EU VAT reverse charge and OSS explained

What the reverse charge and the One Stop Shop are

The EU VAT reverse charge moves the duty to account for VAT from the supplier to the business customer on most cross-border business-to-business supplies, while the One Stop Shop (OSS) lets a business selling to consumers in other EU countries declare their VAT on one quarterly return at home. It matters because the two schemes decide what VAT appears on every cross-border invoice.

Both rest on the VAT Directive, Council Directive 2006/112/EC, which every member state transposes into national law. The reverse charge keeps VAT neutral between businesses: the customer declares the VAT and, if fully taxable, deducts it on the same return. The OSS exists because sales to consumers are taxed where the consumer is, and registering in every member state would be impractical for a small online seller.

This guide works through the rules a finance team applies every day, with worked examples in euro and the standard rates listed by the European Commission as of September 2026: for example 19% in Germany, 20% in France and Austria, 21% in the Netherlands, Belgium and Spain, 23% in Ireland and 25.5% in Finland.

Four questions that decide the VAT on a cross-border sale

Every cross-border invoice can be settled by answering four questions in order. The answers point to one of a small number of outcomes: charge your own country's VAT, charge the customer's country's VAT through OSS, charge no VAT because the customer reverse charges, or zero-rate an export.

• Is it goods or services? Goods follow the transport; services follow the place-of-supply rules
• Is the customer a business with a valid VAT number, or a consumer?
• Where is the place of supply under the Directive's rules and exceptions?
• Who is liable: the supplier, or the customer under the reverse charge?
• Goods to an EU business: exempt intra-Community supply, customer declares acquisition VAT
• Services to an EU business: usually no VAT, customer reverse charges
• Goods and electronic services to EU consumers: home VAT up to EUR 10,000, then the customer's country's VAT via OSS; most other services to consumers: the supplier's VAT (Article 45)
• Goods leaving the EU: export, zero-rated with proof of export

Goods to EU businesses: the intra-Community supply

A supply of goods dispatched from one member state to a business customer in another is exempt in the supplier's country, which in practice means invoiced without VAT, under Article 138 of the Directive. Since the 2020 quick fixes (Directive (EU) 2018/1910, applicable from 1 January 2020) the exemption has two substantive conditions beyond the transport itself: the customer must be identified for VAT in another member state and must have given the supplier that VAT number, and the supplier must report the supply correctly on its recapitulative statement. Check the number in the Commission's VIES service and keep the result.

The supplier also needs evidence that the goods actually left. Article 45a of Implementing Regulation 282/2011 creates a presumption of transport when the supplier holds two non-contradictory documents from independent parties, such as a signed CMR and an insurance policy or bank record for the transport. Without evidence, a tax authority can deny the exemption and assess domestic VAT.

The customer then declares an intra-Community acquisition in its own country, charging itself VAT at the local rate and, if it makes taxable supplies, deducting the same amount on the same return. The tax is recorded, but no cash changes hands.

Services to EU businesses: the general rule and its exceptions

For services supplied to a taxable person, the general rule in Article 44 of the Directive places the supply where the customer is established. When the supplier is established in another member state, Article 196 makes the customer liable for the VAT. The supplier invoices without VAT, shows the customer's VAT number and states that the reverse charge applies, and the customer declares output VAT and deducts it as input VAT.

The general rule covers most professional, consulting, software, advertising and digital services. The exceptions are where errors cluster, because the place of supply moves to where something physically happens and the supplier may have to register there.

For services to consumers the default is the opposite: Article 45 taxes them where the supplier is established, so a consultant advising a private individual in another member state normally charges home VAT. The main consumer exception is telecommunications, broadcasting and electronic services, taxed where the consumer lives under Article 58, which is why they fall within the EUR 10,000 threshold and the One Stop Shop described below.

