The OSS Scheme: VAT on Online Sales to Consumers in the EU

An online course sold to customers in France, Spain and Austria. A shop dispatching goods from a warehouse in Germany to buyers across the EU. For online sales like these to consumers, VAT is usually due in the country where the customer is located. Without a simplification, the business would have to register for VAT in every one of those countries. Since 1 July 2021, the OSS scheme – the One-Stop Shop – has offered a way out: all such sales are declared and paid in a single Member State. Which version of the scheme is open to you depends on where your company is established. The rules differ considerably between companies in Bulgaria, Estonia or Cyprus on the one hand and a US LLC or a UK Ltd on the other.

The destination principle for consumers

In the EU, two kinds of supplies to consumers follow the destination principle. For distance sales of goods dispatched to a consumer in another Member State, the supply takes place where the transport ends (§ 3c Abs. 1 UStG, the German VAT Act). For telecommunications, broadcasting and electronically supplied services – such as software, streaming or online courses without personal tuition – what counts is where the customer lives (§ 3a Abs. 5 UStG). In both cases the seller owes the VAT of the customer’s country, at the rate that applies there.

The €10,000 threshold

Smaller businesses within the EU benefit from a simplification. If the total of such distance sales and electronic services to consumers in other Member States did not exceed €10,000 in the previous calendar year and does not exceed that amount in the current year either, the VAT of the seller’s own country continues to apply (§ 3c Abs. 4 and § 3a Abs. 5 Satz 3 UStG; Article 59c of the VAT Directive). The €10,000 threshold applies EU-wide, not per country. A business that opts out of it is bound by that choice for at least two calendar years.

Two restrictions are often overlooked. The threshold is only available to businesses established in a single Member State, and for goods only if they are dispatched from that state. According to the European Commission’s explanatory notes, it does not apply at all to businesses established outside the EU. A US LLC selling an automated online course to a consumer in Italy therefore owes Italian VAT from the very first euro.

How the OSS scheme works

At its core, the way the OSS scheme works is simple: the business registers in a single Member State, known as the Member State of identification. In Germany, the Federal Central Tax Office (Bundeszentralamt für Steuern) is responsible; in Austria, registration is made via FinanzOnline. Participation generally starts on the first day of the calendar quarter following the notification. If the first supply is notified no later than the tenth day of the following month, however, the registration applies from that first supply (Article 57d of Implementing Regulation 282/2011).

Returns are filed quarterly, by the end of the month following the end of the quarter: by 30 April, 31 July, 31 October and 31 January. If the deadline falls on a weekend or public holiday, it is not postponed. A quarter without any sales still requires a return. The tax is generally paid in euros to the Member State of identification (states outside the eurozone may require their national currency), which passes it on to the other Member States. Records must be kept for ten years and made available electronically on request.

Union scheme, non-Union scheme and IOSS

The One-Stop Shop comes in three versions. Which one applies to you is decided primarily by where your company is established – the Union scheme, the non-Union scheme or the import scheme, known as IOSS.

For a Bulgarian EOOD or an Estonian OÜ, the route is therefore the Union scheme in its own country of establishment. A US LLC, or a Ltd from the UK or the Emirates, declares electronic services through the non-Union scheme. If it ships goods from a warehouse in the EU, it uses the Union scheme for those goods in the state from which they are dispatched. According to the European Commission, Austria requires businesses from third countries to appoint a fiscal representative in this case. For the IOSS, businesses outside the EU generally need an intermediary established in the EU; according to the Federal Central Tax Office, the only current exception is Norway – not the UK, the US or the Emirates.

Invoices and input VAT in the OSS

For intra-Community distance sales of goods to Germany declared under the Union scheme, there is no obligation to issue invoices (§ 14a Abs. 2 Satz 2 UStG); Austria likewise does not require an invoice in this case. Otherwise, and where invoices are issued voluntarily, the rules of the Member State of identification apply. Input VAT cannot be reclaimed in the OSS. Foreign input VAT is instead refunded through the VAT refund procedure – in Germany, via the Federal Central Tax Office.

Common mistakes and their consequences

In practice, three mistakes are particularly common, and businesses that make them soon feel their consequences. First, the €10,000 threshold is applied where it does not apply – for example to a company outside the EU, or to goods shipped from a warehouse in another Member State. Second, corrections are made in an earlier return; this is only permitted in a later return and within three years (Article 61 of Implementing Regulation 282/2011). Third, nil returns for quarters without sales are forgotten.

Anyone who repeatedly breaks the rules – for instance after three consecutive reminders about late returns or payments, none of which was remedied within ten days – is excluded from the OSS scheme for two years, and from all its versions (Article 58b of Implementing Regulation 282/2011). Registration in each individual Member State then becomes necessary. Note also: if a foreign company is in fact managed from Germany, it may also be established there for VAT purposes. Why that is the case is explained in “Forming a Company Abroad: Seven Myths Every Founder Should Know”.

What changes from 2027 and 2028

With the “VAT in the Digital Age” reform package (Directive (EU) 2025/516), the One-Stop Shop is being expanded step by step. What changes at first are details: from 1 January 2027, clarifications apply, including on how the €10,000 threshold is calculated. From 1 July 2028, the Union scheme will be extended to further supplies, including domestic supplies to consumers by businesses not established in the country concerned, and transfers of own goods to other Member States. The aim is that businesses will less often have to register in several countries.

Frequently asked questions about the OSS scheme

Three questions about the OSS scheme that are frequently asked, answered briefly:

This article is for general information only and does not replace tax or legal advice. Last reviewed: October 2026.