EU VAT for online sellers: distance sales and the VAT OSS

A distance sale of goods, in EU VAT terms, is when you sell goods to a consumer (a private person, not a business) in another EU country and the goods are shipped to them by you or on your behalf. A Portuguese shop posting a jacket to a shopper in Madrid is making a distance sale. A sale to a Spanish company with a VAT number is not: that is a business-to-business sale, covered further down.

The rules below are for sellers established in one EU country who dispatch the goods from that same country. If you hold stock in several countries, or import goods from outside the EU, more rules apply and this guide only touches on them.

According to Your Europe's page on cross-border VAT, a €10,000 threshold applies to distance sales of goods to EU consumers. Below it, you may charge VAT as you would at home. Above it, VAT is due at the rate of the customer's country.

The details matter, and the Commission's explanatory notes spell them out:

• One EU-wide total, not €10,000 per country. Sales to Spain, France and Italy all count towards the same figure.
• Excluding VAT. It is the net value of your sales.
• Goods and some services together. The total adds intra-Community distance sales of goods to cross-border telecoms, broadcasting and electronic services sold to consumers.
• Current and preceding calendar year. If you passed €10,000 last year, or pass it during this year, the threshold no longer helps you.
• No grace period. Once the total is exceeded, the destination rule applies from that sale on, without exception.
• You can opt in early. Below the threshold you may choose to charge the customer's country's VAT anyway.

Below the threshold, and unless you opted otherwise, you charge your own country's rate on a distance sale, exactly as on a domestic sale. Above it, you charge the rate of the country the goods are delivered to, and the rate for that kind of product in that country, which can differ from yours: a product on a reduced rate at home may be on the standard rate elsewhere.

Rates change, so check the European Commission's VAT rates page before you set them in your shop. The figures below are the ones published there at the time of writing. The EU minimum standard rate is 15%.

A shop in Lisbon sells a jacket for €100 before VAT to a consumer in Seville and posts it from Portugal.

1. 1

   Total EU distance sales below €10,000

   The shop may charge Portuguese VAT at 23%. The customer pays €123, and the €23 goes on the shop's normal Portuguese VAT return.

2. 2

   Total EU distance sales above €10,000

   Spanish VAT at 21% is due instead. The customer pays €121, and the €21 is owed to Spain. With OSS, the shop declares it on its quarterly OSS return in Portugal and pays it there.

3. 3

   What changes for the shop

   The price, the invoice and the return. Decide whether your prices include VAT: if you show €123 to everybody, a sale at Spanish VAT leaves you €101.65 net instead of €100. Many shops show prices per country for exactly this reason.

The One Stop Shop has been in force since 1 July 2021. It is optional. You register in one Member State, called the Member State of identification, and declare and pay there the VAT on all your distance sales to consumers in other EU countries. Its Union scheme covers intra-Community distance sales of goods and cross-border services to consumers. The point is that you deal with one tax office, not one per customer country. Source: the European Commission's OSS portal.

• The return is quarterly and submitted electronically by the end of the month after the quarter: 30 April, 31 July, 31 October and 31 January (declare and pay).
• A return is due even if you sold nothing cross-border that quarter. That is a nil return, and it is easy to forget.
• Payment is due by the same deadline as the return.
• Records are kept for 10 years from the end of the year of the transaction (record keeping). For each sale, keep what a tax office would need to check it: the customer's country, the date, the net value, the rate and the VAT.

OSS is for sales to consumers. When you sell goods to a VAT-registered business in another EU country, the sale does not go through OSS. Those sales usually fall under the intra-Community supply and reverse-charge rules, which have their own conditions and reporting. Ask your accountant how to handle them before you start selling to businesses abroad.

The Import One Stop Shop (IOSS) is a separate scheme for distance sales of goods imported from outside the EU in consignments of up to €150. Its returns are monthly. If you post everything from a warehouse inside the EU, it does not apply to you. Source: Your Europe on the One Stop Shop.

Portugal's rates are set in article 18 of the IVA code. The Azores and Madeira set lower rates of their own, so a shop based there should check those instead.

The article 53 exemption lets small businesses with turnover of no more than €15,000 in the previous calendar year skip charging IVA. It is not available to exporters. Whether it fits a shop selling across borders is a question for a certified accountant (contabilista certificado) before you rely on it.

1. 1

   Add up your cross-border sales

   Your net distance sales of goods to EU consumers, plus any cross-border electronic services, for this year and last. Over €10,000, or close to it, means you need a plan now.

2. 2

   Make sure you are VAT registered at home

   OSS sits on top of your normal VAT registration. In Portugal that is your NIF with IVA activity at the Finanças.

3. 3

   Register for the Union scheme

   In your Member State of identification. In Portugal it is the Balcão Único on the Portal das Finanças, with guidance in Portuguese on the e-commerce guidance page.

4. 4

   Set the destination rates in your shop

   One rate per country you sell to, checked against the Commission's list, and the right one for each kind of product.

5. 5

   File and pay every quarter

   By the end of the month after the quarter, nil returns included. Portugal takes payment by bank transfer in euro to the account it indicates (IGCP).

6. 6

   Keep the records

   For 10 years. An export of your orders each quarter, filed with the return, is a simple habit that covers most of it.

Everything above is the general rule as the European Commission and the Portuguese tax authority publish it. Your case may have details it does not cover, such as stock in other countries, special products or marketplace sales. Confirm your set-up with an accountant (in Portugal, a contabilista certificado) before you file.

In WhizzyCommerce you set tax rates per destination country or region in the dashboard. The most specific rule wins, and anything without a rule falls back to one flat shop rate, so a shop over the threshold can charge 21% in Spain and 20% in France while keeping 23% at home. Orders export as CSV at any time, which gives you the figures for the OSS return.

We do not file OSS for you, and there is no automatic OSS return. In Portugal, certified invoices come from your own InvoiceXpress or Moloni account through a plugin; the details are on invoices. Plans and fees are on pricing.