• Services connected with immovable property: where the property is (Article 47)
• Admission to cultural, sporting, educational and entertainment events: where the event takes place (Article 53)
• Restaurant and catering services: where they are physically carried out (Article 55)
• Short-term hire of means of transport: where the vehicle is put at the customer's disposal (Article 56)
• Passenger transport: where the transport takes place, in proportion to distances covered

Worked examples: goods and services between businesses

Goods. A Dutch wholesaler sells EUR 20,000 of equipment to a VAT-registered customer in Belgium and ships it from Rotterdam to Antwerp. The invoice carries no Dutch VAT, quotes both VAT numbers and refers to the intra-Community supply exemption. The Dutch wholesaler posts Dr Trade receivables 20,000 / Cr Revenue, intra-EU supplies 20,000 and reports EUR 20,000 on its Dutch VAT return and its recapitulative statement. The Belgian customer self-assesses Belgian VAT at 21%, EUR 4,200, and deducts it in the same period.

Services. An Irish software consultancy invoices EUR 5,000 of implementation services to a German company. The place of supply is Germany under Article 44, and the German customer is liable under Article 196. The invoice shows no VAT and the words reverse charge. The German customer declares output VAT of 19%, EUR 950, and deducts EUR 950 as input VAT; the consultancy reports EUR 5,000 as a service on its recapitulative statement.

• Belgian customer: Dr Inventory 20,000 / Cr Trade payables 20,000
• Belgian customer: Dr VAT recoverable 4,200 / Cr VAT on intra-EU acquisitions 4,200
• German customer: Dr Consulting expense 5,000 / Cr Trade payables 5,000
• German customer: Dr VAT recoverable 950 / Cr VAT payable, reverse charge 950
• Net VAT effect for a fully taxable customer: nil

The EC Sales List (recapitulative statement)

The recapitulative statement, known in English-speaking countries as the EC Sales List, lists each customer's VAT number and the total value of intra-Community supplies of goods and reverse-charged services supplied to that customer in the period. Tax authorities exchange these lists and match them against the customers' declared acquisitions, which is why a missing or wrong entry can now cost the goods exemption itself.

Frequency and deadlines are national within limits set by the Directive. Germany's rules are typical: the statement is due on the 25th day after the end of the reporting period, electronically; it is monthly when intra-Community supplies of goods and triangular supplies exceed EUR 50,000 in the current calendar quarter or in any of the four previous quarters, and otherwise quarterly. A business that crosses EUR 50,000 during a quarter switches to monthly filing at once. Germany also compares each statement with the VAT returns, so the two must agree.

The statement reports values, not VAT, and the amounts must be in the period of the tax point. The simplest control is a monthly reconciliation of the recapitulative statement to the zero-rated intra-EU sales accounts and to the relevant boxes of the VAT return before either is filed.

Selling to consumers: the EUR 10,000 threshold

Intra-Community distance sales of goods to consumers in other member states are taxed where the goods arrive, and telecommunications, broadcasting and electronic (TBE) services where the consumer lives. A single EU-wide threshold, extended to goods on 1 July 2021, softens this for small sellers: a supplier established in only one member state may keep charging its home VAT while the total of these cross-border sales does not exceed EUR 10,000, excluding VAT, in the current and the preceding calendar year.

As soon as the threshold is exceeded, the general rule applies without exception. The threshold is one combined figure for goods and TBE services, not a figure per country, and it does not apply to other services or to imported goods. A seller below it may opt for destination taxation, and is then bound by that choice for two calendar years.

Example. An Irish online shop sold EUR 6,000 to consumers in other member states in 2025. By 20 June 2026 its 2026 cross-border consumer sales reach EUR 9,400. On 21 June it ships a EUR 1,000 order to Lyon, taking the year to EUR 10,400. That order and every later cross-border consumer sale is taxed in the customer's country, so the Lyon order carries French VAT at 20%, EUR 200, not Irish VAT at 23%. Because the threshold was exceeded in 2026, all of 2027 is taxed at destination too.

