OSS & IOSS in the EU:
The Complete Guide for Cross-Border Sellers

1. Background: The July 2021 E-Commerce VAT Reform

On 1 July 2021, the EU's e-commerce VAT package came into effect, representing the most significant overhaul of cross-border VAT rules in over two decades. The reform abolished the country-specific distance selling thresholds — which ranged from €35,000 in France to €100,000 in Germany — and replaced them with a single EU-wide threshold of €10,000.

Above this threshold, all B2C cross-border sales of goods and electronically supplied services are taxed at the rate of the Member State where the customer is located (the destination principle). To comply with this obligation without registering for VAT in every single EU country where they have customers, businesses can use one of three simplified reporting mechanisms known collectively as the One Stop Shop (OSS).

The reform serves a dual purpose: it ensures fair taxation at destination for EU consumers, and it provides businesses with a simplified compliance mechanism — the European Commission estimated that the OSS reduces administrative costs by up to 95% compared to registering in every Member State individually.

2. The Three OSS Schemes Explained

The OSS is not a single system but rather three distinct schemes, each designed for a different type of business and transaction. It is critical to understand which scheme applies to your situation, as using the wrong one is a compliance error.

2.1 The Union Scheme

The Union scheme is available to businesses that are established within the EU (i.e., they have their registered office, central administration, or a fixed establishment in at least one Member State). It covers two main categories of transactions: intra-EU distance sales of goods to consumers (B2C), and all B2C supplies of services where VAT is due in a Member State other than the one where the supplier is established.

Registration is made in the Member State where the business is established. If the business has fixed establishments in multiple Member States, registration must be in the Member State where the head office is located.

Art. 369a–369k, Directive 2006/112/EC as amended.

2.2 The Non-Union Scheme

The Non-Union scheme is designed for businesses that are not established anywhere in the EU and that do not have a fixed establishment in any Member State. It covers B2C supplies of services where VAT is due in any EU Member State.

A non-EU business using this scheme may choose any Member State as its "Member State of identification" — in other words, it can register with whichever national tax authority it prefers. All VAT reporting and payments are then processed through that single authority.

If a non-EU company does have a fixed establishment in any EU Member State, it cannot use the Non-Union scheme and must instead use the Union scheme, registering in the Member State of that fixed establishment.

Art. 358a–358e, Directive 2006/112/EC. For the definition of "fixed establishment," see ECJ Cases C-73/06 (Planzer) and C-605/12 (Welmory).

2.3 The Import Scheme (IOSS)

The IOSS is a dedicated scheme for distance sales of goods imported from third countries (outside the EU) in consignments with an intrinsic value not exceeding €150. It is explained in full detail in Section 3 below.

Scheme Comparison

Compiled from Art. 358a–369k, Directive 2006/112/EC. See also European Commission Explanatory Notes on E-Commerce VAT Rules (Sept. 2020).

3. IOSS — The Import One Stop Shop

The IOSS was created specifically to simplify VAT compliance for businesses selling low-value goods to EU consumers from outside the EU. Before July 2021, parcels worth under €22 were exempt from import VAT entirely, creating significant competitive distortion. The IOSS replaced this with a system where VAT is collected at the point of sale rather than at the border.

3.1 How IOSS Works

When a seller is registered for IOSS, the process works as follows: VAT is charged to the consumer at checkout at the rate of the destination Member State. The seller reports and pays this VAT through a single monthly IOSS return filed in their Member State of identification. At customs, the IOSS registration number is provided on the customs declaration, and the goods are released without any further VAT being charged to the consumer.

This creates a smooth customer experience — the consumer pays one price with VAT included, and receives the goods without unexpected charges at the border.

3.2 The €150 Threshold

IOSS applies only to consignments with an intrinsic value of €150 or less. The intrinsic value is the value of the goods themselves, excluding transport and insurance costs if these are invoiced separately. When a parcel contains multiple items, the total value of all items in the consignment is assessed against the threshold.

Deliberately splitting shipments to stay below the €150 threshold is prohibited under anti-abuse provisions. Goods subject to excise duties (alcohol, tobacco) are always excluded from IOSS regardless of their value.

Art. 369l–369x, Directive 2006/112/EC. Anti-abuse: Art. 369l(2).

3.3 Non-EU Sellers and the Intermediary Requirement

Non-EU sellers cannot register directly for IOSS. They must appoint an EU-established intermediary who acts as a fiscal agent. The intermediary registers under their own VAT number, files the IOSS returns on behalf of the seller, and is jointly and severally liable for the VAT.

Because of this joint liability, intermediaries typically require a security deposit from non-EU clients to cover their potential VAT exposure. This is standard practice and should be factored into the cost of using IOSS.

