VAT on sales of goods to the EU: OSS and distance sales

Selling goods to end customers in other member states has its own rules, and VAT on sales of goods to the EU is closely linked to the OSS scheme and distance sales. For e-shops this topic is essential, because it directly affects prices, administration and to whom and where you pay the tax. In this article we explain how the tax is applied, what the distance sales threshold means and when it pays to register for OSS.

Distance sales to end customers

If you sell goods to non-taxable persons, that is, consumers in other EU states, the place of supply shifts to the customer’s country once the set threshold is exceeded. This means that you should pay the tax in the country of consumption at its rate, not at the Slovak rate. Check the level of the common EU-wide threshold in the current version of the legislation, as it can change, and keep an eye on whether your sales exceed it. The threshold is calculated for all EU states combined, not for each country separately, which surprises many sellers and leads them to deal with registration late.

What the OSS scheme covers

So that you do not have to register for tax in each state separately, there is a one-stop shop, known as the OSS scheme. Through it, you declare and pay the tax for all member states at once by means of a single return filed in Slovakia, which greatly simplifies administration.

• one registration instead of several abroad
• one return for all EU states
• payment of the tax in one place in Slovakia
• less administration as the number of countries grows

When OSS pays off

If you regularly sell to several countries and exceed the threshold, OSS greatly simplifies administration and saves the cost of separate registrations abroad. With small volumes below the threshold, you can apply the domestic regime and invoice with Slovak tax, but it is worth keeping an eye on whether you are approaching the limit, so that exceeding it does not take you by surprise in the middle of the year.

Records and documents

Even under the OSS scheme, you must know and correctly apply the tax rates in force in the individual states and keep records of where the customer is located. Keep sales documents and customer data for the prescribed period, because they serve as evidence in the event of an audit. Rates differ between countries and change, so check them regularly and update them in your e-shop.

The difference between goods and services

The OSS scheme applies to sales of goods to end customers, but also to some services, such as digital ones. However, the rules for goods and services differ, so if you also provide electronic services alongside goods, assess their regime separately, so that you do not mix up different obligations and determine the place of taxation incorrectly.

A final recommendation

Getting VAT on sales of goods to the EU right protects your e-shop from tax arrears abroad as well as from unnecessary fines. If you are starting cross-border sales or growing quickly, discuss the set-up of your system, the thresholds and OSS registration with an expert who will help you set up your processes correctly from the start. This way you avoid finding out after the fact that you should have paid tax in some countries and having to pay it retrospectively along with a penalty.

Related articles: VAT on services supplied abroad: the place of supply, Transfer of tax liability (reverse charge) in practice, VAT registration under Sections 7 and 7a explained.

Frequently asked questions

Do I have to register for OSS, or is it voluntary?

Registration for OSS is voluntary and is meant as a simplification. The alternative is to register for tax directly in each state to which you sell above the threshold. However, OSS saves most e-shops a great deal of administration and cost.

How do I find out which tax rate to use?

For sales to end customers above the threshold, you use the rate in force in the country of consumption. Rates differ between countries and change, so always check them against current sources before setting up your e-shop.