If you run a Shopify store and sell to customers in Europe, EU VAT is unavoidable. The rules have evolved significantly since 2021's OSS reform, and 2026 brings further changes — particularly around customs duties, IOSS thresholds, and e-invoicing obligations in key markets.
This guide covers everything you need: OSS vs IOSS explained, registration thresholds, filing deadlines, Shopify-specific configuration, and what's new in 2026. No fluff, no generic tax advice — just the specific rules that apply to you.
What Is EU VAT and Why Does It Apply to You?
The EU imposes Value Added Tax (VAT) on goods and services consumed within its member states. As a non-EU merchant selling to EU consumers, you are required to collect and remit VAT in most circumstances — regardless of where your business is registered.
The key rule: VAT is due in the country of the customer, at that country's rate. With 27 EU member states and rates ranging from 17% (Luxembourg) to 27% (Hungary), this creates significant compliance complexity for Shopify merchants.
Many Shopify merchants assume EU VAT only applies if they have a physical presence in Europe. This is wrong. Distance selling rules mean EU VAT applies to B2C sales regardless of where your business is located. Ignoring this creates retroactive tax liability.
OSS vs IOSS: Which Scheme Applies to You?
The EU introduced two simplified registration schemes in July 2021 to avoid requiring separate registrations in each country. Which one applies depends on your goods and where they're stored.
OSS (One-Stop Shop)
OSS covers digital services and goods already held in EU warehouses. If you use Shopify Fulfillment Network or a 3PL with EU stock, your cross-border EU-to-EU sales go through OSS.
- Threshold: €10,000/year in cross-border B2C sales to EU customers (combined across all EU countries)
- Registration: One registration in a single EU member state
- Filing: Quarterly OSS returns (Jan–Mar, Apr–Jun, Jul–Sep, Oct–Dec)
- Payment: In the country of registration, which distributes to destination countries
IOSS (Import One-Stop Shop)
IOSS applies to goods imported into the EU from outside — typically merchants shipping directly from the US, UK, China, or other non-EU countries to EU customers.
- Threshold: Goods valued at €150 or under per consignment
- Registration: One EU-country registration (or via an EU intermediary if you're non-EU)
- Benefit: VAT-paid at checkout → faster customs clearance, no surprise charges for customers
- Filing: Monthly IOSS returns
IOSS only covers consignments under €150. For shipments above €150, standard import VAT and customs duties apply at the border. The customer or carrier handles this, which often causes parcel refusal — a significant conversion problem for high-AOV merchants.
| Scheme | Applies To | Threshold | Filing | Best For |
|---|---|---|---|---|
| OSS | EU-held stock, digital services | €10,000/yr B2C | Quarterly | EU fulfillment centers |
| IOSS | Imported goods ≤ €150 | No minimum | Monthly | Direct-to-consumer imports |
| Local Registration | Goods > €150, or B2B | Country-specific | Varies | High-AOV or B2B merchants |
EU VAT Rates in 2026: What You Need to Know
Every EU country sets its own VAT rate within EU minimum rules (15% standard minimum). As a Shopify merchant, you need to charge the correct rate for each country and each product type.
Key rates for common e-commerce categories:
| Country | Standard Rate | Reduced Rate | Super Reduced |
|---|---|---|---|
| 🇩🇪 Germany | 19% | 7% | — |
| 🇫🇷 France | 20% | 10% / 5.5% | 2.1% |
| 🇮🇹 Italy | 22% | 10% / 5% | 4% |
| 🇪🇸 Spain | 21% | 10% | 4% |
| 🇳🇱 Netherlands | 21% | 9% | — |
| 🇵🇱 Poland | 23% | 8% / 5% | — |
| 🇸🇪 Sweden | 25% | 12% / 6% | — |
| 🇭🇺 Hungary | 27% | 18% / 5% | — |
| 🇱🇺 Luxembourg | 17% | 14% / 8% | 3% |
🔍 Check Any EU VAT Rate Instantly
Our VAT Rate Engine covers all 27 EU countries and 25 product categories. Look up the exact rate for your goods in under 10 seconds — or generate a full OSS filing report from your transaction data.
Use VAT Rate Engine →IOSS Registration in 2026: What Changed
IOSS has been operational since July 2021 but 2026 brings changes that affect all importers.
The €150 Threshold Under Pressure
Customs reform proposals (discussed further in our customs reform guide) may adjust import thresholds. The current €150 IOSS ceiling has been debated but as of Q2 2026, the €150 threshold remains in effect. However, July 2026 introduces a new €3/item customs duty on top of import VAT — a major additional cost for low-margin merchants.
