In 2025, EU-U.S. trade in goods exceeded €910 billion, roughly $1.056 trillion. The EU market is huge, and U.S. ecommerce brands that expand into it enjoy tremendous growth opportunities. However, they also face extensive tax compliance challenges, which often catch them off guard.
While U.S. sellers are all too familiar with the complexities of sales tax, the tax applied to goods and services is very different in the EU.
EU countries apply a value-added tax (VAT). Unlike U.S. sales tax, which is applied only at the final sale, VAT is collected at each step of the supply chain.
While companies can claim input VAT so that only the end consumer bears the burden of the tax, buyers and sellers operating in the EU still may have multiple obligations to collect and remit the tax.
This is made more complicated by the fact EU VAT rates and rules vary across member states.
So, does your U.S. business need to collect and remit EU VAT and, if so, how do you do it? The answer is typically yes for B2C sales. For B2B sales, VAT is frequently shifted to the customer through the reverse charge mechanism (more on that later), but registration obligations can still arise.
This guide explains how EU VAT applies to U.S. businesses, options for registration in EU countries, including One Stop Shop and Import One Stop Shop, upcoming changes to EU law, and how to invoice correctly.
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What is EU VAT?
U.S. sales tax is typically collected by sellers from buyers at purchase. All 50 states and many individual locations have their own sales tax rules.
When a seller establishes economic or physical nexus in an area, it must register, then collect and remit tax to the state.
Sales tax is only collected and remitted once, typically by the final B2C seller. Manufacturers and resellers usually provide exemption certificates when buying raw materials or goods to build or resell. This means they don't have to pay sales tax on the purchase.
EU VAT is different, as it's a consumption tax applied at each distribution and production stage. Companies collect VAT on taxable sales and may recover VAT paid for qualifying business purchases by claiming input tax credits. Private consumers generally can't claim input credits.
The VAT Directive in the EU created a harmonized framework for VAT compliance in the member states, but rates and rules still vary considerably among countries. While the minimum VAT rate is 15%, standard EU VAT rates range from 17% in Luxembourg to 27% in Hungary.
Since leaving the EU, the United Kingdom is no longer bound by the VAT Directive and no longer takes part in the European scheme. This means different VAT rules apply if your company is selling into the UK.
Does your U.S. business need to collect EU VAT?
Determining if your U.S. business must collect EU VAT is more complicated than you'd think, as there are multiple ways to trigger obligations. Many companies based in the U.S. are unaware they have a VAT liability until they are out of compliance and risk an audit and penalties.
It's a good rule of thumb to assume that if you're selling goods or services directly to EU customers (aka engaged in B2C sales), EU VAT rules likely apply. This is true regardless of where your business is incorporated or the sales volume within EU countries.
Before we move on, if you need help managing VAT compliance, we can help you monitor and fulfill obligations here at Numeral.
There are three triggers that could result in your business being required to collect VAT:
1) You ship physical goods from the U.S. to EU customers
If you ship orders from the U.S. directly to EU customers, import VAT and import duties are typically both due at the border.
The EU treats the import of goods as a taxable transaction, so anyone importing goods into the EU will be liable for VAT on the import as well as customs duty.
To make sure EU and foreign sellers are on a level playing field, VAT is collected at import, unless a special regime applies. EU sellers collect VAT at checkout, so if import VAT wasn't charged, a U.S. seller could sell goods VAT-free and would have a significant advantage.
Unfortunately, when VAT is collected at import, this creates problems. If VAT isn't prepaid, buyers must pay the import VAT before they collect their items. The postal operator or courier will collect the tax and fees, but this often frustrates customers who aren't expecting a charge.
The European Union created the Import One Stop Shop (IOSS) in part to avoid this outcome. Foreign companies selling into the EU can use IOSS to collect VAT at checkout for orders under €150 (~$165).
Under IOSS:
- When orders under the threshold are placed, the seller collects VAT from customers at checkout, charging the correct rate.
- The seller then files a monthly IOSS return and remits VAT payments to a single EU tax authority.
- The EU tax authority distributes the collected revenue to the correct member state.
Until July 1, 2026, the EU also had in place a €150 exception to customs duty (often called the de minimis exemption). This allowed low-value packages to come into the EU without customers owing customs duty, although VAT obligations could still apply. Together, IOSS and the de minimis exemption meant that for orders under €150, VAT was collected at checkout and no customs duty was charged at the border, so buyers received their packages without any unexpected fees at delivery.
