Your guide to the EU VAT e-commerce package

The EU VAT e-commerce package changed VAT rules for cross-border trade.

While the package makes life simpler and fairer for all, the details can be complex. This guide helps you to:

Make the right decisions for your business

Say goodbye to buzzwords, jargon and painful accounting

Ease trade and unlock business growth

Don’t have time for reading? Ask our experts instead, no question is too difficult for them on the EU VAT e-commerce package.

How to trade within and outside the EU

Knowing how to trade within the EU or as a business outside the market is more challenging than ever. Numerous rules to follow. Penalties to avoid. Even finding accurate, up-to-date information is difficult.

Our guide explains how to handle EU E-Commerce VAT compliance, from the moment you advertise a product to when and how you pay your VAT bill. Our guide is ideal reading if you are:

  • A business affected by Brexit
  • An ambitious e-commerce company that’s expanding internationally
  • A tax professional facing EU VAT headaches
  • An accounting team struggling with new compliance requirements
  • A curious retailer intrigued by online marketplaces
  • A finance person tasked with understanding the rules

Learn more about VAT compliance for e-commerce and how the Sovos Compliance Services Portal can help.

This guide to the EU VAT e‑commerce package contains:

Information. Lots of helpful information.

We go right back to basics, explaining what EU VAT is, what you need to know as a business, and the goal of the EU VAT e-commerce package.

We cover key facts too, so you can get a solid grasp of what the package is. Don’t forget a timetable with all the important dates you need to know. Then we cover the schemes enabling simpler trade for all.

Table of Contents

What is the EU VAT e-commerce package?

The EU VAT e-commerce package arrived on 1 July 2021.

It’s ultimately a set of rules defining how businesses trade within the European Union. It applies to B2C and e-commerce companies and focuses on which party pays VAT, and how.

The idea behind the EU VAT e-commerce package is to level the playing field by simplifying distance selling. The package also means B2C businesses selling into the EU can use the appropriate VAT registrations across the EU according to their requirements instead of registering in each Member State.

The EU VAT e-commerce package consists of three schemes – the Import One Stop Shop (IOSS), One Stop Shop (OSS) and Non-Union One Stop Shop (Non-Union OSS, which used to be the Mini One Stop Shop (MOSS)). Depending on where your business is based and where it operates, you could need to use just one or all three schemes.

All of these are explained later in our guide.

The most important thing to remember is that although these schemes simplify trade, they require businesses to prepare and thoroughly understand the additional requirements involved.

This means:

  • Life becomes harder for anyone responsible for VAT within a non-EU business
  • Companies must change how they process and report transaction data
  • Compliance becomes more complex
  • The chance of human error increases, as does the risk of penalties
  • Help is available to make your life easier

The EU VAT e-commerce package affects many parties, from VAT experts and tax managers to e-commerce sellers, entrepreneurs, marketplace store owners, accountants and audit firms.

An introduction to EU VAT: What you need to know

Like other regions across the globe, EU Member States charge VAT on purchases.

Member States is an official term for countries within the European Union, and Value Added Tax (VAT) is a tax collected by businesses on behalf of their government. Generally, the burden for VAT lies with the consumer, who pays VAT that applicable companies then collect through their supply chain.

There is no single standard rate of VAT in the EU. The VAT rate varies from country to country. Some tax authorities charge 19%, while others charge 25% or higher rates. The minimum EU standard rate can be no less than 15%.

Businesses must charge the correct applicable VAT rate, as mistakes can cause customer issues or, worse, result in financial penalties.

Explaining how to follow all the rules correctly is covered in our guide that introduces EU VAT as a general concept.

Key facts about the EU VAT e-commerce package

Everyone loves a fact, and we have plenty to share on the EU VAT e-commerce package.

Did you know…

  • Import One Stop Shop (IOSS) is for low value goods delivered from outside the EU
  • Union One Stop Shop (Union OSS) is for intra-EU B2C deliveries of goods and for intra-EU services provided B2C by EU established suppliers
  • Non-Union One Stop Shop (non-Union OSS) is for non-EU to EU services and replaces and extends the previous Mini One Stop Shop (MOSS)
  • Businesses using any OSS simplification must apply it to all qualifying transactions
  • Additional record keeping is required for OSS
  • Declarations for Union OSS and Non-Union OSS are quarterly, declaration for IOSS is monthly
  • Non-EU businesses might need to appoint an intermediary
  • Non-EU retailers may need to report under all three schemes

All this talk about different rates, dates and thresholds can be confusing – simplify your life by reading our EU VAT buster on rates, number formats and thresholds.