The One Stop Shop: Union, non-Union and import schemes

The OSS lets a business register in one member state, its member state of identification, and declare VAT due in other member states on one electronic return. The Union scheme covers intra-Community distance sales of goods and services to consumers supplied by EU businesses in member states where they are not established. The non-Union scheme covers services to EU consumers supplied by businesses established outside the EU. The import scheme, IOSS, covers distance sales of goods imported from outside the EU in consignments with an intrinsic value not exceeding EUR 150, excluding goods subject to excise duties.

The Union and non-Union returns are quarterly and due by the end of the month after the quarter: 30 April, 31 July, 31 October and 31 January. The IOSS return is monthly. The deadline does not move when it falls on a weekend or public holiday, payment is due with the return, and a nil return is required for a quarter with no supplies. Registration normally takes effect from the first day of the next calendar quarter, or from the first supply if the member state of identification is told by the 10th day of the following month.

Two limits catch businesses out. The OSS return declares output VAT only: VAT incurred in other member states is reclaimed through the separate refund procedure or a local registration, not deducted on the OSS return. And OSS records must be kept for 10 years from the end of the year of the transaction and made available electronically on request.

Worked example: one OSS quarter

The Irish shop above files its Union scheme return for July to September 2026 with the Irish Revenue as member state of identification. Its cross-border consumer sales for the quarter are EUR 25,000 net, split by country and taxed at each country's rate. The return is due, and the VAT payable, by 31 October 2026, in a single payment to Ireland, which passes each country's share on.

In the ledger each sale posts Dr Cash or card clearing, Cr Revenue and Cr an OSS VAT payable account per destination country; for the quarter that is Dr Cash 29,930 / Cr Revenue 25,000 / Cr OSS VAT payable 4,930. The shop's domestic Irish sales, and its purchases and input VAT, stay on its normal Irish VAT return. Keeping OSS VAT on separate accounts by country makes the return a direct read of the ledger.

• Germany: EUR 12,000 at 19% = VAT 2,280
• France: EUR 8,000 at 20% = VAT 1,600
• Netherlands: EUR 5,000 at 21% = VAT 1,050
• Total: EUR 25,000 net, VAT 4,930, due by 31 October 2026

ViDA: what changes in 2027, 2028 and 2030

The VAT in the Digital Age package (ViDA) entered into force on 14 April 2025 and phases in over a decade. According to the European Commission's timeline, small clarifications affecting OSS and IOSS users apply from 1 January 2027. From 1 July 2028 the single VAT registration measures start: the OSS schemes are extended, a transfer of own goods module is introduced, and a mandatory reverse charge applies where a supplier not identified in a member state supplies a customer who is. Platforms for short-term accommodation rental and passenger transport by road become deemed suppliers from the same date, although member states may delay this until 1 January 2030.

From 1 July 2030 digital reporting requirements apply to cross-border business-to-business supplies, and by 1 January 2035 member states with domestic real-time reporting must align them with the EU model. For finance teams, the practical consequence is that the customer VAT numbers, place-of-supply decisions and tax codes that support today's recapitulative statement become transaction-level data that must be right on the day of the invoice.

Doing this in Skyline Nexus ERP

Skyline Nexus ERP handles the ledger side of cross-border VAT through its tax rates and tax groups. Each rate is a single percentage with a VAT category, so a 0% rate for intra-Community supplies and reverse-charged services, and each destination country's rate for OSS sales, are set up as separate rates chosen on the sale line. Customers carry a tax number field, imported with the contact list, which is where the VAT number for the recapitulative statement is held. With auto-posting on, each final sale posts revenue and output tax per line in the background, and the VAT Analysis report lists input and output tax from the ledger for the period, the starting point for reconciling the VAT return, the recapitulative statement and the OSS return.

Business locations let a group run a branch per country with its own invoice numbering, and the trial balance, profit and loss and balance sheet filter by branch. Foreign-currency invoices can be issued with a manually entered exchange rate while the ledger stays in the base currency. EC Sales List, OSS and ViDA reporting files are being rolled out market by market; tell us your countries and we will confirm your go-live date. Until then, sales and returns can be exported to Excel in the Audit Pack workbook, and sales, contacts and taxes can be read through the Connector REST API by an integration partner, to prepare the filings.