In 2024, the EU’s e-commerce VAT systems generated more than €33 billion in VAT revenue. This represented a 26% increase compared with 2023, with more than 170,000 businesses registered across the OSS and IOSS frameworks.
Two schemes, different transactions
Although OSS and IOSS are often discussed together, they apply to different types of sales.
Union OSS
Main use: intra-EU B2C sales
Typical transaction: goods dispatched from one EU country to consumers in other member states
Return frequency: quarterly
Non-Union OSS
Main use: B2C supplies of services by non-EU businesses
Typical transaction: services supplied by a business established outside the EU to consumers in EU member states
Return frequency: quarterly
IOSS
Main use: imported low value goods
Typical transaction: goods sent from outside the EU to EU consumers in consignments not exceeding €150
Return frequency: monthly
While the non-Union OSS applies to certain services supplied by non-EU businesses to EU consumers, the Union OSS is designed for cross border business to consumer sales of goods and certain services within the EU. Instead of registering for VAT in every country where customers are located, an eligible seller can register in one member state, charge the VAT rate applicable in the customer’s country and report the sales through one OSS return.
IOSS currently applies to distance sales of imported goods in consignments with an intrinsic value not exceeding €150. However, under the EU’s planned customs and VAT reforms, this threshold is expected to be removed from March 2028, allowing IOSS to be used for imported B2C consignments above €150 as well. The seller, marketplace or deemed supplier collects VAT at checkout and declares it through one monthly IOSS return. This approach avoids requiring the customer to pay import VAT when the parcel arrives.
How OSS works
For an intra-EU B2C sale, the seller generally needs to:
- Identify the customer’s member state.
- Apply the VAT rate applicable in that country.
- Collect the VAT at checkout.
- Record the transaction by destination member state and VAT rate.
- Include the sale in the OSS return.
- Pay the declared VAT to the tax authority in the member state of identification.
The tax authority receiving the OSS return and payment then distributes the VAT to the relevant member states. The seller therefore uses one electronic reporting channel rather than managing a separate return for each destination country.
OSS does not eliminate all VAT obligations. A business may still need domestic VAT registrations and returns, particularly for local sales, stock held in another country, domestic transactions or transactions outside the scheme’s scope.
How IOSS works
IOSS addresses a different supply chain: goods sold to EU consumers from outside the EU.
Where the conditions are met, the seller charges VAT when the customer places the order. The VAT is calculated using the rate applicable in the customer’s member state. The seller then reports the transaction in a monthly IOSS return and pays the VAT through the relevant IOSS system.
The IOSS number must be transmitted securely through the customs process so that the import can be identified as an IOSS transaction. When the data is correct, the buyer should not be charged import VAT again on delivery.
For non-EU businesses, an intermediary may be required to fulfil IOSS obligations. Businesses should also retain appropriate transaction records and ensure that order, tax and customs data remain consistent.
Why the schemes matter
OSS and IOSS turn a fragmented VAT process into a centralised reporting model. Their principal benefits include:
- Fewer foreign VAT registrations for eligible transactions
- One return covering sales to multiple EU member states
- Centralised payment of VAT
- Better visibility over destination based VAT liabilities
- Lower administrative effort for cross border ecommerce
- More predictable costs for customers buying imported goods
- Reduced risk of import VAT being collected at the border when IOSS is used correctly
The scale of the schemes demonstrates their importance. In 2024, more than €24 billion was declared through the Union OSS, €2.8 billion through the non-Union OSS and €6.3 billion through IOSS.
However, registration alone does not ensure compliance. The business must apply the correct VAT rate, identify the correct destination, distinguish eligible and ineligible transactions, maintain supporting records and reconcile the return to its sales and logistics systems.
What OSS and IOSS do not cover
The schemes are simplifications, not universal substitutes for VAT compliance. They do not automatically cover:
- Domestic sales in the seller’s own member state, except for deemed supplies
- Goods stored in another member state where local obligations arise
- Imports exceeding the IOSS consignment value limit
- Goods subject to special rules or exclusions
- Business to business sales requiring a different VAT treatment
- Transactions where the seller’s supply chain does not meet the scheme conditions
- Local reporting, invoicing or record keeping obligations that remain outside the scheme
A company should therefore map its transaction flows before selecting OSS or IOSS. The relevant questions include where the goods are located, where they are dispatched from, who the customer is, the value of the consignment and whether a marketplace is involved.
The practical control framework
A reliable OSS or IOSS process should connect tax, commerce and logistics data. Core controls include:
- Product and transaction classification
- Customer location validation
- Automated VAT rate determination
- Separate treatment of domestic, intra-EU and imported sales
- Consignment value checks for IOSS eligibility
- Secure transmission of IOSS customs data
- Reconciliation between orders, payments, returns and VAT collected
- Review of adjustments, refunds and cancelled orders
- Retention of records supporting each reported transaction
The central principle is straightforward: one registration and one return can simplify EU VAT reporting, but the underlying transaction data must still be accurate for every destination country.
Key takeaway
OSS allows eligible businesses to report intra-EU B2C sales through one EU VAT return, while IOSS allows eligible sellers to collect and declare VAT on imported consignments not exceeding €150 through one monthly return. Together, the schemes can replace much of the administrative burden associated with multiple EU VAT registrations.
For cross border sellers, the benefit is not simply “one return for 27 countries”. It is a controlled reporting framework that aligns VAT calculation, customer location, customs data and payment flows across the EU.
This article has been prepared by Tax Desk for general information purposes and does not constitute tax or legal advice. VAT rules change frequently and Tax Desk recommends a specific compliance review before making registration or filing decisions.