That changed on July 1, 2026. At the end of 2025, the European Union agreed to eliminate the €150 de minimis exception, and as of July 1, customs duties are now owed even on low-value imports.
With the elimination of the de minimis exemption, customs duties now apply to all goods entering the EU. However, the full customs regime won't be applied to small packages entering the EU until a proposed EU customs data hub is up and running in 2028.
As an interim measure, so that imported goods can't enter duty-free, a flat €3.00 (approximately $3.30) customs duty now applies per item. As a result of this change, IOSS sellers must collect both VAT and the €3 duty at checkout.
When a package includes multiple units of the same product classification, the €3.00 fee is charged once. If a parcel contains different product classifications, it is subject to multiple €3 charges.
If sellers aren't part of IOSS, then both VAT and the €3.00 duty are collected at customs when items are sent. This is the scenario where the customer is asked to pay, but now there are two fees, adding even more potential friction for customers.
The EU is also still negotiating a possible separate €2 (~$2.20) per-parcel handling fee, expected no later than November 2026. This would be separate from VAT and from customs duties. It's not yet finalized, but if it goes into effect, the combined per-parcel charge (VAT aside) would reach €5.
It's also worth noting that, for now, the €150 IOSS eligibility threshold remains unchanged. However, regulators have been considering restructuring and expanding IOSS so sellers of higher-value goods could also collect VAT and duties at checkout and pay on a set schedule instead of upon importation. It's unclear if this will occur, though.
2) You're storing inventory in the EU via Amazon Pan-EU FBA or a 3PL
U.S.-based sellers (and other foreign sellers) may also trigger VAT registration requirements by using Amazon's Pan-European FBA Program. This program allows Amazon to store your inventory and move it automatically across EU countries.
Many sellers join Pan-EU FBA without understanding the full implications.
Specifically, if you're a participant, you may trigger VAT registration obligations in multiple countries and can't consolidate registration through a single OSS registration because the storage of your inventory in EU countries means you have a physical presence there.
To join Pan-EU, Amazon requires you to send products to an EU fulfillment center and enable inventory placement in at least two countries from among the list of Germany, France, Italy, Spain, or Poland.
You must register for VAT in all countries where Amazon stores your goods. So if you want to participate in FBA in Germany, France, Italy, Spain, and Poland, you would need to register in each of these five countries.
Even if you don't want to sell in all countries, you must provide at least two VAT registration numbers to sign up. Numeral can complete these registrations for you for a transparent flat fee with no long-term commitments required.
An expansion of OSS may help alleviate this issue starting in July of 2028. The ViDA package's Single VAT Registration (SVR) reform will expand OSS and enable reporting of stock transfers through a centralized process.
Once this change is made, movement of your own goods across countries will likely no longer be treated as a taxable cross-border transfer triggering separate registration requirements.
3) You're selling digital goods or services to EU consumers
In 2021, the EU ecommerce VAT package established new rules for the sale of digital goods and services, including SaaS, software downloads, courses, ebooks, and streaming apps. Under the new rules:
- EU-established businesses for TBE (telecommunications, broadcasting, electronically supplied) services can charge the VAT rate of their home country until a €10,000 EU-wide combined threshold for sales of digital and physical goods is met. Then, EU companies must charge VAT at the correct rate, following the correct rules for the destination country where the item is being sent. This applies to the distance sales of goods and electronically supplied services to consumers.
- Non-EU sellers must charge VAT at the destination country's VAT rate from the first sale, but can participate in the Non-Union OSS scheme. This allows them to register in a single EU country and submit quarterly returns in that country's portal for all digital service sales made directly to consumers. Numeral can register you for this scheme.
Unfortunately, many sellers of digital products in the U.S. are unaware that selling even a single subscription or eBook to an EU buyer can trigger a VAT obligation. Numeral's monitoring service helps you avoid these unfulfilled obligations and ensure you act proactively, not reactively.
What if you're selling B2B to EU businesses?
If you are selling directly to other businesses (B2B) in the EU, rather than to consumers (B2C), VAT compliance may be easier. That's due to the reverse charge mechanism.
Under the reverse charge mechanism, if you're outside the EU selling to a VAT-registered EU customer, VAT obligations typically shift to the buyer:
- You issue an invoice with no VAT charges.
- The buyer accounts for VAT when filing, paying the amount due, and claiming any import credits.
You must note on your invoice when the reverse charge mechanism applies. For example, your invoice language may state: "Reverse charge applies—VAT to be accounted for by the recipient under Article 196 of Council Directive 2006/112/EC."
