EU VAT for online shops: the 10,000 euro threshold, OSS and IOSS explained for checkout systems

What changed in July 2021

Before July 2021, sellers of goods to consumers in other EU countries charged VAT of their home country until they exceeded a distance selling threshold set by each destination country, typically 35,000 or 100,000 euros. Sellers then had to register for VAT in each country where they crossed the threshold.

The EU VAT e-commerce package replaced those national thresholds with a single EU-wide threshold of 10,000 euros per year. Above it, intra-EU distance sales of goods to consumers are taxed in the member state where the goods arrive, at that country’s VAT rate. The same threshold also covers telecommunications, broadcasting and electronically supplied services to consumers in other member states.

The package also removed the VAT exemption for imported goods worth up to 22 euros, so all goods imported into the EU are subject to VAT, and it introduced new schemes to make reporting manageable.

The 10,000 euro threshold

The threshold applies to the combined total of cross-border B2C distance sales of goods and cross-border B2C telecommunications, broadcasting and electronic services across the whole EU, for businesses established in only one member state. Below it, sellers may charge their home country VAT. Once it is exceeded, destination country VAT applies from the sale that exceeds it.

Many growing shops cross the threshold earlier than expected, because it is low and counts all EU countries together. Sellers can also choose to apply destination VAT from the start, which avoids a switch midway through a year.

The One-Stop Shop

The One-Stop Shop, known as OSS, lets businesses declare and pay VAT due in other member states through a single quarterly return in the country where they are registered, rather than registering in every destination country. The tax authority then distributes the VAT to the other countries.

The Union scheme covers intra-EU distance sales of goods and cross-border B2C services supplied by EU businesses. A non-Union scheme covers B2C services supplied by businesses not established in the EU.

OSS is optional, but without it a seller above the threshold would need VAT registrations in each country where it sells. OSS does not cover everything, for example domestic sales in a country where the business holds stock may still require local VAT registration, which affects sellers using fulfilment warehouses in several countries.

The Import One-Stop Shop

The Import One-Stop Shop, known as IOSS, applies to distance sales of goods imported from outside the EU in consignments with a value not exceeding 150 euros. Sellers registered for IOSS charge VAT at the customer’s rate at checkout and declare it through a monthly return. The goods can then be released from customs without the customer paying import VAT on delivery.

Without IOSS, import VAT on such parcels is usually collected from the customer on delivery, often with a handling fee from the carrier. Customers dislike unexpected charges and may refuse parcels, which is why IOSS matters for customer experience as well as compliance. Goods above 150 euros follow normal import rules, and excise goods are excluded.

Marketplaces as deemed suppliers

Online marketplaces and platforms that facilitate certain sales are treated as the supplier for VAT purposes. This applies to distance sales of imported goods in consignments up to 150 euros, and to sales of goods within the EU by sellers not established in the EU. In these cases the marketplace charges and accounts for the VAT, and the underlying seller’s obligations change.

Sellers who sell both through marketplaces and through their own shop need to understand which sales are covered by the marketplace’s VAT handling and which remain their own responsibility, so VAT is neither missed nor charged twice.

What checkout and order systems must do

Correct VAT depends on data the shop system captures at the moment of sale. Many problems come from systems configured for one country that were never adapted when the business began selling across borders.

Destination rates

Apply the correct VAT rate for the customer’s country and product category, including reduced rates where they apply.

Threshold tracking

Monitor cross-border B2C sales against the 10,000 euro threshold if destination VAT is not applied from the start.

Evidence of location

Record the delivery address and other evidence of the customer’s location for goods and digital services.

B2B handling

Validate VAT numbers of business customers where reverse charge rules apply.

Price display

Show consumer prices including the correct VAT for the destination, and handle price changes when rates differ.

Reporting data

Produce OSS and IOSS reports by country and rate directly from order data.

Changes ahead

The EU adopted the VAT in the Digital Age package in 2025, which introduces further changes in phases over the following years, including extended single registration, new rules for platforms in certain service sectors and digital reporting requirements based on e-invoicing for cross-border transactions. Sellers and system providers should follow national implementation dates. This article is a general overview and not tax advice; VAT treatment should be confirmed with a tax adviser.

Where this sits in what we do

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