New EU VAT Rules for E-Commerce Businesses

Since the 1st of July 2021, new value-added tax (VAT) rules are applicable within the European Union (EU). According to these new rules, below a threshold of 10.000 €, the VAT can be paid to the Member State where your business is located. Above this threshold, your business will be able to easily register in a One-Stop-Shop (OSS), where you can declare and pay the VAT due in the other Member States. As a consequence, if you register for OSS, you can now sell into all 27 EU Member States with just one VAT return. This might sound intimidating, but this article will help you navigate these new rules.

What is VAT in the European Union?

VAT is a multi-stage turnover tax, which is levied on the value-added at each stage of the production and sale. It is a cost that is generally borne by the end-consumer but is collected by the seller.

What is the One-Stop-Shop?

The OSS is an electronic system that simplifies up to 95 percent of VAT obligations throughout the EU. Since the rules are still relatively new, a general overview of the benefits follows, with additional areas of application likely to emerge in the future. However, the OSS allows your EU-based e-commerce business to:

  • register for VAT electronically in a single Member State for all intra-EU distance sales of goods and B2C supplies of services and thus avoid VAT registration in multiple Member States
  • declare and pay the VAT due on all these supplies of goods and services in a single electronic quarterly return
  • work with the tax administration of your corresponding Member State, even if your sales are cross-border

How to register for the OSS?

Each EU Member State has an online OSS portal where your business can register (if headquartered in Germany: ELSTER). This single registration will be valid for all sales to consumers in the other EU Member States.

What do you need to do if you want to use the OSS?

In order to use the OSS you have to:

  • register for OSS at your national OSS portal (if headquartered in Germany: German Federal Central Tax Office BZSt)
  • apply the relevant VAT rate of the Member State where the goods are dispatched to or where the services are supplied
  • collect VAT from the buyer on intra-EU distance sales of goods or supplies of services
  • submit an electronic VAT return quarterly via the OSS portal of the Member State where you are registered for OSS
  • make a quarterly payment of the VAT declared in the VAT return to the Member State where you are registered for OSS
  • keep records of all eligible OSS sales for 10 years

Key takeaways

If you choose to register for OSS, you should be aware of the following implications:

  1. Below a threshold of 10.000 €, VAT can be paid to the Member State where your business is headquartered.
  2. Above this threshold, your business will be able to easily register in an OSS, where you can easily declare and pay the VAT due in the other Member States.
  3. If you register for OSS, you have to add the respective VAT of the destination country to your orders and pay the VAT quarterly to the tax authority of the country you are headquartered in. This way, the VAT is transferred automatically to the country where your delivery arrives.


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Note: For more detailed information regarding the new EU VAT rules for e-commerce businesses please visit the relevant website of the European Commission.