OSS vs. IOSS: What’s the Difference and Which One Applies to Your Business?

The OSS (One-Stop Shop) is a voluntary scheme introduced by the EU in July 2021. It allows e-commerce and general businesses report all their cross-border sales B2C, including intra-community distance sales, distance sales of imported goods, and B2C services, in one OSS return. By consolidating VAT reporting, the OSS makes VAT compliance easier, eliminating the need for VAT registration in multiple EU countries.

Depending on your business type and where you’re based, there are three possible schemes: Union OSS, Non-Union OSS, and IOSS.

What Is the OSS Scheme and Who Is It For?

The One-Stop Shop (OSS) scheme is a simplified VAT system for businesses selling goods or services across EU borders to final customers B2C. It allows businesses to declare and pay VAT in one EU country for all eligible cross-border sales, instead of registering in each country separately.

Under the OSS regime, the following categories can be differentiated:

• Union OSS: This covers:
  • Intra-community distance sales of goods, regardless of the country of establishment of the supplier. This refers to a sale of goods to a private individual in another EU country, where the seller arranges the transport. The key characteristics of intra-Community distance sales of goods are the following ones: i) the goods and the buyer are in different EU countries, ii) the buyer is not VAT-registered, i.e., it is a B2C transaction, and iii) VAT is due in the country of arrival of the goods.
  • B2C services taxable in a Member State other than the supplier's country of establishment. This includes telecommunications, broadcasting, electronically supplied services, accommodation, access to events, passenger transport, etc. Only EU-based companies can report these B2C services in the Union OSS.
• Non-Union OSS: This scheme only covers B2C supplies of services that are taxable in the EU when the supplier is a non-EU-based company. These are the same types of B2C services that can be reported under the Union OSS, i.e., exceptions to the general rules for place of supply of services, however, in this case the country of establishment of the supplier determines the use of Union or Non-Union OSS.

Online marketplaces facilitating cross-border B2C sales within the EU can also benefit from the OSS.

You can find here the applicable OSS schemes for your company

What Is the IOSS Scheme and When Should You Use It?

The Import One-Stop Shop (IOSS) is a VAT scheme for online sellers created to simplify the declaration and payment of VAT for distance sales of low-value goods (not exceeding €150) imported from third countries. As a result of using the IOSS, suppliers are exempt from the payment of import VAT at Customs, and shall only deal with VAT on the sale to the final customer B2C, charging local VAT in the country of arrival.

To use this regime, the company carrying out distance sales of imported goods must register in the Member State where it has established its business. In case the business is a non-EU based company, the company must appoint an intermediary for VAT purposes, and the Member State of Identification for IOSS will be the same as the country of establishment of the intermediary.

Once registered, the taxable person is required to submit a monthly IOSS returns to the Member State of identification, detailing:

• The total taxable amount for each product supplied to each Member State where the goods are delivered
• The VAT rate
• The VAT amount

Once the return is submitted, the company will pay the VAT to the Member State of identification, which will distribute the VAT to the Member States listed in the IOSS return.

The companies that should benefit from this regime are EU and non-EU businesses selling imported goods valued at no more than €150.

OSS vs. IOSS: Key Differences You Need to Know

Although both schemes aim to simplify VAT compliance in the e-commerce sector, there are key differences between OSS and IOSS :

Difference 1: Transactions Covered

Based on the transactions covered, you should use one simplification scheme or another:

• • Union and Non-Union OSS cover B2C intra-Community distance sales of goods and certain B2C services.
  • The IOSS scheme only applies to EU and non-EU businesses making distance sales of imported goods valued at €150 or less.

Difference 2: Member State of Identification

Taxpayers must following different criteria when determining the country of registration, also known as the Member State of Identification, depending on whether they are EU or non-EU based:

• EU businesses must register for OSS and IOSS in their country of establishment.
• Non-EU businesses:
  • When selling goods, the Member State of Identification for OSS must be one of the countries where holding stock.
  • When selling B2C services, the supplier can choose any Member State as Member State of Identification for OSS (non-Union OSS).
  • For IOSS registration, taxable persons and electronic interfaces not established in the EU need to appoint an intermediary to use the scheme. The country of registration will be that of the intermediary.

