Two years after Brexit, most UK e-commerce sellers who ship to EU customers are still getting the tax wrong — either over-paying, under-paying, or watching their EU customers abandon deliveries because of unexpected customs charges on arrival. The EU introduced OSS and IOSS specifically to fix this, but take-up among UK sellers remains surprisingly low.
The Problem These Schemes Solve
Before these schemes existed, a UK business selling goods to EU consumers had two unattractive options: register for VAT in every EU country where you had customers (27 registrations, 27 sets of returns), or ignore the obligation. For low-value goods under €150 sent directly to EU consumers, EU import VAT became chargeable at the point of entry — causing cart abandonment at delivery of over 60%.
OSS solves the first problem. IOSS solves the third. Together, they let UK sellers ship to all 27 EU countries with a single registration and a single return.
VAT OSS: One Return for All EU Sales
The VAT One Stop Shop scheme allows businesses to register for EU VAT in a single EU member state and use that registration to account for VAT across all 27 EU countries through one quarterly return.
Who it's for: UK businesses selling goods that are already in the EU and being sold to EU consumers — Amazon Pan-European FBA, EU dropshipping, digital services to EU consumers.
Who it's NOT for: UK businesses shipping physical goods from the UK directly to EU customers. Those are imports — that's where IOSS applies.
| Scenario | Correct Scheme |
|---|---|
| Goods in UK → EU customer (under €150) | IOSS |
| Goods in Amazon EU warehouse → EU customer | OSS |
| Digital products / software → EU customer | OSS |
| Dropshipping from EU supplier → EU customer | OSS |
| Goods in UK → US customer | Neither — export, zero-rated |
The €10,000 Threshold
UK businesses with EU sales below €10,000 in a calendar year can avoid OSS registration. Once EU sales — combined across all member states — exceed €10,000, OSS registration becomes mandatory for qualifying transactions. A Shopify store shipping £1,000/month to EU customers hits this in ten months.
How to Register for OSS as a UK Business
UK businesses cannot use HMRC to register for OSS — that option ended with Brexit. You must register through the tax authority of an EU member state. Most commonly chosen: Ireland (English-language, familiar legal system), Germany, or the Netherlands.
IOSS: Fixing the Customs Charge Problem
IOSS applies to goods worth €150 or less, shipped from outside the EU directly to EU consumers. Without IOSS, your customer receives an import VAT charge at delivery plus a carrier handling fee. With IOSS, you collect EU VAT at checkout. The parcel clears customs without the recipient being charged. Sellers who implement IOSS typically see 15-25% increases in EU order completion rates.
IOSS Registration for UK Sellers
UK businesses cannot register for IOSS directly and must use an EU-established intermediary. Costs typically range from €100–€400/year for the intermediary service. Shopify supports IOSS number entry natively — once entered, Shopify adds the correct destination-country VAT rate to checkout for EU customers.
Common Mistakes UK Sellers Make
- Using IOSS for parcels over €150 — IOSS only covers goods worth €150 or less
- Not passing the IOSS number to the carrier — customs charges the customer anyway
- Confusing OSS and IOSS — the schemes cover different scenarios and are not interchangeable
- Missing monthly IOSS return deadlines — returns are due by the end of the month following each calendar month
- Not accounting for different EU VAT rates — Germany 19%, France 20%, Hungary 27%
Selling to EU customers and not sure which scheme applies? Our cross-border tax specialists identify exactly what you need and manage registration through the right EU authority.
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