OSS — One Stop Shop

What it means

OSS is the special scheme under which VAT on sales to consumers in other member states is paid through one electronic return in the state of identification, instead of registering in every country.

It covers distance sales of goods within the EU and certain services to non-taxable persons. It does not change the place of supply rule - tax is still due at the customer country’s rate; only the way it is paid changes.

OSS is voluntary but not selective. Whoever registers for it must declare through it every qualifying distance sale and service to every member state, not just to some of them; sales to a state where the business would prefer its own registration cannot be carved out of the scheme.

How it works in practice

The threshold for cross-border sales to consumers is EU-wide and shared between goods and the services concerned. Above it the destination country’s VAT applies; below it you may tax at home or register voluntarily.

Returns are filed quarterly and paid in euros; records are kept by country and rate and retained for the statutory period. For an online store that means rates configured correctly by delivery country.

VAT on purchases in the country of consumption, such as advertising or services from local suppliers, cannot be deducted in the OSS return. It is recovered separately through a foreign VAT refund, so we record such invoices apart from domestic ones and file the claim for the whole year at once.

What to watch out for

OSS does not cover everything: not sales to businesses, which are intra-EU supplies, and not imports of low-value consignments, where IOSS applies. Misclassifying a transaction is the commonest error in the whole scheme.

If an online store keeps stock in another member state, for instance in a fulfilment provider’s warehouse, sales from that warehouse to local customers are domestic supplies in that state and OSS does not cover them. The business needs its own VAT registration there, and one that overlooks it owes the local tax plus penalties.