What changed?
On 1 July 2021, EU implemented changes to the VAT obligations for businesses selling to consumers (B2C) as part of their VAT e-commerce package. There have been further changes from 1 January 2025, although these will likely affect very few UK-based businesses.
Due to the special post-Brexit rules for Northern Ireland, Northern Ireland is treated as part of the EU in relation to goods; any references to the EU in this article includes Northern Ireland.
The two major reforms from 1 July 2021 were the end of Low Value Consignment Relief (LVCR) and the expansion and replacement of the Mini-One-Stop-Shop (MOSS) to the Import One-Stop-Shop (IOSS) and the Union One-Stop-Shop (OSS).
The IOSS can be used by businesses selling goods from non-EU stock for delivery to EU consumers. The OSS can be used by businesses for selling goods that are shipped from one EU country to consumers in another EU country.
From 1 January 2025 the EU widened the ability of member states to use reduced rates of VAT for certain products. It also introduced an optional SME VAT scheme for small to medium EU-based businesses. This enables qualifying businesses selling goods and services within the EU to avoid VAT registration, thereby enabling them to sell free of EU VAT. As at February 2025, the UK has not implemented this scheme (for Northern Ireland based traders) so it is only available to businesses with a physical presence (beyond mere stockholding) in the actual EU (i.e. not including Northern Ireland).
If you also sell services (including digitised products) to EU consumers, please see our separate article on services.
1. The end of LVCR and introduction of the IOSS
Previously, sales of non-EU goods online to customers in the EU, valued at less than €22, were exempt from import VAT. This was known as LVCR. Since July 2021 however, all imported goods into the EU are subject to import VAT for the relevant country (and consignments over €150 might also be subject to customs duty).
To simplify this change, the IOSS was introduced, allowing businesses to collect the import VAT for B2C orders across the EU at point of sale. Once registered for IOSS you report and pay the collected VAT for each EU country monthly via a single IOSS return, but only for consignments of €150 or less.
IOSS simplifies VAT for EU consumers as they will see full costs at checkout, rather than the couriers collecting VAT (and potentially their own fees) from the consumer at delivery. This also avoids any surprise fees for your customer and helps to streamline the movement of goods through customs.
If your business is established outside of the EU, IOSS generally requires you to appoint an EU-based intermediary to act on your behalf.
2. What if I sell my goods via an online marketplace?
For consignments under €150, the online market place (OMP) will usually be deemed to be buying the goods from you, and then selling them on to the EU consumer. As a result, the marketplace is the party responsible for the EU VAT (usually via its own IOSS registration) on the sale to the consumer and you will just be making a sale from your non-EU stock to the marketplace (which will be subject to the tax rules of the stock country, e.g. a zero-rated export if shipped from mainland UK stock). If this is the case, you’ll need to include your marketplace’s IOSS number in your electronic shipping data fields for B2C imports into the EU where your consignment value is €150 or less. Check with your marketplace for more information on this.
3. Can I choose not to use IOSS?
IOSS is optional and only helps for sales of consignments of €150 or less. If you do not wish to register for the IOSS, or if you do not sell via an online marketplace registered for it, VAT will be collected on importation of the goods into the EU, in the same way as is generally the case for higher-value goods. This would normally be collected by the relevant courier or postal operator, with the customer only receiving the goods once the VAT (and potentially customs duty for goods over €150) is paid. If, unusually, you ship to consumers via freight forwarders under DDP Incoterms®, it is likely you would be required to register for VAT in the country(ies) of import.
A courier or postal operator is likely to charge you, or your customer, a clearance fee for their service, so you may wish to make it clear to your customers that they are responsible for any import VAT, taxes or fees as a result of these rules. In practice, many transport businesses refuse to deliver parcels under €150 unless IOSS is being used by the supplier (or marketplace) as many consumers refuse to accept such deliveries because they don’t want to pay more.
4. The launch of the One-Stop-Shop (OSS) for distance sales
In parallel to the launch of the IOSS, the EU also launched the OSS for intra-EU distance sales of goods. Distance sales are sales of goods from EU stock to consumers in a different EU country. The OSS can be used for such sales by both EU and non-EU established businesses.
Northern Ireland established businesses benefit from the EU-wide threshold of €10,000 for distance sales of goods, meaning they do not have to register for, or charge, EU VAT on such sales until they exceed this threshold (but they may need to charge UK VAT for goods shipped from Northern Ireland).
UK-based businesses can register for the OSS via HMRC if they are based in, or hold stock in, Northern Ireland or else via the EU Member State in which they hold stock.
What do these rules mean for me?
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Selling through a marketplace like Amazon or Etsy? Check with your marketplace to see how the new deemed seller rules will affect you and their associated fees. Many online platforms have variable VAT rate functionality built in.
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Selling direct? Decide if you want to register for the IOSS (for goods shipped from outside the EU), and / or the OSS (for goods shipped from inside the EU). Registration is optional, but you must use the scheme for all such sales to EU consumers if you do register. If you do not use IOSS or OSS your customers may face extra fees and / or you may have one or more EU VAT registration obligations. You will also need to ensure your website pricing is sufficiently high to cover the potential EU VAT rates, or has variable VAT rate functionality; the VAT payable will be different depending on the EU delivery country per shipment.
Where can I go for more advice?
- The European Commission has published guidance on the IOSS and OSS, available here.
- HMRC has published guidance on the OSS for businesses selling stock from Northern Ireland into the EU, available here.
- Further guides to selling into the EU are available in the VAT area of the Resource Library on FSB Legal and Business Hub for FSB members (FSB Members should access this service through the member dashboard).