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What Is the VAT OSS Scheme for Online Shops?

If you sell physical goods or digital products to customers in EU countries, you need to understand the EU’s One Stop Shop for VAT. This article explains what the scheme is, how it works for UK-based online sellers post-Brexit, who it applies to and what your practical options are. Whether you run a small e-commerce shop or are scaling up your cross-border sales, this guide will help you decide what to do next.

What is the VAT OSS scheme?

The VAT One Stop Shop (OSS) scheme is an EU system that allows businesses to report and pay VAT on cross-border sales of goods and services to consumers across all EU member states through a single registration in one EU country. Without it, a business selling to customers in, say, France, Germany and Spain would need to register separately for VAT in each of those countries once it exceeded the local distance-selling threshold.

The OSS scheme was introduced by the EU in July 2021. It replaced the older Mini One Stop Shop (MOSS) system and expanded it significantly to cover not just digital services but also physical goods sold to consumers across EU borders.

There are three versions of the scheme:

  • Union OSS: for EU-based businesses selling goods or services to consumers in other EU member states.
  • Non-Union OSS: for businesses based outside the EU selling digital services to EU consumers.
  • Import OSS (IOSS): for businesses (inside or outside the EU) selling physical goods imported into the EU with a value of €150 or less per consignment.

The key point is that OSS lets a business file one VAT return covering multiple EU countries and make a single payment, which is then distributed to the relevant tax authorities across the EU.

How did we get here? A bit of background

Before July 2021, EU distance-selling rules meant that if you sold physical goods to consumers in other EU countries, you only charged your home country’s VAT rate until your sales to that specific country exceeded a threshold (typically €35,000 or €100,000 depending on the country). Once you crossed it, you had to register for VAT there.

These old thresholds were scrapped in July 2021. The EU replaced them with a single EU-wide threshold of €10,000 for cross-border B2C sales. Exceed that across all EU sales combined and you must charge the VAT rate of each customer’s country. The OSS scheme was introduced at the same time to make compliance manageable, otherwise businesses would face registering in up to 27 countries.

For UK businesses, Brexit changed the picture entirely. The UK left the EU VAT area at the end of 2020, so UK sellers are now treated as third-country (non-EU) sellers.

Does the VAT OSS scheme apply to UK sellers?

The short answer: not directly. UK-based businesses cannot register for the Union OSS because it is only open to businesses established within the EU.

However, this does not mean the OSS is irrelevant to you. Depending on what you sell and how you sell it, two parts of the OSS framework may still apply:

  • The Non-Union OSS, for digital services sold to EU consumers.
  • The Import OSS (IOSS), for low-value parcels shipped into the EU.

If neither of those fits your business, you may need to register for VAT in individual EU countries. We cover each route below.

What are the options for UK sellers selling to EU customers?

Post-Brexit, UK sellers broadly have three routes for handling EU VAT on sales of physical goods to EU consumers:

1. Use IOSS for low-value goods (under €150 per consignment)

If you sell goods that are imported into the EU from outside the EU, and each consignment is worth €150 or less, you can use IOSS. You then account for VAT on those sales under one registration covering every EU country. See the IOSS section below for more detail.

2. Register for VAT in each relevant EU country

If your goods are stored in the EU (for example, in an Amazon FBA warehouse in Germany or Poland) or your consignments exceed €150, IOSS does not cover you. In this case, you generally register in each EU country where your goods are held or where you have significant sales. This is the most complex and costly route.

3. Let your customer’s country handle import VAT

Some UK sellers choose to sell on Delivery at Place (DAP) terms, meaning the customer is responsible for paying import VAT and duties on arrival. This avoids the need for the seller to register abroad but creates friction at the point of delivery. Customers often receive unexpected bills, which leads to abandoned parcels and poor reviews. It is generally not recommended if you care about the customer experience.

The Import One Stop Shop (IOSS) explained

IOSS is the most relevant part of the OSS framework for UK-based online sellers shipping goods directly from the UK to EU customers.

How IOSS works

When you register for IOSS (through a single EU member state, or via an EU-established intermediary if you are a non-EU business), you receive an IOSS number. At the point of sale, you charge the customer VAT at the rate applicable in their EU country. You declare all those sales in a monthly IOSS return and pay the VAT collected. The relevant EU tax authorities then receive their share.

Because you have already collected and remitted the VAT, goods carrying a valid IOSS number are released by customs without the customer facing additional VAT charges on arrival. This creates a smooth delivery experience.

The €150 limit

IOSS only covers consignments with an intrinsic value of €150 or less. If a single parcel exceeds this, it falls outside IOSS. Customs will then collect import VAT from the recipient directly (or from you if you use Delivered Duty Paid terms).

How UK sellers register for IOSS

UK businesses are not EU-established, so they cannot register for IOSS directly. You must appoint an EU-established intermediary (sometimes called a fiscal representative) who registers on your behalf and is jointly liable for the VAT. Many tax agents, customs brokers and specialist services offer this.

Some marketplaces, such as Amazon and eBay, handle IOSS on behalf of sellers for sales made through their platforms. If you sell through one of these platforms, check whether they already collect and remit the EU VAT for you, in which case you do not need your own IOSS registration for those sales.

What about goods stored in the EU?

If you use fulfilment by Amazon (FBA) or a third-party EU warehouse, your goods are already inside the EU before the sale. IOSS does not apply here because it only covers imported goods. Instead, you will need to be VAT registered in the country where your stock is held, and potentially in other countries where you sell.

Registering for VAT in each EU country

For UK sellers with goods stored in the EU or consignments above €150, country-by-country VAT registration is the required route. Each EU country has its own registration process, VAT rates and filing obligations.

