The EU One-Stop Shop (OSS) Explained: Simplifying VAT for Cross-Border B2C Sales

If you sell goods or digital services to consumers across multiple EU member states, you have two options: register for VAT separately in every country where your customers are located, or use the EU One-Stop Shop. The OSS exists specifically to eliminate the administrative burden of the first option. This guide covers all three OSS schemes, who qualifies, how filing works, and where the boundaries are.

Why the EU Created the One-Stop Shop

Before July 1, 2021, businesses selling digital services (telecommunications, broadcasting, and electronically supplied services, collectively called TBE services) to EU consumers could use the Mini One-Stop Shop (MOSS) to report and pay VAT through a single member state. MOSS was limited in scope: it only covered TBE services and did not address physical goods at all.

The EU e-commerce VAT package, effective July 1, 2021, replaced MOSS with a significantly expanded system. The new One-Stop Shop (OSS) framework extends the single-registration principle to cover cross-border B2C sales of goods, not just digital services. It also introduced the Import One-Stop Shop (IOSS) to handle low-value goods imported from outside the EU.

The policy rationale was straightforward: the old system of country-by-country registration and filing created disproportionate compliance costs for businesses, particularly SMEs. It also created competitive distortions, since businesses established in low-VAT member states had a price advantage over those in high-VAT states. By eliminating distance selling thresholds per country and replacing them with a single EU-wide EUR 10,000 threshold, the new rules level the playing field while making compliance more manageable.

The Three OSS Schemes at a Glance

Non-Union OSS: For Businesses Outside the EU

The Non-Union OSS is the most relevant scheme for non-EU software companies, SaaS providers, and digital service businesses selling to EU consumers. If your business has no establishment, fixed or otherwise, in any EU member state and you supply services (not goods) to EU consumers, this is your scheme.

What it covers

The Non-Union OSS covers all B2C supplies of services where the place of supply is in an EU member state. In practice, this primarily means TBE services (electronically supplied services, telecommunications, and broadcasting), but it also extends to other services that are deemed supplied where the consumer is located, such as consultancy, legal, or accounting services supplied to non-taxable persons.

How registration works

You choose any EU member state as your member state of identification. There is no requirement to pick a state where you have customers. Many businesses choose Ireland, the Netherlands, or Luxembourg based on language accessibility, portal usability, or existing banking relationships. Registration is done electronically through that member state's OSS portal.

What you must charge

You charge VAT at the rate applicable in the member state of consumption, i.e., where your customer is located. If you sell a SaaS subscription to a consumer in Germany, you charge 19% (Germany's standard VAT rate). If that same service is sold to a consumer in France, you charge 20%. You must apply the correct rate for each member state, which means tracking 27 different rate regimes.

Union OSS: For EU-Established Businesses

The Union OSS serves businesses that are established in the EU (or have a fixed establishment there) and make cross-border B2C supplies to consumers in other member states. This is the scheme that replaced the old distance selling thresholds.

What it covers

The Union OSS covers two categories of supply:

1. Intra-Community distance sales of goods: When an EU business ships goods from one member state to a consumer in another member state. For example, a German retailer shipping products to a consumer in Italy.
2. B2C supplies of services: Where the place of supply is in a member state other than the one where the supplier is established. This includes TBE services supplied by EU businesses to consumers in other member states.

The EUR 10,000 threshold

Before the OSS applies, there is a EUR 10,000 annual threshold for intra-Community distance sales of goods and TBE services combined. Below this threshold, an EU business can continue to charge VAT of its home member state. Once cross-border B2C sales exceed EUR 10,000 in the current or preceding calendar year, the business must charge VAT at the rate of the member state of consumption. At that point, the Union OSS becomes the practical compliance mechanism.

This is an EU-wide threshold, not per country. A business selling EUR 5,000 to French consumers and EUR 6,000 to Spanish consumers has exceeded the threshold even though neither country individually exceeds EUR 10,000.

Registration

EU businesses register in their member state of establishment (their home country). If a business has fixed establishments in multiple member states, each fixed establishment registers separately for the supplies it makes. Non-EU businesses that have a fixed establishment in the EU but no seat of economic activity there can register in any member state where they have a fixed establishment.

IOSS: The Import One-Stop Shop

The IOSS addresses a specific problem: low-value goods imported into the EU from third countries. Before July 2021, goods valued under EUR 22 were exempt from import VAT. This exemption was widely abused through deliberate undervaluation, and it gave non-EU sellers a competitive advantage over EU-based retailers. The EU eliminated the exemption entirely and introduced the IOSS as the replacement mechanism.

How IOSS works

Under the IOSS, the seller charges and collects VAT at the point of sale (at the rate of the destination member state) for goods with an intrinsic value not exceeding EUR 150. The goods are then released from customs without any import VAT being charged. The seller reports and pays the collected VAT through the IOSS return.

• The buyer pays the correct VAT upfront at checkout, with no surprise customs charges on delivery.
• The seller handles VAT through a single IOSS return rather than dealing with customs procedures in each member state.
• Customs can release the goods immediately since VAT has already been collected.

Key IOSS rules

• The EUR 150 limit applies to the intrinsic value of the goods (excluding transport and insurance costs, unless they are included in the price).
• Excise goods (alcohol, tobacco, perfumes) are excluded from IOSS regardless of value.
• Non-EU businesses must appoint an intermediary established in the EU to use the IOSS. The intermediary assumes the obligation to file and pay VAT on behalf of the seller.
• Online marketplaces that facilitate the sale of imported goods under EUR 150 are deemed to be the supplier for VAT purposes and must use the IOSS (or handle import VAT through other mechanisms).