3.4 When IOSS Is Not Used

If a seller does not register for IOSS and the consignment is worth €150 or less, the EU provides a "special arrangement" under which the carrier or postal operator collects the VAT from the recipient upon delivery. The VAT rate applied is the standard rate of the destination Member State. This results in the consumer paying an unexpected charge on delivery, which harms the customer experience and is a significant commercial disadvantage.

For goods above €150, IOSS cannot be used at all. Standard import VAT procedures apply: the goods go through regular customs clearance, duties are assessed, and import VAT is charged on the customs value plus any duties and transport costs.

4. Key Thresholds and When They Apply

It is important to note that the €10,000 threshold is calculated on the aggregate value of all B2C cross-border supplies of goods and telecommunications, broadcasting, and electronic (TBE) services across all Member States. Once exceeded, all cross-border B2C sales become taxable at destination — not just the amount above the threshold.

Art. 59c, Directive 2006/112/EC (€10,000 threshold). Art. 369l (€150 IOSS). Council Regulation (EC) No 1186/2009 (customs duty exemption, to be abolished per EU Customs Reform 2026).

5. Filing Mechanics: Returns, Deadlines, and Currency

5.1 OSS Returns (Union and Non-Union Schemes)

OSS returns are filed quarterly with the following deadlines:

The return must be filed in EUR. Businesses that transact in other currencies must convert using the European Central Bank exchange rate published on the last day of the reporting period.

The return breaks down sales by Member State of consumption. For each Member State, the business reports the taxable amount and VAT per applicable rate (standard, reduced, etc.). Payment is made to the Member State of identification only — that authority then distributes the VAT to each consumption Member State.

Corrections to previous periods are made by amending the original return in the current quarter's filing. There is no separate amendment procedure.

Art. 369f–369g (Union), Art. 364–365 (Non-Union), Directive 2006/112/EC. Commission Implementing Regulation (EU) 2019/2026, Art. 6.

5.2 IOSS Returns

IOSS returns are filed monthly, with the deadline falling on the last day of the month following the reporting period (i.e., January sales are due by 28/29 February). The structure is similar to the OSS return: sales are broken down by Member State of consumption, with VAT amounts per applicable rate.

Art. 369t, Directive 2006/112/EC.

5.3 Audit Rights

Although all filing and payment goes through a single Member State, each Member State of consumption retains the right to audit the portion of VAT relating to sales made to its consumers. In practice, this means that a business using the French OSS portal to declare sales to Germany may still be audited by the German tax authority (Finanzamt) for those German sales.

Art. 369i, Directive 2006/112/EC.

6. Marketplace Deemed Supplier Rules

One of the most impactful elements of the 2021 reform is the "deemed supplier" provision. Under Article 14a of the VAT Directive, online marketplaces (referred to as "electronic interfaces" in the legislation) are treated as if they themselves have received and supplied the goods in two situations:

Case 1: Distance sales of imported goods with a value not exceeding €150, regardless of where the underlying seller is established. In this case, the marketplace collects VAT from the consumer and remits it. The underlying seller makes a deemed zero-rated supply to the marketplace.

Case 2: Any B2C sale of goods within the EU facilitated by the marketplace where the underlying seller is not established in the EU. This applies regardless of the value of the goods. The marketplace is the deemed supplier and handles VAT collection.

A crucial point that many sellers misunderstand: the deemed supplier rules do not eliminate all VAT obligations for the underlying seller. The seller remains responsible for VAT on stock movements between Member States (e.g., intra-community transfers of inventory to Amazon warehouses), for import VAT on goods entering the EU, and for Intrastat declarations where applicable. The marketplace only takes over the VAT on the final sale to the consumer.

7. Amazon FBA: Pan-European VAT Requirements

Sellers using Amazon's Pan-European Fulfilment by Amazon (Pan-EU FBA) programme face a particularly complex VAT landscape because Amazon distributes inventory across warehouses in multiple EU countries to optimise delivery speed.

The movement of goods from one Member State warehouse to another constitutes a deemed intra-community supply (a "transfer of own goods"), which triggers a VAT registration obligation in both the country of dispatch and the country of arrival. This obligation exists regardless of whether any sales are made from that warehouse — the mere presence of stock is sufficient.

For the standard Pan-EU FBA programme, mandatory VAT registrations typically include Germany, France, Italy, Spain, and Poland at a minimum. If the seller also uses the CEE (Central and Eastern European) or Nordic storage options, registrations in the Czech Republic and/or Sweden may also be required.