Difference 3: Reporting Periods

The OSS returns are filed quarterly. This applies to both the Union OSS and the non-Union. However, the Import One-Stop Shop returns (IOSS) returns are filed on a monthly basis.

Difference 4: Country of Establishment of the Supplier

The country of establishment of the supplier will only be relevant when choosing the right one-stop shop scheme for B2C services to customers in the EU. In fact, this will be the key factor that will determine whether you should choose the Union or the non-Union OSS scheme:

• If you are an EU business, you should register for reporting B2C services in scope in Union OSS in your country of establishment.
• If you are a non-EU business, you should register for reporting the B2C services in scope in the Non-Union OSS. In fact, this is the only use case included in this particular regime.

Learn more in our e-commerce manual.

How to Decide Which VAT Scheme Applies to Your Business

The key points to check when deciding which VAT scheme should I use are the type of transactions that you are performing and where are you established as a supplier:

• Does your business deal with intra-Community distance sales of goods? In this case, goods are located in the EU and transported to another Member State. The right regime is the Union OSS.
• Does your business deal with B2C services taxable where your customer is located, or where the service is physically carried out? In this case, unless you are established in the same country, you can use the Union OSS regime, if you are a EU based company, or the non-Union OSS regime, if you are a non-EU based supplier.
• Does your business deal with distance sales of imported goods? In this case, goods are transported from outside of the EU to the final location of your B2C customer. If the value of the shipment is below €150, the IOSS is the right simplification for you.

In any case, the EU VAT schemes for e-commerce, OSS and IOSS schemes, are voluntary, meaning that you can always opt to follow the convencional approach of VAT registering in each of the Member States where you need to charge VAT to your final customer.

Check all you need to know about OSS registrations.

Here are some common scenarios where companies can apply for OSS or IOSS registration:

• Scenario 1: A company established in France sells B2C to clients in Italy, Portugal, and Spain. The goods are dispatched from France to the different Member States where the customers are located. The French company could apply for OSS registration and report all B2C distance sales in a single OSS return in France, avoiding VAT registration in those countries.
• Scenario 2: A company based in the United States provides B2C services to customers in various EU countries. The US company can apply for the Non-Union OSS scheme and choose the country where they want to register.
• Scenario 3: A UK company imports goods valued at €100 from the US in Ireland, and sells them to Irish customers. The company can apply for IOSS registration, choosing to register in any EU country, and report all transactions through their monthly OSS return.

Why Use OSS or IOSS? Key Benefits for Online Sellers

• Simplified VAT Compliance: Companies registered under the OSS scheme can avoid multiple registrations and reduce their administrative burden.
• Minimized Tax Compliance Risks: By including all transactions in a single return, OSS or IOSS minimizes the risk of errors, as it eliminates the need for multiple returns with varying VAT rules and requirements.
• Reduced Risk of Non-Payment: Making a single payment for all transactions and having the Member State of registration distribute VAT significantly reduces the risk of penalties or missed payments in individual countries.
• Faster Expansion: By centralizing VAT obligations through a single registration and return, sellers can begin selling across the EU immediately after registration in just one Member State.

Learn all you need to know about OSS returns.

How Marosa Helps You with OSS and IOSS Registration and Compliance

Marosa can handle your OSS and IOSS registration in the right EU country, ensuring accurate and timely VAT compliance. Our team of experts can help you define which specific OSS scheme you need as well as if a standard VAT registration abroad is required.

Also, we make VAT compliance simple! Using our specialized software, Vatify, we prepare and file your VAT returns, as well as OSS and IOSS return, simplifying cross-border reporting by consolidating your sales data. This allows you to focus on growing your business confidently across EU markets.

Check the VAT rules for dropshipping and e-commerce in the EU.