Practical Example: A US SaaS Company Using Non-Union OSS

Without the OSS, CloudMetrics would need to register for VAT in Germany, France, and Spain individually, file separate returns in each country (potentially in the local language), and make separate payments. For a company selling to consumers in 10 or 15 member states, the compliance cost difference is substantial.

OSS Filing: Returns, Deadlines, and Required Data

OSS returns are filed quarterly, aligned to calendar quarters. The filing and payment deadline is the last day of the month following the end of the quarter:

IOSS returns follow a different schedule: they are filed monthly (not quarterly), with a deadline of the last day of the month following the reporting month. Union OSS and Non-Union OSS returns are quarterly; IOSS returns are monthly only.

What data is required

Each OSS return must include, per member state of consumption:

• The total value of supplies (net of VAT) for each VAT rate applied
• The applicable VAT rate(s)
• The total VAT amount due per rate and per member state

For the Union OSS, if a business dispatches goods from multiple member states, the return must additionally show the member state from which goods were dispatched.

All amounts must be reported in euros. Businesses in non-euro member states use the exchange rate published by the ECB on the last day of the reporting quarter (or the last day of the reporting month for IOSS).

Record-keeping

Businesses using any OSS scheme must keep records of all transactions for 10 years from December 31 of the year in which the supply was made. These records must be made available electronically upon request from the member state of identification or any member state of consumption. Required records include details sufficient to verify that the VAT return is correct: customer location evidence, transaction amounts, dates, and the VAT rate applied.

When OSS Does Not Apply

The OSS is not a universal VAT mechanism. Several important categories of transactions fall outside its scope:

• B2B sales: The OSS is exclusively for B2C transactions. When your customer is a VAT-registered business, the reverse charge mechanism applies instead. The buyer self-assesses VAT in their country, and the seller does not charge VAT. Correctly distinguishing B2B from B2C transactions is therefore a prerequisite for using the OSS.
• Domestic sales: Supplies where the goods are dispatched from and delivered to consumers within the same member state are not cross-border and cannot be reported through the OSS. These require a standard domestic VAT registration.
• Goods above EUR 150 (IOSS): Imported goods with an intrinsic value exceeding EUR 150 cannot use the IOSS. These follow standard import procedures with VAT collected at customs.
• B2B supplies of goods with installation: Where goods are supplied with installation or assembly in another member state, these are treated as local supplies in the destination state and require a local VAT registration.
• Exempt supplies: If the supply is VAT-exempt in the member state of consumption (e.g., certain educational or medical services), it cannot be reported through the OSS.

Common Pitfalls

• Incorrect customer location determination: VAT must be charged at the rate of the customer’s member state. Misidentifying the customer’s location means applying the wrong rate, which creates discrepancies that member states will flag during audits. You need at least two non-contradictory pieces of evidence (IP address, billing address, bank location, SIM country code) to determine the customer’s location.
• Mixing B2B and B2C: Reporting a B2B transaction through the OSS (charging VAT instead of applying the reverse charge) creates errors on both sides: you overpay, and your customer cannot deduct input VAT correctly.
• Missing rate changes: EU member states update VAT rates periodically. Using an outdated rate, even by a fraction of a percent, creates reporting mismatches. Automated rate databases are essential for businesses operating at scale.
• Currency conversion errors: Non-euro amounts must be converted using the correct ECB rate for the correct date. Using a different rate source or date is a compliance failure.

OSS and Tax Automation

The OSS simplifies filing, but it does not simplify tax determination. You still need to determine the correct VAT rate for every transaction based on the customer’s location, the nature of the supply, and the applicable exemptions or reduced rates in each member state. With 27 countries, multiple rate tiers per country, and regular rate changes, this is not a spreadsheet problem. It is a rules engine problem.

This is where automated VAT determination becomes critical. The filing itself is one quarterly return. The hard part is ensuring every line item on that return reflects the correct rate, the correct customer classification, and the correct place of supply determination across potentially thousands of transactions.

Frequently Asked Questions

What is the EU One-Stop Shop (OSS)?

The OSS is an EU simplification scheme that lets businesses register for VAT in a single EU member state and file one quarterly return covering B2C sales across all 27 member states, instead of registering separately in each country.

What is the difference between Union OSS, Non-Union OSS, and IOSS?

Union OSS is for EU-established businesses selling cross-border B2C goods and services. Non-Union OSS is for non-EU businesses selling B2C services to EU consumers. IOSS is for sellers of imported goods with a value up to EUR 150.

How often do I need to file OSS returns?

Union OSS and Non-Union OSS returns are filed quarterly. IOSS returns are filed monthly. You must file even if you have no sales (nil return) — three consecutive missed nil returns can result in deregistration.

Does the OSS cover B2B transactions?

No. The OSS is exclusively for B2C transactions. B2B sales are handled through the reverse charge mechanism. Correctly distinguishing B2B from B2C is a prerequisite for using the OSS.

What is the EUR 10,000 OSS threshold?

EU-based sellers whose combined cross-border B2C TBE services and distance sales of goods are below EUR 10,000 annually can charge their home country VAT rate. Above this threshold, destination-country rates apply. This threshold does not apply to non-EU sellers.