EU VAT for ecommerce explained: OSS and IOSS (2026)

If you sell online across the EU, VAT is the compliance headache that quietly grows with your revenue. The good news: since July 2021 the EU has run two schemes — the One-Stop-Shop (OSS) and the Import One-Stop-Shop (IOSS) — that let you handle VAT for the whole bloc through a single registration and a single return, instead of registering in every country you sell to. This guide explains the thresholds, when each scheme applies, and what changed in 2026.

The problem OSS and IOSS solve

Before 2021, once your sales into another EU country passed that country's "distance-selling" threshold, you were expected to register for VAT there — charge local VAT, file local returns, and repeat for every market. A shop selling into five countries could face five registrations.

The EU's VAT e-commerce package, live since 1 July 2021, replaced that patchwork with two central schemes. You register once, charge the customer's local VAT rate, and file one periodic return covering all your EU B2C sales. Your home tax authority then distributes the money to the other member states for you.

Sources: European Commission — One Stop Shop.

The €10,000 threshold

For EU-established sellers there is now a single, EU-wide threshold of €10,000 per year. It works like this:

• Below €10,000 in total cross-border B2C sales to other EU countries: you can simply charge your own country's VAT rate and account for it on your normal domestic return. No OSS needed.
• Above €10,000: you must charge VAT at the rate of the country where each customer is located — and OSS is the simple way to report it all in one place.

Two things to note. The threshold is cumulative across all EU countries combined, not per-country. And it only applies to businesses established in a single EU member state — sellers based outside the EU do not get the €10,000 allowance.

If you are not sure which side of the line you are on, our VAT OSS threshold checker walks you through it, and the EU VAT calculator helps you work out the correct destination-country rate to charge once you cross it.

Sources: European Commission — One Stop Shop.

How OSS works (intra-EU B2C)

OSS — properly the Union scheme — is for goods and services you sell from within the EU to consumers in other EU countries. Once registered:

• You charge the VAT rate of the customer's country at checkout.
• You file one OSS return with your member state of identification (your home country), covering all your intra-EU B2C sales. Union-scheme returns are filed quarterly.
• You make a single payment, and your tax authority forwards each country's share.

You avoid registering for VAT in every destination market. OSS is optional, but if you opt in it must cover all your qualifying cross-border supplies.

Choosing where to base that business is itself a decision worth thinking through — we cover the trade-offs in our guide to the best country to start an ecommerce business in Europe.

How IOSS works (imports up to €150)

IOSS — the import scheme — covers a different situation: goods shipped to EU consumers from outside the EU, in consignments with an intrinsic value not exceeding €150. It is designed for dropshippers and sellers fulfilling from stock held in the UK, US, China or anywhere outside the bloc.

With IOSS:

• VAT is charged to the buyer at the point of sale, at the destination-country rate — so there are no surprise VAT bills or handling fees when the parcel is delivered.
• You register once, in a single member state, and receive an IOSS identification number.
• You file a monthly IOSS return and pay the VAT you collected.

IOSS does not apply to consignments over €150, or to excise goods such as alcohol and tobacco. Registration has been possible since April 2021 and the scheme is voluntary — but without it, your customers face import VAT and often a courier handling charge on arrival, which is a poor buying experience.

Sources: European Commission — VAT One Stop Shop.

What changed in 2026: customs duty on small parcels

One important update for anyone importing into the EU. Historically, consignments under €150 were exempt from customs duty (VAT still applied — that exemption ended in 2021). From 1 July 2026, the EU has scrapped the customs-duty exemption and introduced a temporary €3 flat customs duty per low-value item, running until 1 July 2028.

Two clarifications:

• This is a customs duty, separate from VAT. Using IOSS does not exempt you from it — the €3 charge applies regardless of VAT scheme.
• The €150 IOSS VAT threshold still stands for now, though the Commission has proposed removing it in a later reform.

If you import to EU customers, build the extra €3 per item into your pricing from 1 July 2026.

Sources: Avalara — end of the €150 customs-duty exemption.

Which scheme do you need?

• Selling within the EU to consumers in other EU countries, and above €10,000 a year: OSS (Union scheme).
• Shipping goods into the EU from outside, value up to €150 per consignment: IOSS.
• Doing both: you may well need both registrations.
• A non-EU business selling services or storing goods inside the EU may also need the non-Union scheme or standard local registrations — worth checking with an adviser.

Once you are selling across borders, the customer experience matters as much as the tax side. Charging the right local VAT is one half of localisation; showing the right language is the other — see whether you actually need a multi-language website to sell across Europe. Both fit into the bigger picture of how to start an online business in Europe.

This is general information, not legal or tax advice — rules vary by country and change; confirm with a qualified professional before acting.

Getting your store set up properly

VAT compliance is far easier when your storefront is built to handle destination-based rates, OSS reporting and clean checkout from the start — rather than bolted on later. If you want a shop that charges the correct EU VAT out of the box and is ready to scale across markets, see our web development service, or book a free consultation and we will map out the right setup for where you sell.