You must also validate your buyer's VAT registration number using the EU's VIES system, as invalid VAT numbers jeopardize the reverse charge protection. To ensure you're audit-ready, retain a time-stamped record of each validation.
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EU VAT registration: OSS, IOSS, and direct registration
As soon as you have an EU VAT obligation, registration is the first step. There are three main paths to registering, depending on your business model:
1) One-Stop Shop (OSS)
One-Stop Shop allows companies to register in a single EU member state and to file a single quarterly return covering all 27 states. There is often no need for separate registrations, and you do not have to submit returns or remit tax in over two dozen countries as you otherwise might.
Registration for One-Stop Shop is open to EU-based businesses and, in some cases, to non-EU businesses holding inventory in an EU country, including companies whose inventory is held through Amazon FBA.
However, inventory storage generally still creates local VAT registration obligations. OSS is not a replacement for inventory-country registrations until the ViDA reforms take effect.
EU-based businesses typically do not need to register until their cross-border sales across all EU countries exceed €10,000 (approximately $11,500) per year. Below that threshold, they can register in their own home country and charge VAT based on their country's local rules.
Countries outside the EU do not have a €10,000 threshold and must register and begin collecting VAT under the rules of the customer's home country from the first sale.
OSS greatly simplifies tax compliance across the EU, as eligible companies register once, submit one return, and the tax authority in the registered country redistributes payments to the appropriate EU country. You can register for OSS online if you are eligible.
2) Import One-Stop Shop (IOSS)
Non-EU sellers who ship goods into the EU from outside the EU may take part in the Import One Stop Shop Scheme (IOSS).
Under current rules, you can use IOSS to fulfill VAT obligations on consignments valued at €150 (~$165) or less. IOSS covers only the physical sale of goods shipped direct to customers (B2C) from outside the EU. Digital goods and services aren't covered and go through Non-Union OSS.
If you register with IOSS, you collect VAT based on the rules in the destination country where the customer is located. Starting July 2026, you must also collect the €3 customs duty at checkout.
Registering for IOSS allows you to avoid a more complex process requiring both VAT and duty to be collected at delivery, potentially resulting in customers facing unexpected charges and abandoning packages.
To register for IOSS, you must appoint an EU-established intermediary, unless you're in a country with a VAT mutual assistance agreement with the EU. The U.S. isn't, so an intermediary is always required and typically costs €50–€200 (~$55–$220) per month.
3) Direct country registration
If neither OSS nor IOSS applies, you must register for VAT directly in each country where you have an obligation. This includes sellers with physical goods stored in the EU, including if you are holding inventory in multiple EU countries due to participation in Pan-EU FBA.
Direct registration must be completed through each country's national tax authority, and you must file local VAT returns on the schedule set by each country. You may also be required to appoint a fiscal representative to register in many EU countries.
This path is administratively intense. Most companies with multiple direct registrations choose to work with a VAT compliance service unless they have their own large in-house compliance department.
How to charge and invoice EU VAT correctly
After you have registered, you must charge the correct VAT rate at the point of sale. You also must ensure your invoice is VAT compliant in qualifying transactions.
Charging the correct VAT rate can be more complicated than you would think. The correct rate depends on:
- The destination country where the customer is located: For B2C transactions, that will generally be the customer's home country unless you are an EU seller who has sold under €10,000 in goods across the EU. Numeral's guide to EU VAT rates explains the different rates charged across the EU member countries.
- The product or service type: Some items are taxed at the standard rate, others at a reduced or super-reduced rate, and others are zero-rated. There are also exempt items that are outside of the VAT system.
- Whether the transaction is a B2C transaction or a B2B transaction with a verified VAT-registered business: If it is a B2B transaction and you have verified the buyer's VAT number, the reverse charge should apply, and you will issue a zero-rated invoice with a note to that effect.
If you are using OSS or IOSS, you will report the rate you charged each customer based on their destination country when you file your single return.
Pricing conventions in the EU are different from those in the United States. While U.S. prices are typically listed without sales tax included, in the EU, VAT-inclusive prices are displayed on most B2C sites.
Not including VAT in the displayed price will look incorrect and may violate EU consumer protection rules. You should build VAT into your displayed price for your EU storefront. Numeral can calculate the correct tax due in real time so you can charge your customers correctly.
EU VAT invoice requirements
VAT invoicing rules apply throughout the European Union. Depending on the transaction, you may be required to produce a simplified invoice or a full invoice. There are different requirements for each one.
