Countries in the European Union charge value-added tax (VAT) at each stage of the supply chain. Suppliers must collect VAT on taxable sales, file VAT returns, and remit payment.
Before 2021, selling directly to consumers (B2C) across EU borders meant sellers potentially had to register to collect VAT in each country where sales exceeded local thresholds. All of the EU countries had their own rules, requirements, and deadlines.
In 2021, this system was replaced as part of the VAT E-Commerce Package, which introduced new VAT rules, including the One Stop Shop (OSS) framework. This framework includes three schemes: One Stop Shop, Import One Stop Shop, and the Non-Union One Stop Shop.
OSS is an optional scheme that allows eligible companies to register in one EU member state and file a single quarterly return to report VAT on all qualifying cross-border transactions. Sellers pay VAT when filing the return, and the money is distributed through the OSS system.
OSS didn't completely eliminate all VAT registration requirements, and you must be eligible to take part in it. However, it greatly simplified the VAT compliance process for companies selling across the EU.
This guide explains how OSS works, the different OSS schemes, who qualifies, how to register, and how IOSS and OSS differ.
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How VAT OSS works
Cross-border VAT rules don't apply to EU-based businesses for the first €10,000 in annual sales. The €10,000 threshold is an aggregate limit across the EU. If you're below it, you apply your home country's VAT rate, not the destination country's.
Since applying destination-based VAT rules is only mandatory for EU businesses once the €10,000 threshold is reached, OSS is most relevant to those who exceed it. However, companies can choose to voluntarily take part in OSS even if they are below the threshold.
Businesses outside of the EU are typically required to register and collect VAT from the first taxable sale in an EU member country.
For eligible companies, the One Stop Shop (OSS) simplifies the EU VAT compliance process by allowing the business to select one country and register for OSS within that country. The EU country you select is your member state of identification (MSI).
Each state has its own registration process. For example, in Spain, you can register online using Form 035.
Once you've registered for OSS in your member state, you file a single quarterly return through your MSI portal if you are part of the union or non-union schemes. You file a monthly return and remit payments monthly if you are part of the Import One Stop Shop Scheme.
Your return will list your sales to customers in each EU country, including the applicable VAT collected for each country. You'll make a consolidated VAT payment to your MSI, and the money will be distributed on your behalf to all of the appropriate member states.
Registering for OSS will not replace your domestic VAT return. OSS covers cross-border B2C transactions only. You still must file a regular VAT return in your home country or member states for domestic sales.
The 3 OSS schemes
The One Stop Shop framework actually includes three distinct schemes, each of which applies to different types of sellers and goods. Here is how each of the three OSS schemes works:
1) Union scheme
The Union scheme is the most common OSS scheme used by businesses in the European Union that sell across borders. Here's how it works:
- Who is it for: Businesses established within the EU and non-EU businesses that have a fixed establishment within the European Union. A fixed establishment is any permanent business presence with the human and technological resources needed to supply or receive services.
- What does it cover: Goods shipped from one EU country to another EU country (known as intra-EU distance sales of goods) and services supplied directly to EU customers (B2C services).
- Where you register: Register in the EU country where your business is established.
- When to register: Once you have at least €10,000 in aggregate sales so you can avoid having to directly register separately in member states where you're doing business.
- Filing requirements: Submit quarterly returns and remit payments to OSS through your member state and submit a regular VAT return in countries where you are established.
2) Non-Union scheme
The Non-Union OSS scheme evolved from the EU's Mini One Stop Shop (MOSS), which was first introduced in 2015 for telecommunications, broadcasting, and electronic services.
The EU's VAT E-Commerce Package in July 2021 expanded the scheme to cover all eligible B2C services supplied by businesses that are not established in the EU. Here's how it works:
- Who is it for: For businesses with no establishment, including no fixed establishment, in the EU.
- What does it cover: The supply of services directly to EU customers (B2C), including digital sales, consulting, SaaS subscriptions, ebooks, professional services, and more.
- Where you register: You can select any member state as your MSI. However, U.S.-based sellers often choose a country with an English-language portal, such as Ireland, to make registration simpler.
- When to register: Register before you begin making taxable B2C sales. VAT applies from the first sale for non-EU businesses, and registration takes effect from the beginning of the calendar quarter following registration, so you may wish to register before expanding into the EU market.
- Filing requirements: Submit quarterly returns and remit payments to your MSI. Returns are required even if no eligible sales were made during the quarter.
3) Import scheme (IOSS)
The Import One Stop Shop (IOSS) scheme was introduced as part of the EU VAT E-Commerce Package and came into effect on 1 July 2021. IOSS is used for non-EU businesses shipping low-value goods from outside of the EU, while OSS is for intra-EU sales.
Here's how IOSS works:
- Who is it for: EU and non-EU companies making B2C distance sales of goods imported into the EU from outside the EU. Non-EU businesses generally must appoint an EU-established intermediary to use the scheme.
- What does it cover: Low-value imported goods coming from outside the EU and valued at or below €150 (approximately $165).