This can become costly and administratively heavy. Many UK sellers in this position use a specialist EU VAT compliance service or work with a local fiscal representative in each country. The costs and complexity should be factored into your pricing and expansion plans before you commit to EU warehousing.

If you are unsure whether your current setup triggers EU VAT obligations, speak to an accountant familiar with cross-border e-commerce. Getting this wrong exposes you to back-taxes, penalties and potential removal from EU marketplaces.

What about selling digital services to EU customers?

If you sell digital products, such as downloadable software, ebooks, online courses or streaming content, to consumers in the EU, different rules apply.

Since 2015 (under the old MOSS rules, now replaced by OSS), the place of supply for digital services sold to consumers is the customer’s country. So a UK seller providing a digital download to a French consumer owes French VAT on that sale, regardless of where the seller is based.

UK businesses can register for the Non-Union OSS in one EU member state of their choice and file one quarterly return covering all EU sales. This avoids the need for multiple registrations across the EU.

There is no de minimis threshold for digital services, the rules apply from the first sale. If you sell even one digital product to an EU consumer, you technically have an EU VAT obligation. In practice, HMRC and EU tax authorities focus enforcement on businesses with meaningful sales volumes, but the legal position is clear.

UK VAT registration and your online shop

Regardless of the EU position, do not overlook your UK VAT obligations. In 2026/27, the VAT registration threshold in the UK is £90,000 of taxable turnover in a rolling 12-month period. If your online shop’s UK sales (and any other taxable turnover) exceed this, you must register for UK VAT.

Once registered, you will need to file VAT returns, typically quarterly, and charge VAT to UK customers (subject to the VAT status of your goods). Under Making Tax Digital rules, VAT-registered businesses must keep digital records and submit returns using compatible software such as Xero.

If you are close to the threshold and want to understand your position, good bookkeeping is what keeps you in control of where you stand month by month. Crossing the threshold without realising it is one of the most common and costly mistakes small online sellers make.

Practical steps for online sellers

Here is a straightforward checklist to work through:

  1. Identify where your stock is held. If it is in the UK and shipped directly to EU customers, IOSS may be your best route for sub-€150 consignments. If it is in an EU warehouse, you need country-specific VAT registration.
  2. Check whether you sell through a marketplace. Platforms like Amazon and eBay often collect and remit EU VAT on your behalf for sales through their sites. Confirm this in writing with the platform. Do not assume.
  3. Know your consignment values. If your average order value exceeds €150, IOSS will not cover you and you need an alternative arrangement.
  4. Assess your digital product sales. If you sell digital products to EU consumers, register for Non-Union OSS to avoid managing multiple EU VAT registrations.
  5. Monitor your UK turnover. Track your cumulative UK taxable turnover and register for UK VAT before you hit £90,000, not after.
  6. Appoint a fiscal intermediary if needed. Non-EU businesses cannot register for IOSS directly. Find an EU-established intermediary before you start selling.
  7. Get your accounting software set up correctly. VAT on cross-border sales requires proper tax codes and reporting. If you use Xero, our bookkeeping service can set up the tax codes so cross-border sales are handled correctly.

Running an online shop across multiple jurisdictions creates real complexity. If you are spending more time on tax admin than on growing your business, it is worth getting professional help. Our team works with e-commerce businesses of all sizes on exactly these issues.

The bottom line for UK online sellers

The VAT OSS scheme is an EU mechanism, and UK businesses cannot access the Union OSS route that EU sellers use. But that does not mean the scheme is irrelevant to you. IOSS is available for low-value imports, and the Non-Union OSS covers digital services. For everything else, country-by-country EU VAT registration is still required.

Do not let the complexity put you off selling into the EU, but do get the structure right from the start. The cost of sorting out retrospective VAT liabilities across multiple EU countries is far greater than setting things up properly at the outset. Speak to an accountant who understands cross-border e-commerce before you expand, not after problems arise.

Frequently asked questions

Can a UK business register for the EU VAT OSS scheme?

Not for the Union OSS, which only EU-established businesses can join. They can still use the Non-Union OSS for digital services and, through an EU intermediary, IOSS for parcels worth €150 or less.

Do I need to register for VAT in every EU country I sell to?

Not necessarily. If you sell physical goods shipped directly from the UK and each consignment is under €150, IOSS covers all EU countries through a single registration. If you sell digital services to EU consumers, the Non-Union OSS does the same. Country-by-country registration is required when goods are stored in EU warehouses or consignments exceed €150 and no other scheme applies.

Does Amazon handle EU VAT for me?

For sales made through Amazon’s marketplace to EU customers, Amazon acts as the deemed supplier and collects and remits VAT in most cases. However, if you store goods in EU Amazon warehouses (FBA), you may still have VAT registration obligations in those countries. Always confirm your specific position with Amazon and with your accountant.

What is the IOSS €150 limit based on?

The €150 limit applies to the intrinsic value of the goods in a single consignment, essentially the value of the goods themselves, excluding transport and insurance costs. It is calculated per parcel, not per item. If a single shipment contains multiple items worth more than €150 in total, the consignment falls outside IOSS.

What happens if I ignore EU VAT obligations?

EU customs authorities can stop goods at the border, and marketplaces can suspend listings if you are not compliant. EU tax authorities can also raise assessments for unpaid VAT going back several years, plus interest and penalties. The risks are real, particularly if you sell at volume.

Do I charge UK VAT on sales to EU customers?

No. Sales of goods exported from the UK to customers outside the UK are zero-rated for UK VAT purposes. You do not charge UK VAT on these sales. Instead, EU VAT rules apply in the customer’s country, which is why IOSS or local EU VAT registration is necessary.