For a full invoice, you must include:
- The date of issuance
- A unique sequential invoice number
- The supplier and customer's full names and addresses
- The customer's VAT identification number
- A description of the goods or services and quantity of goods and services supplied, as well as the unit price of goods or services exclusive of tax discounts or rebates
- The date of transaction or payment if it is not the same as the invoice date
- The VAT rate applied and amount payable, as well as a breakdown of VAT amount payable by rate or exemption
In some cases, extra information is required, such as the words "reverse charge" when the reverse charge procedure applies, or a reference to the margin scheme involved if applicable.
A simplified invoice, on the other hand, must include the date of issuance, a supplier's VAT identification number, the type of good or service supplied, and the VAT amount payable or the information needed to calculate it.
For cross-border B2B and intra-Community supplies, EU law generally requires invoices to be issued by the 15th day of the month following the supply date, though deadlines vary by country and transaction type.
Note that upcoming ViDA reforms will shorten this deadline to 10 days from the chargeable event once implemented.
If you're registered under OSS or IOSS, you also must retain your invoices and VAT records for 10 years. Retention requirements for direct country registrations vary by member state, typically ranging from 5 to 10 years.
Filing EU VAT returns
The filing frequency and deadline for submitting a VAT return will depend on which registration scheme you are using. The table below shows when returns are due:
If you miss a deadline under OSS, you could be excluded from the scheme and forced to return to direct registration in each country. This is one of the most significant compliance risks faced by any business relying on the simplified schemes.
Numeral can auto-file your returns for you, with each return reviewed by a tax expert before submission. This ensures you won't miss a deadline and jeopardize your continued ability to take a simplified approach to VAT compliance.
Consequences of non-compliance with EU VAT
The EU has numerous compliance mechanisms in place, and member states impose penalties for non-compliance.
Compliance enforcement mechanisms for digital sales
Deemed supplier rules are the primary enforcement mechanism for EU VAT, and they actually make compliance easier for many sellers. These rules were put into place beginning July 2021 due to the VAT ecommerce package.
Under these rules, online marketplaces or platforms like Amazon or Etsy that facilitate the supply of goods are considered to have received and supplied the goods for VAT purposes. Deemed suppliers become responsible for collecting and remitting VAT on B2C sales.
Your sales on these platforms will be reported, so taxing authorities can cross-reference this information to confirm whether all companies with registration and remittance obligations are complying.
The DAC7 directive also imposed reporting requirements for digital platforms, which must share seller income information with tax authorities across EU member states. This provides cross- border visibility into sales activity, enabling revenue authorities to better identify non-compliance.
ViDA (VAT in the Digital Age)
ViDA took effect in April 2025, after being formally adopted and published in March of 2025. The goal is to make VAT reporting more digital, to reduce fraud, and to provide taxing authorities with more visibility into cross-border transactions.
ViDA made multiple changes to VAT rules, but many of the changes were phased in over time. Specifically:
- OSS will expand to cover electricity and gas suppliers. This will allow suppliers to report VAT through a single portal. Energy markets have become increasingly cross-border, and the EU wants consistent VAT treatment across all digital and cross-border sectors. (Scheduled for 2027)
- Deemed supplier rules will be extended to accommodation and passenger transport platforms. This shifts the compliance obligation to marketplaces and booking platforms, rather than individual sellers, to maximize collected revenue (Expected July 2028)
- Single VAT Registration (SVR) will be implemented. Today, a company storing inventory in multiple EU countries often needs multiple VAT registrations. Under SVR, more of these transactions can be handled through a single VAT registration due to the expansion of OSS to cover cross-border movement of your own goods. (Expected July 2028).
- The reverse charge mechanism will become mandatory for non-identified suppliers. This will result in more EU buyers being required to report and remit tax payments. (Expected July 2028)
- Mandatory e-invoicing and digital reporting requirements will go into effect for cross-border B2B transactions. This will provide more real-time visibility into taxable transactions and will improve accuracy in reporting. (expected July 1, 2030)
- Full harmonization. By 2035, member states that currently operate their own domestic digital reporting systems must transition into the EU-wide framework so that there is a single VAT ecosystem. (expected 2035)
Although the changes are being phased in, U.S. companies should establish compliance systems sooner rather than later, before ViDA's enforcement mechanisms tighten and change becomes essential, not optional.
