Selling Across EU Borders? Here's How VAT Works
Cross-border e-commerce within the EU has specific VAT rules. OSS, reverse charge and thresholds: here is what you need to know.
Selling across borders within the EU is great for growth, but VAT gets complicated fast. Different countries, different rates, different rules. Here's the practical breakdown.
The One-Stop-Shop (OSS) system
Since July 2021, the EU has the OSS system. Instead of registering for VAT in every EU country where you sell, you register for OSS in your home country and report all EU sales through a single return. The threshold to trigger OSS is €10,000 in annual cross-border B2C sales across all EU countries combined.
B2C and B2B: completely different rules
B2C (selling to consumers): Below the €10,000 threshold, you charge your home country's VAT rate. Above it, you charge the destination country's rate and report through OSS.
B2B (selling to businesses): If the buyer has a valid VAT number, you apply the reverse charge mechanism: 0% VAT on your invoice, and the buyer reports the VAT in their own country.
Which VAT rate to charge?
This depends on the destination country and the product category. Germany has 19% standard / 7% reduced. France has 20% / 5.5%. Belgium has 21% / 6%. Your invoicing tool should handle this automatically if you configure it for OSS.
Your store, your VAT
On your own Shopify store there is no platform that collects the VAT for you. Shopify calculates tax at checkout from the settings you enter, but you are the one who charges it, reports it and pays it. That also means the invoice has to come from you, with the right rate for the destination country and the right wording when you apply reverse charge.
Keep records clean
For cross-border sales, your records need to show: the customer's country, the VAT rate applied, the VAT amount, and whether it was a B2B or B2C sale. Automatic invoicing makes this dramatically easier than doing it by hand.
