Sellers ask us the same question every week: "Where does VAT actually get paid on this order?" The answer depends on where stock is, where the customer is, the value of the consignment, and whether the sale runs through a marketplace. This is the decoder ring.
OSS: One-Stop Shop (intra-EU distance sales)
OSS is for businesses already established (or stock-resident) inside the EU selling B2C goods cross-border to other EU member states. Instead of registering for VAT in each destination country, the seller registers for OSS in one EU member state and files a single quarterly return covering all distance sales.
OSS does not cover domestic supplies. If you store stock in Germany and sell to a German customer, you still need a German VAT registration.
IOSS: Import One-Stop Shop (low-value imports)
IOSS applies to B2C goods imported into the EU in consignments not exceeding EUR 150 intrinsic value. With IOSS, the seller (or marketplace) charges VAT at checkout at the destination country's rate and remits monthly through a single IOSS return. The benefit: customs clearance is faster, no surprise import VAT charges on doorstep delivery, and lower refusal rates.
UK sellers can use IOSS by appointing an EU-based intermediary unless they have an EU establishment. The marketplace usually provides this for Amazon, eBay, and Etsy sellers.
The GBP 135 UK import threshold
Mirroring the EU's EUR 150 rule, the UK applies a GBP 135 threshold for imported consignments. Below GBP 135, the seller (or marketplace) must register for UK VAT and charge it at checkout. Above GBP 135, import VAT is collected at the border in the normal way and the customer or importer of record pays it.
Three worked examples
Example 1: UK Shopify store, German customer, GBP 80 order, shipped from UK
This is a B2C distance sale to the EU under EUR 150. If the seller uses IOSS, they charge German VAT (19%) at checkout and report through IOSS. If they do not use IOSS, the customer pays import VAT on delivery, often with a handling fee from the courier.
Example 2: UK seller, UK customer, GBP 50 order, shipped from China by drop-shipper
This is a low-value import into the UK. The seller is responsible for charging UK VAT at checkout under the GBP 135 rule. If sold through a UK-facing marketplace, the marketplace handles the VAT collection.
Example 3: UK seller using Amazon FBA Germany, French customer, GBP 200 order
Stock is in Germany. The sale is an intra-EU distance sale to France. Amazon ships from Germany to France. The seller needs a German VAT registration for the domestic supply leg and can use OSS for the distance sale to France. Alternatively, Amazon may handle this under the marketplace deeming rules.
The traps
- Splitting consignments: artificially splitting orders to stay below thresholds is challenged as abuse.
- IOSS misuse: claiming IOSS on consignments above EUR 150 creates double-VAT and audit risk.
- Mixed orders: orders containing one item over GBP 135 and several below can confuse classification.
- Returns: VAT-recovery on cross-border returns is rarely automated and requires manual reconciliation.
Practical setup we use with clients
For sellers under GBP 1m turnover, we typically recommend a single OSS or IOSS scheme in Ireland (English-speaking tax authority, efficient processing) plus a UK VAT registration. For larger sellers, we layer country-specific registrations where Pan-EU FBA stock movements require them. Our VAT team handles end-to-end set-up and ongoing returns.
Compliance is cheaper than recovery
We have helped clients recover six-figure overpayments and settle five-figure assessments. Both are avoidable with a properly scoped registration map at the start. Talk to us if you sell across two or more borders, or read our e-commerce sector overview.