Penalties for VAT non-compliance
Penalties for VAT non-compliance vary by country but are material. For example:
- Germany imposes late filing penalties up to 0.25% of assessed tax per month of delay, with a minimum penalty of €25 per month ($28.81) and a maximum of €25,000 (approximately $27,500).
- Portugal imposes fines for incorrect filing totaling up to €3,750 ( approximately $4,100)
Penalties can also include past-due VAT, interest charges, and, in some cases, restrictions on participation in VAT schemes.
How Numeral handles EU VAT compliance
With multiple registration schemes and different ways to trigger registration, complying with VAT obligations is incredibly complicated. But not with Numeral's help.
Numeral handles VAT compliance in over 80 countries, including all EU member states, and manages the full required workflow. This includes:
- Determining when registration is required
- Completing registration with OSS, IOSS, Non-Union OSS, or direct registration, including facilitating a partnership with fiscal representatives when required
- Collecting the correct VAT tax
- Filing VAT returns on schedule
- Remitting payments
When you expand into Europe, Numeral will integrate directly with Shopify and with other platforms to calculate the correct VAT rate based on the country and the item, and will automatically collect EU transaction data for filing purposes.
Numeral offers a free monitoring plan to help you determine when different registration options are triggered. We charge flat rates for filing and registration and there is no long-term commitment required.
Book a demo with Numeral to learn how we can help with global tax compliance.
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EU VAT compliance FAQs
Do U.S. businesses have to pay EU VAT?
U.S. businesses are often required to register for VAT and to collect and remit VAT from the first sale into EU countries. This is true regardless of where the business is incorporated.
B2B sales to EU businesses with valid VAT numbers are typically exempt as the reverse charge mechanism can be used to transfer the VAT obligation to the buyer. This is possible as long as the buyer is VAT-registered. These transactions typically require an invoice with a notation that reverse charge applies.
What is the EU VAT threshold for U.S. sellers?
In general, there is no EU VAT threshold for U.S. sellers. In the EU, businesses with under €10,000 in cross-border sales to all EU countries can simply collect VAT in their home country. U.S. businesses do not have that option, and the obligation starts with the first sale.
However, there are different options for U.S. sellers offering low-value goods. For example, companies selling goods under €150 (~$165) can use the IOSS scheme to register in one country, collect VAT at checkout and remit one VAT report. Companies selling digital goods are also responsible for VAT from the first sale, but can register for the Non-Union OSS scheme.
What is the difference between OSS and IOSS?
One Stop Shop (OSS) is for businesses established in the EU, or non-EU businesses that store inventory in the EU (including through Amazon's Pan-European FBA program). It allows you to register in one EU member state and submit a single quarterly VAT return covering all 27 states.
Import One Stop Shop (IOSS) is for non-EU sellers who ship consignments valued at under €150 into the EU from outside the European Union. It offers the opportunity to collect VAT at checkout and, beginning in July 2026, to also collect a €3 customs duty at checkout so customers don't face unexpected charges at delivery.
Does selling on Amazon EU mean I need to register for EU VAT?
If you sell on Amazon and use Amazon's Pan-European FBA program, you may need to register for VAT sooner than you'd think in multiple countries. When you are part of the FBA program, your inventory is distributed among multiple countries, triggering VAT registration in each one regardless of transaction volume.
However, it's worth noting that Amazon is a deemed supplier for eligible marketplace-facilitated transactions within the EU and will collect and remit VAT for on-platform transactions as a result. This does not necessarily eliminate registration requirements, including direct registration requirements based on inventory storage.
What happens if I sell to EU businesses without charging VAT?
If you sell to an EU business and you are outside of the EU, you may not need to charge VAT because of the reverse charge mechanism. Reverse charge shifts the burden of VAT compliance to the buyer if the buyer is VAT-registered.
You'll need to confirm the customer's VAT registration number is valid and issue a zero-rated invoice, noting that reverse charge applies. If you fail to fulfill these obligations, you may be liable for VAT and could face penalties and interest if you don't collect and remit payment.
What is ViDA, and how does it affect U.S. sellers?
ViDA stands for VAT in the Digital Age. It is a reform package adopted in the EU in March 2025 that is being phased in over time through 2035.
ViDA will usher in multiple changes, including single VAT registration beginning in July 2028, as well as mandatory e-invoicing and digital reporting of cross-border B2B transactions beginning July 2030.
While many changes are still in the implementation process, the near-term effect of ViDA is that digital platforms have expanded reporting requirements, which will result in tighter enforcement and increase the risk of companies facing consequences for failure to register and remit VAT as required.
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