IOSS Registration Requirements for Non-EU Merchants
If you're based outside the EU, you cannot register for IOSS directly. You need an EU-established intermediary (typically a fiscal representative or tax agent) to register and file on your behalf. Key requirements:
- One registration in any EU member state (most merchants choose Ireland, Netherlands, or Luxembourg)
- Monthly VAT returns filed by the 20th of the following month
- Keep records for 10 years
- Your IOSS number must be provided to carriers for customs clearance
Filing Deadlines You Can't Miss
| Scheme | Period | Filing Deadline | Payment Deadline |
|---|---|---|---|
| IOSS | Monthly | 20th of following month | Same as filing |
| OSS | Q1 (Jan–Mar) | 30 April | 30 April |
| OSS | Q2 (Apr–Jun) | 31 July | 31 July |
| OSS | Q3 (Jul–Sep) | 31 October | 31 October |
| OSS | Q4 (Oct–Dec) | 31 January | 31 January |
IOSS late filing results in immediate exclusion from the scheme for 2 years in the most severe cases. Missing even one monthly deadline can trigger a compliance review. OSS late payments accrue interest at country-specific rates (typically 0.5–3% monthly).
Shopify VAT Configuration: The Basics
Shopify's tax engine handles EU VAT automatically for OSS if configured correctly. Here's what you need to set up:
1. Enable EU VAT Collection
In Shopify Admin → Settings → Taxes and Duties, add each EU country where you're registered or using OSS. Shopify will apply the correct VAT rate based on the customer's shipping address.
2. Validate Your Prices
EU law requires that prices shown to consumers include VAT. Shopify's "Include tax in price" setting must be enabled for EU markets — otherwise you'll be charging VAT on top of displayed prices, creating refund issues and potential consumer protection violations.
3. Set Up IOSS Number
If you're IOSS-registered, add your IOSS number to Shopify's customs settings. This ensures it appears on commercial invoices for EU shipments, enabling customs officials to verify VAT has been paid at checkout.
4. Export Transaction Data for OSS Reporting
For your quarterly OSS return, you'll need transaction totals by destination country. Shopify's standard reports provide this, but you may need to categorize by product type for accurate rate application. Our OSS Report Generator can process your CSV export directly.
When You Need a Direct Country Registration
OSS and IOSS simplify compliance but aren't always sufficient. You need a direct VAT registration in an EU country if:
- B2B sales: OSS doesn't cover B2B transactions — these require local registration in the customer's country (or the customer handles via reverse charge if they have a VAT number)
- Goods above €150: IOSS doesn't apply — import VAT is handled at the border
- Local stock: If you hold inventory in an EU warehouse, you may need a local registration regardless of OSS
- Distance selling threshold breach per country: Some legacy thresholds may require direct registration in specific countries
- Fiscal representation required: Certain countries (historically France, Greece) have required fiscal representatives for non-EU merchants
📋 French VAT Registration Guide
France is one of the more complex EU registrations — fiscal representation rules, e-invoicing mandates from September 2026, and strict documentation requirements. Our guide walks through the full process.
View Registration Guide →What's New for EU VAT in 2026
E-Invoicing Mandates Expanding
Multiple EU countries are introducing mandatory e-invoicing for B2B transactions in 2025–2026. France's mandate takes effect in September 2026. Germany's B2B e-invoicing requirement for receiving e-invoices is already live. If you have EU B2B customers, you need to support structured invoice formats (Factur-X, XRechnung, PEPPOL UBL).
Customs Duty Reform — July 2026
The most impactful change for Shopify merchants: a new €3/item customs duty on all e-commerce parcels imported into the EU, effective July 1, 2026. This applies on top of existing VAT and duties. A merchant shipping 10,000 orders/month faces €30,000 in additional monthly costs. See our full customs reform analysis.
IOSS Enforcement Tightening
EU customs authorities have increased monitoring of IOSS compliance. Shipments with incorrect IOSS numbers, undervalued goods, or missing documentation are being intercepted and held — causing delays and customer complaints. Ensure your carrier integrations correctly include IOSS numbers on all sub-€150 shipments.
Action Checklist for Shopify Merchants
- Determine which scheme applies: IOSS (shipping from outside EU), OSS (shipping from EU stock), or both
- Register for the appropriate scheme — engage a tax agent for IOSS if non-EU
- Configure Shopify tax settings: enable EU VAT, set "include tax in price", add IOSS number
- Verify your carrier passes the IOSS number on commercial invoices
- Set calendar reminders for filing deadlines (monthly for IOSS, quarterly for OSS)
- Review B2B sales — OSS doesn't cover these, check if direct registrations are needed
- Model customs duty impact for July 2026 reform using our calculator
- Check if your key EU markets require e-invoicing support for B2B
Get the Full EU Compliance Checklist
A complete checklist covering IOSS setup, OSS filing, customs duty prep, and e-invoicing — formatted for Shopify merchants. Free.
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Getting Professional Help
EU VAT compliance isn't something to guess at. Retroactive assessments can cover up to 5 years of sales, and penalties in some countries exceed 100% of the underpaid tax. For merchants with material EU revenue, working with a specialist is cheaper than the risk.
Our partner Cyplom handles EU VAT registrations, OSS/IOSS setup, and ongoing filing for Shopify merchants. They specialize in e-commerce tax compliance and know the Shopify platform specifically.