in consignments worth €150 or less

Check whether you are over, or close to, the threshold. Add up your cross-border B2C sales of goods and in-scope services to other EU countries for the current and previous calendar year.
Pick the right scheme. EU-established sellers usually use the Union scheme. Non-EU service sellers look at the non-Union scheme. Low-value imports point to IOSS.
Register through your tax authority's portal. Registration timing affects when you can start using the scheme, so check the start date rules before you register.
Charge the right VAT at checkout. Set your store or billing system to apply each customer country's rate, including any reduced rates that apply to your products in that country.
File the OSS return and pay. Report sales by country and rate for the quarter, then make one payment by the deadline.
Keep your records. OSS records must be detailed and kept for a long period, and other countries can ask to see them.

Pro tip

If you use the Union scheme, you generally must report all your qualifying sales through it, not just some countries. Decide early and set up your sales platform to tag every B2C order with the customer's country so the quarterly return is a report, not a research project.

What OSS does not cover

OSS simplifies a lot, but it is not a complete VAT solution. Keep these limits in mind:

Your domestic sales. Sales to customers in your own country still go on your normal national VAT return.
B2B sales. These stay outside OSS and follow the usual reverse charge and reporting rules.
Input VAT recovery. You cannot reclaim VAT you paid on costs in other countries through the OSS return. That usually needs a separate refund procedure or a local registration.
Stock held abroad. If you store goods in a warehouse in another EU country, for example through a fulfillment network, local VAT registration in that country is usually required for the stock movements and local sales.

A pile of parcels wrapped in plain brown paper and tied up, stacked and ready to be shipped — Where your parcels ship from, and where they arrive, decides which VAT rules apply.

IOSS and low-value imports

When goods come into the EU from outside, import VAT normally applies. For consignments worth €150 or less, the Import One Stop Shop lets the seller or marketplace charge VAT at checkout, at the rate of the customer's country, and report it monthly through IOSS. The parcel can then clear customs without the customer paying VAT and handling fees on delivery.

For sellers outside the EU, including UK businesses after Brexit, IOSS can make a real difference to the customer experience. Nobody likes a surprise charge at the door, and surprise charges lead to refused parcels. Non-EU sellers usually need to appoint an EU-based intermediary to register for IOSS, unless an agreement between their country and the EU removes that need.

Consignments above €150 sit outside IOSS. Import VAT and any customs duty are then dealt with at import, often by the courier or the customer, depending on your shipping terms.

Example

Imagine a small UK business that sells handmade notebooks to consumers in France, Germany and the Netherlands, shipping direct from the UK. Most orders are worth well under €150. By registering for IOSS through an intermediary, it can charge each customer's local VAT at checkout and file one monthly IOSS return. Customers receive their parcels without an extra charge, and the business deals with one return instead of three countries' import processes for every order.

Records you need to keep

OSS shifts work from registering to record keeping. Tax authorities in any of your customer countries can ask for your records, so they need to be complete and easy to export. For each sale, keep:

The customer's country and the evidence you used to decide it, such as billing address, delivery address, IP location or bank country for digital services.
The date of the sale and the date of any payment received.
A description and quantity of the goods or services.
The taxable amount, the VAT rate applied and the VAT amount, with the currency.
Details of any refunds, credit notes or later adjustments.
For goods, the date of dispatch and where they were shipped from.

Most e-commerce and subscription platforms can capture this data automatically if you configure them properly. Check your settings before your first OSS quarter, not after.

Benefits of OSS

One registration instead of one per country
One return and one payment each period
Correct local VAT for customers across the EU
Fewer surprise charges for customers on low-value imports with IOSS

Things to watch

You must track many VAT rates and keep them up to date
Detailed records are required for every sale
Foreign input VAT is not reclaimed through OSS
Stock held in other countries can still trigger local registration

Your OSS action plan

Total your cross-border B2C sales to other EU countries for this year and last year
Separate B2B sales, domestic sales and B2C cross-border sales in your reports
Decide whether the Union, non-Union or Import scheme fits your business
Check registration timing rules on your tax authority's OSS page
Set up country-based VAT rates in your store or billing system
Capture customer location evidence for every B2C sale
Add OSS return and payment deadlines to your calendar
Review your setup if you start holding stock in another EU country

Frequently asked questions

Do I have to use the OSS?

OSS is optional. The alternative is usually registering for VAT in each EU country where your B2C sales are taxable, which most small sellers find far more work. Check your own position with your tax authority or an adviser before you decide.

Can I opt to charge customer-country VAT even below €10,000?

Generally yes. Sellers below the threshold can choose to apply the VAT of the customer's country, often through OSS, for example to keep one consistent pricing system. That choice can bind you for a minimum period, so read the conditions first.

What if I sell through an online marketplace?

In some cases, especially for imported goods and for goods sold by non-EU sellers through a platform, the marketplace is treated as the seller for VAT purposes and handles the VAT. Check the marketplace's seller terms and confirm which sales it covers and which remain your responsibility.

I am a UK seller. Does the OSS apply to me?

UK businesses selling to EU consumers are non-EU sellers for EU VAT. Depending on what you sell and where you ship from, the non-Union scheme, IOSS or a local EU registration may be relevant. UK VAT on your UK sales is a separate matter handled with HMRC.

The bottom line

The One Stop Shop turned EU VAT for online sellers from a country-by-country headache into one quarterly routine. Know the €10,000 threshold, choose the scheme that fits how you sell, charge the right local rate and keep tidy records of where every customer is. That covers most of the work.

VAT rules, rates and procedures change, and edge cases such as marketplaces, stock held abroad and mixed B2B and B2C sales can get complex. Check the European Commission's VAT e-commerce guidance and your national tax authority, and speak to a qualified adviser before you register or change how you charge VAT.