Filing requirements in each country where the seller holds inventory include periodic VAT returns (monthly or quarterly depending on the Member State), Intrastat declarations for goods movements above the applicable threshold, and EC Sales Lists for intra-community supplies.

Art. 17(1), Directive 2006/112/EC (transfer of own goods as deemed IC supply). Intrastat: Regulation (EC) No 638/2004.

8. Common Errors and How to Avoid Them

Based on our experience advising over 3,000 companies on EU VAT compliance, these are the most frequent errors we encounter with OSS and IOSS:

Using OSS for B2B sales. The OSS is strictly B2C only. Cross-border B2B supplies of services are generally subject to the reverse charge mechanism (Article 196, Directive 2006/112/EC), where the customer accounts for the VAT, and cannot be reported via OSS. B2B supplies of goods may require local registration or benefit from the reverse charge depending on the Member State.

Declaring OSS sales in a Member State where locally registered. If a business has a local VAT registration in a Member State — for example, because it holds inventory there — it must declare all sales to consumers in that country on its local VAT return. Including those sales in the OSS return as well would result in double reporting.

Using IOSS for goods exceeding €150. The €150 threshold is absolute. Goods with an intrinsic value above €150 must go through standard import VAT procedures. There is no possibility of declaring these through IOSS, and attempting to do so is a compliance violation.

Non-EU sellers using the Union scheme. The Union scheme is exclusively for EU-established entities. Non-EU businesses without a fixed establishment in the EU must use the Non-Union scheme (for services) or IOSS (for imported goods ≤€150). Registering under the wrong scheme can lead to the registration being voided retroactively.

Ignoring VAT rate variations across Member States. Reduced VAT rates differ significantly between countries and change periodically. For example, e-books enjoy a reduced rate of 5.5% in France but 7% in Germany and 4% in Spain. Applying the wrong rate through the OSS return is the seller's liability, not the marketplace's.

Not filing nil returns. A nil return must be filed even if there were no sales during the period. Consistently failing to file can result in exclusion from the scheme and back-exposure to individual Member State registration requirements.

9. ViDA Reforms: What Changes in 2027–2028

The VAT in the Digital Age (ViDA) reform package was formally adopted by the Council of the EU on 11 March 2025, published in the Official Journal on 25 March 2025 as Council Directive (EU) 2025/516, and entered into force on 14 April 2025. Its third pillar — the Single VAT Registration — will significantly expand the scope of the OSS over the coming years.

9.1 Key Changes by Date

Council Directive (EU) 2025/516, amending Directive 2006/112/EC. Published OJ L, 25 March 2025.

9.2 Impact on Amazon FBA and Warehouse Sellers

The most consequential change for e-commerce sellers is the new "transfer of own goods" OSS module coming in July 2028. Under this scheme, businesses moving their own inventory across EU borders will be able to report these movements via the OSS portal instead of registering for VAT in each destination country. This could dramatically reduce the number of VAT registrations required for Pan-EU FBA sellers.

However, this comes with conditions: the scheme cannot be used if the owner is not entitled to fully deduct input VAT on those goods in the destination Member State. Capital goods are also subject to specific rules. Businesses should begin assessing their supply chains now to prepare for this transition.

9.3 Mandatory B2B Reverse Charge

From July 2028, Member States will be required to apply the reverse charge mechanism when a non-established, non-registered supplier makes a B2B supply to a customer who is VAT-registered in that Member State. This removes one of the major remaining reasons for non-resident businesses to hold local VAT registrations — purely domestic B2B supplies.

Member States will have some flexibility in extending this rule further, for example applying it even when the customer is not established locally. Margin scheme transactions and works of art are excluded from this mandatory reverse charge.

10. 2026 Update: Removal of the €150 Customs Duty Exemption

From 1 July 2026, the EU will abolish the €150 customs duty exemption for low-value consignments imported from third countries. This is separate from the IOSS scheme (which addresses VAT, not customs duties) but has significant practical implications for businesses using IOSS.

Under the transitional arrangement, a simplified flat-rate customs duty of €3 per consignment will apply to all e-commerce parcels entering the EU with a value below €150. This is an interim measure until the EU Customs Data Hub becomes operational in 2028, at which point standard duty classification (based on HS codes) will apply to all imported goods regardless of value.

For IOSS users, this means that while the VAT side of compliance continues to work as before, customs duties will now also need to be accounted for on every import. Businesses must ensure their systems capture accurate HS codes, country of origin, and product descriptions to comply with the new requirements.

EU Council Decision of 13 November 2025, abolishing the customs duty exemption under Council Regulation (EC) No 1186/2009. EU Customs Reform 2028: COM(2023) 258 final.