- Where you register: You can select any EU member state as your MSI.
- When to register: When making eligible sales into the EU. Once you register, you can collect VAT from EU customers at checkout instead of having VAT collected at import.
- Filing requirements: Submit monthly returns and report all eligible EU sales during the month. Remit payments by the end of the month following the reporting period.
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Who should use OSS (and who it doesn't help)
OSS is effective at simplifying VAT compliance for:
- Companies based in the EU that ship goods from one EU country to consumers in another EU country and that have more than €10,000 in sales across the EU.
- After: Non-EU businesses selling B2C services directly to EU consumers.
- Companies that want to simplify multi-country B2C VAT compliance.
However, OSS is limited in its ability to simplify VAT compliance for certain types of sellers and in certain situations. Here are some examples of companies where OSS may be of limited use.
FBA and multi-country warehouse sellers
If you store goods in an EU country, your physical presence within that country means that you are required to register for VAT locally, regardless of whether you choose to participate in OSS or not.
While OSS can eliminate the requirement to register directly in countries that you ship items to, this applies only if you do not store items there. It does not eliminate your registration requirement if you hold inventory locally.
If you participate in Amazon's Pan-European FBA, Amazon will store goods in warehouses for you across the EU. You must directly register in each country where Amazon is storing your goods, even if you are using OSS for other member states.
This means, for example, that if you want to sell across France, Germany, Italy, Spain, and Poland, through Amazon's FBA, you would need to directly register in all five countries.
Pro Tip: This rule is one of the most common misconceptions about OSS. Companies that don't understand the rule or that aren't aware of the VAT compliance impacts of participating in Amazon's Pan-European FBA could face significant penalties for not following registration obligations, even if they are part of OSS.
B2B sales
The OSS scheme only covers business-to-consumer (B2C) transactions. It does not cover business-to-business transactions.
A different scheme, called reverse charge, applies to B2B transactions. If you are not established in the EU and sell to an EU-established buyer with a valid VAT number, the VAT compliance obligation shifts to the buyer under the reverse charge scheme.
You will not have to collect and remit VAT in these circumstances. You will produce an invoice stating that the reverse charge mechanism applies and the buyer will remit VAT due, while also claiming any input credits. The transaction will not be reported through OSS.
Domestic sales
If you sell to customers in the same country where you have a physical presence (including where goods are stored), this is a domestic sale. You must report the sale on your local VAT return, not through OSS.
How to register for OSS
Registering for the One Stop Shop is completed through your chosen member state of identification. Your options for your MSI depend on your company's status:
- If you are a taxable person and your business is established in the EU, your MSI is typically the state where your headquarters is. If your headquarters is outside the EU, it's the member state where you have a fixed establishment. If you have multiple fixed establishments, you can choose any of them as your member state, but you are bound by that decision for a calendar year plus the two following calendar years.
- If you have no fixed establishment in the EU and are registering for the non-union scheme, you can select any member state to be your MSI. That state will assign you a VAT number that can only be used to register for the OSS Scheme.
- If you are established outside of the EU and are registering for Import One Stop Shop, you may need an intermediary to use the import scheme, but you can register in any member state where your chosen intermediary is established.
You will need to find the relevant tax authority portal for your member state. If you are U.S.-based, you may want to choose an MSI where the portal will be based in English.
When you submit your registration, it becomes effective from the first day of the calendar quarter following the date that you register. This means if you register in March, then you will officially be eligible for OSS participation on April 1.
If you make your first qualifying sale prior to registering, you are allowed to register retroactively. However, you must notify your MSI by the 10th day of the month following the sale.
Pro Tip: Once you have registered for OSS, you must use the scheme to report and remit VAT for all qualifying supplies across all EU member states. There is an all-or-nothing rule and you cannot use OSS for some countries but not others.
Filing, deadlines, and record-keeping
OSS returns must be filed quarterly and they are due by the end of the month after each quarter. The table below shows the schedule for when returns must be submitted.
Returns must be filed for each quarter, even if your qualifying sales for that time period were €0. You also must remit payments on the same day as the return. If you make late payments, you could be removed from the OSS scheme.
There are also a few other key filing rules you need to know. Specifically:
- If you must amend a prior return, you cannot make corrections by revising the original return. You must include the corrections in a subsequent return you file.
- If you made sales in non-euro currencies, you should use European Central Bank exchange rates to convert the amounts to Euros when you prepare your OSS reports.
You must keep records of all OSS transactions for 10 years, and those records must be available electronically and provided to tax authorities upon request.
Key limitation: Input VAT cannot be reclaimed through OSS
While OSS has major advantages, there is a huge downside. OSS returns cover only output VAT, which is the VAT you collect from customers. You can't use OSS returns to reclaim input VAT. This downside is often overlooked, to the detriment of companies unaware of the limitation.
Input VAT is the tax you pay on goods and services. Since VAT is collected at each stage of the supply chain (unlike in the U.S., where sales tax is collected only from the end consumer), companies typically reclaim input VAT, so only the final buyer ends up incurring a tax burden.