Timetable of the EU VAT e-commerce package

Businesses need to know where they’ve been to know where they’re heading. This is why we’ve summarised the package’s major milestones since the moment it was first announced.

  • 2016 – European Commission publishes ‘Action Plan on VAT’, introducing a One Stop Shop mechanism for cross-border e-commerce
  • 15 July 2020 – European Commission adopts new Tax Action Plan, a four-year plan to make tax fair and simple
  • 30 September 2020 – European Commission publishes ‘Explanatory Notes on VAT E-Commerce Rules’
  • 1 July 2021 – The EU VAT E-Commerce Package is introduced
  • 8 December 2022 – European Commission proposes changes in relation to VAT in the Digital Age initiative

Keeping track of dates is often time-consuming, especially with so much information spread across many online sources.

Visit our regularly updated live blog about the EU VAT reform timeline. Read this blog if you want to answer that frustrating question: what are the latest EU VAT rates, laws and changes?

How to trade within the EU

Let’s dig deeper.

OSS stands for One Stop Shop, the umbrella term for all three schemes. Union OSS is a scheme to help EU established suppliers with providing B2C intra-EU services and for B2C deliveries of goods within the EU.

EU established businesses need to register for OSS in the Member State they are established in.

Don’t fear OSS. Our free guide covers everything you need to expand your knowledge.

Want to skip straight to the benefits? Talk to an expert about leveraging the OSS scheme for your business

Origin of Goods – Claiming Relief on Trade Between the EU and UK

How to trade outside the EU

IOSS is short for Import One Stop Shop. This scheme simplifies the registration obligations for taxpayers who carry out distance sales of goods imported from third countries to private individuals in the EU. IOSS applies to low value goods, defined as up to €150.

What is meant by distance selling?

This term covers the sale of goods, services or digital content where there is no face to face contact with the consumer. It includes online, postal, and phone sales.

What is meant by a third country?

This basically refers to any country that is not a member of the EU.

Non-Union OSS applies to all services sold B2C by suppliers not established in the EU.

Want to learn more about IOSS? We’ve got an easy to understand guide to help you get to grips with the scheme.

What non-EU countries need to know about IOSS and OSS

Does it pay to be in the EU club? Judging by the fact EU VAT becomes trickier when your business isn’t located within the region, perhaps the answer’s yes. These are the key facts you need to know. If you want more information about what non-EU countries need to know, read more here.

What’s the difference between IOSS and OSS?

IOSS accounts for B2C of goods imported from third countries, whereby the eligible supplies are restricted to a single consignment value of up to €150.

OSS accounts for B2C intra community distance sales of goods irrespective of the consignment value.

The main difference is that with IOSS the goods are located in a third country (outside the EU customs territory) at the time of the sale, whereas with OSS the goods are located within the EU’s territory.

Still unclear about the difference? Fortunately, we have another mini guide to rescue you. This guide to OSS and IOSS contains everything needed to make an informed decision.

Related content on the EU VAT e-commerce package

Our helpful guide doesn’t stop here. Our experienced VAT experts have produced guides, blogs and webinars to explore everything related to the EU VAT e-commerce package.

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Do you pay VAT on e-commerce?

This of course depends on what goods or services you are supplying, but unless an exemption or zero rate applies VAT will be due on e-commerce sales into or within the EU.

How does VAT work for e-commerce?

This depends on whether you are selling goods or services as the rules vary, but generally VAT looks to tax the point of consumption, whether that be an individual streaming music in their country of residence or an individual receiving goods purchased online.

Should I be charged VAT from an EU supplier?

Most EU suppliers will need to charge VAT. There are some exceptions, such as the €10,000 threshold for small businesses and depending on the type of product a zero rate or exemption may apply.

Do you charge VAT on digital services to the EU?

Yes, for business to consumer sales, VAT is due in the country of the customers establishment / residence. The OSS simplifications are particularly useful for meeting reporting obligations.

Who is affected by the EU VAT e-commerce package?

The EU VAT e-commerce package applies to VAT for intra-EU B2C supplies of goods and imports of low value goods as well as services. It affects cross-border B2C trade and e-commerce, including businesses who sell on online marketplaces.  The schemes that make up the EU VAT e-commerce package (IOSS, OSS and non-Union OSS) are currently optional.