OSS vs IOSS: Which One Do You Actually Need?

OSS and IOSS are not two versions of the same thing, and they are not alternatives you pick between on price. They solve different problems, and the question that decides which one you need has nothing to do with where your company is registered.

It is this: where are the goods when the journey to your customer begins?

The one question that decides it

• The goods are already inside the EU — in your own warehouse, a fulfilment centre or an Amazon warehouse — and travel to a consumer in another member state. That is an intra-Community distance sale. OSS is the simplification for that.
• The goods travel from outside the EU straight to the consumer, with an intrinsic value up to €150. That is a distance sale of imported goods. IOSS is the simplification for that.
• The goods travel from outside the EU and are worth more than €150. Neither scheme covers it. The parcel is cleared normally and import VAT is settled at the border.

A classic dropshipper shipping directly from China holds no stock in the EU at all. For that model OSS is simply not in scope, whatever a general guide may suggest.

OSS in practice

The Union scheme lets you declare the VAT on all your intra-EU B2C distance sales in one member state, in one quarterly return, instead of registering in each country you sell to.

There is an EU-wide threshold of €10,000 per year for intra-Community distance sales and cross-border digital services, below which you may keep charging your own country’s VAT. One point is regularly missed: Article 59c(1)(a) of Directive 2006/112/EC makes that threshold conditional on the supplier being established in only one Member State. A seller established outside the EU therefore has no threshold and is in scope from the first euro.

IOSS in practice

Under IOSS you charge the destination country’s VAT at checkout on consignments up to €150, and declare it in a monthly return. The import itself is then exempt from import VAT, so the parcel is not stopped for a VAT payment at the door.

Four conditions decide whether it fits you:

• €150 intrinsic value per consignment.
• An intermediary. Under Article 369m(1) of Directive 2006/112/EC a seller not established in the EU can only use the scheme through an intermediary established in the EU. The single exception is point (c): a seller established in a third country with which the Union has a mutual assistance agreement, selling goods from that country. The Commission list of those countries, Implementing Decision (EU) 2021/942, has one entry — the Kingdom of Norway. You will see the United Kingdom named here and there; it is not on that list.
• All or nothing. Article 369m(1) closes with the requirement that those taxable persons “shall apply this special scheme to all their distance sales of goods imported from third territories or third countries”. You cannot run IOSS for some countries and leave the rest to the border.
• Monthly filing, whether or not you had sales.

What IOSS does not do

Three misconceptions cost sellers real money:

• It does not remove customs duty. The opposite: using IOSS is what triggers the flat duty. Since 1 July 2026 a duty of €3 per item applies to consignments up to €150 where the import is VAT-exempt under IOSS, or where the parcel travels by post. Ship by courier without IOSS and the ordinary tariff applies instead. We set this out in full in the article on the 2026 customs changes.
• It does not cover parcels above €150. Split shipments to stay under the ceiling are exactly what customs look for.
• It does not leave the place of supply outside the EU. Article 33(c) of Directive 2006/112/EC places the supply in the member state where transport to the customer ends, precisely when the VAT is declared under the import scheme. That is the whole point of IOSS, and it is why the scheme means charging local VAT at checkout rather than avoiding VAT.

Side by side

• Goods start: OSS — inside the EU. IOSS — outside the EU.
• Value limit: OSS — none. IOSS — €150 per consignment.
• Return frequency: OSS — quarterly. IOSS — monthly.
• Intermediary: OSS — not required. IOSS — required for non-EU sellers, bar the Norway exception.
• VAT charged: both — the destination country’s rate, at checkout.
• Customs duty: OSS — not applicable, the goods are already in free circulation. IOSS — the €3 flat duty per item applies.

The third route most guides skip

There is a structure that uses neither scheme: the customer is the importer. The goods are sold before they enter the EU, the consumer is named as the importer, and import VAT is settled at the border in their name. Under the first paragraph of Article 32 of Directive 2006/112/EC the place of supply is where the goods are when transport begins, so it stays outside the EU and there is no EU VAT on your selling price. The second paragraph is the trap: if you are the importer liable for the VAT, that same article moves the supply into the Member State of importation.

It is legitimate, but it is not a loophole and it is not casual. It stands or falls on three things: the shipping terms actually agreed, the customs declaration naming the right importer, and your checkout and invoices saying clearly that the price excludes local VAT and import charges. Get any of those wrong — most often by shipping DDP while claiming the customer imports — and you are looking at a VAT assessment on your full turnover. That mechanism is explained in DDP vs DAP.

Frequently asked questions

Can I use OSS and IOSS at the same time?

Yes, if you have both types of sale: stock inside the EU going cross-border, and parcels arriving from outside the EU. They are separate registrations and separate returns.

Do I need an EU company for IOSS?

No, but without EU establishment you need an EU-established intermediary, who is jointly liable for the VAT. That is a commercial relationship with a cost and a risk profile, not a formality.

Is IOSS mandatory?

No. It is a simplification. Without it, import VAT is collected at the border, either through the special arrangement operated by the carrier or through a normal customs declaration.

Does IOSS mean I do not charge VAT?

The opposite. IOSS means you charge the customer’s local VAT at checkout and remit it monthly. If a supplier or agency presents IOSS as a way to sell VAT-free into the EU, that is a misunderstanding of the scheme.

Which one do I need if I dropship from China?

If you hold no EU stock: not OSS. Either IOSS for parcels up to €150, or the route where your customer is the importer. Which is better depends on your average order value, your return rate and your margins — that is the calculation we run in the free assessment.

How we can help

We review, free of charge, which treatment applies to your flow of goods and whether your current setup holds up in practice. You send us your key details, we look at the supply chain, the shipping route and your target markets, and we come back within 48 working hours with a clear answer. If your structure does not fit the legal framework, we will say so.

Start the free VAT assessment · OSS and IOSS consulting · VAT rules per EU country · 25 questions dropshippers ask