The fact that you cannot recover input VAT through OSS can be a major disadvantage if you have significant business costs in the EU. With VAT rates in the EU ranging from 17% to 27%, limits on your ability to quickly reclaim VAT paid on business purchases may have a large cost.
In order to recover input VAT that you paid in European countries where you have not submitted a local VAT registration, you must:
- Use the EU VAT refund procedure if you are an EU-established business. This involves filing a refund request through your home company's taxing authority. Your home country will confirm your identity and forward the request to the member state to either approve or deny the refund claim and to process refunds when approved.
- Use the 13th Directive (86/560/EEC) procedure, which is for non-EU businesses. You can use this approach only if you meet specific requirements, including your business being located in a country that offers reciprocity or provides a process for a similar VAT refund to companies in EU countries.
Completing additional steps to reclaim input VAT can impact cash flow substantially by delaying the time input VAT is refunded or making it difficult to get a refund at all. It also complicates a process that OSS was supposed to make simpler.
OSS vs IOSS: Which do you need?
OSS and IOSS are related because both are schemes to help make VAT compliance simpler. However, there are key differences between them, as the table below shows:
If you are outside of the EU and shipping physical goods into it that have a value of €150 or less, you will use IOSS.
If you are shipping goods within the EU across borders or are selling B2C services and/or digital products like SaaS or streaming services, you will use OSS.
Some companies, especially those with a global presence, participate in both schemes.
How Numeral handles EU VAT OSS
While the One Stop Shop scheme simplifies the VAT compliance process, that doesn't mean there aren't still complexities. In fact, many businesses find following all of the EU VAT rules overwhelming despite the different processes in place aimed at simplifying it.
Fortunately, Numeral makes compliance effortless, including in truly complex situations, like for companies that have FBA inventory, sell multiple product types, or sell goods or services from both within and outside of the EU.
Numeral helps with global tax compliance by:
- Monitoring your EU VAT exposure across all member states and helps you determine when OSS registration becomes necessary
- Helping you select a member state that's appropriate based on your company type and company goals.
- Registering your company in your chosen member state, including facilitating registration through a qualified intermediary when required.
- Calculating and applying the correct destination-based VAT rate to every taxable transaction in real-time so you can charge tax at the point of sale and/or create accurate VAT-compliant invoices
- Automating quarterly OSS return preparation and filing so your returns are submitted without much involvement on your part. Each is reviewed by a qualified tax expert before submission.
- Remitting payments on your behalf to the appropriate taxing authorities.
Numeral backs every service we offer with the Numeral Guarantee. If we are late in filing or make a filing error that results in penalties or interest, Numeral will cover the cost.
Managing OSS correctly requires more than just understanding the rules. You must have accurate data, apply the correct rates across 27 countries, and ensure every quarterly (or monthly for IOSS) return is on time. Numeral takes care of these tasks for you.
Book a demo to learn more about how Numeral can help your business stay compliant across the globe.
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VAT OSS FAQs
What is the EU VAT One Stop Shop (OSS)?
The One Stop Shop is a VAT scheme in the European Union that simplifies the tax compliance process. Eligible businesses can register in a chosen member state, file one quarterly return, and remit tax to that member state, which will distribute the proceeds appropriately. It can be a much simpler process than registering for VAT in every EU country where you sell to customers.
Do non-EU businesses (like US companies) qualify for OSS?
Non-EU businesses may be eligible to register for the non-union OSS scheme if they provide eligible B2C services, such as SaaS subscriptions, ebooks, professional services, or consulting. Non-EU companies shipping goods into the EU can qualify for Import One Stop Shop if the goods are valued at €150 or less.
Does OSS mean I don't need to register for VAT in any EU country?
Participating in OSS does not necessarily mean you are free from registering for VAT in any or all European countries. If you're established in an EU country, you typically must register for VAT within it so you can report domestic sales directly to the local revenue department.
If you have physical inventory in an EU country, including through third-parties like Amazon FBA, you also must register locally for VAT in that country, even if you participate in OSS.
What is the €10,000 OSS threshold?
The €10,000 threshold applies to EU-based businesses. If total sales across all EU countries are under the threshold, the business can just collect VAT based on its home country rules.
Once you exceed this threshold, you must charge VAT based on the destination country and OSS registration can become the easiest method of reporting and remitting VAT payments.
What's the difference between OSS and IOSS?
OSS is intended to simplify VAT compliance for B2C service providers and for companies selling goods already within the EU to consumers in a different EU member state from where the business is located.
IOSS is intended to simplify VAT compliance for the sale of goods imported from outside the EU if the consignment is valued at €150 or less. Registering for IOSS allows for the collection of VAT at the point of sale instead of on import.
Can I reclaim input VAT through my OSS return?
You cannot reclaim input VAT through OSS. This is one of the most significant downsides of the OSS scheme. You will need to use the EU VAT refund procedure if you are within the EU and wish to recover the taxes paid on business items purchased in another EU country. If you are a non-EU business, you must follow the 13th Directive refund procedure, which can be more complicated.
