Selling to EU consumers: threshold, OSS and VAT rates

The basic rule is in Section 3c(1) of the German VAT Act: the place of supply of an intra-Community distance sale is the place where the goods are located when the transport or dispatch to the customer ends. For an online shop this means, in practical terms: where the parcel arrives, the supply is taxed. A retailer from Hanover who ships a coffee grinder to a private customer in Graz makes a supply to Austria for tax purposes. Whether the customer speaks German, which card she pays with or where her billing address is located makes no difference to this question.

Distance sales are deliveries to consumers in another EU country where the retailer ships the goods or has them shipped. Sales to businesses with a valid VAT identification number follow different rules; how a shop handles business customers with net prices and a separate customer group is shown in the article Customer groups and net prices in a B2B online shop. For distance sales, the only thing that counts is that a private person in another EU country orders and the goods go there.

The exception for smaller retailers is in Section 3c(4) of the German VAT Act. The rule of the delivery country does not apply if distance sales to other member states in total 10,000 euros (Section 3c(4) German VAT Act) did not exceed the amount in the previous calendar year and do not exceed it in the current calendar year. Two terms in this sentence are decisive for the shop technology. "In total" means: there is one sum for all delivery countries combined, not a separate limit per country. "Current calendar year" means: the threshold can be crossed in the middle of the year, and then the new rule applies within the same year, not only after New Year's Eve. The law also counts certain services to consumers in other EU countries towards the sum (Section 3a(5) German VAT Act); if you offer services of this kind alongside goods, clarify the sum with your tax adviser.

Looking back is part of it. If the shop exceeded the threshold in the previous year, the rule of the delivery country applies from the first day of the new year, even if hardly anything goes abroad in January. The counter therefore needs two values: the closed previous year and the current year. Only if both are below the limit does the German VAT rate remain in place for parcels to other EU countries.

The market shows that this is not a niche question: according to Eurostat, 78 percent (Eurostat) of internet users aged 16 to 74 in the EU bought online in 2025. An online shop that is easy to find will sooner or later receive orders from Austria, the Netherlands or Belgium, often without any targeted advertising there. With an assumed basket of 80 euros, 10,000 euros is just 125 orders a year, spread across all EU countries.

Conversely, a retailer can waive the threshold. He declares to the tax office that he does not want to use the exception and then taxes in the delivery country from the first delivery on. The law attaches a commitment to this: the declaration applies for at least two calendar years (Section 3c(4) German VAT Act). For some shops this is the simpler solution, because there is no switch in the middle of the year and the technology calculates by delivery country from the start. Whether it pays off depends on the VAT rates of the destination countries and on the pricing model, more on that below. The retailer makes the decision with his tax adviser; the shop only has to be able to support both paths.

Most shop systems know tax rules, but the default setting is usually geared to domestic sales: one VAT rate per product, calculated according to the seller's location. Distance sales require three changes. The first concerns the basis of calculation. The VAT rate must follow the delivery address, not the billing address and not the selected language. If the billing and delivery addresses differ, the country the goods are sent to is what counts.

The second change concerns the products. If you store a fixed VAT rate in each product, you have to touch every product for each new delivery country. A tax class per product is more robust, for example "standard rate", "reduced food" or "reduced books". Which rate lies behind it is decided by a table per country. This way the same class points to the rate valid in each delivery country. Which goods are reduced in which country varies from country to country and belongs in the hands of your tax adviser, not in the guesswork of an employee.

The third change is the rate table itself. It needs a rate and a date from which it applies for every combination of country and tax class. VAT rates change: a country lowers a reduced rate or raises the standard rate. An entry with a valid-from date can be created in advance and then takes effect automatically, without anyone changing the table at midnight. The retailer maintains the current rates as specified by the tax adviser; the shop makes sure that a missing entry is not silently calculated at the German rate, but stands out.

The checkout shows whether the settings fit together. The country selection should only offer countries for which a shipping zone, shipping costs and a tax rule are set up. A country without a tax rule does not belong in the selection, even if the parcel service delivers there. If the customer changes the delivery country in the last step, VAT, order total and shipping costs must be recalculated immediately, before she clicks "Order with obligation to pay". Which payment methods customers abroad expect is a topic of its own; the article Online shop payment methods in 2026 sorts out the common options.

Because the threshold applies to all countries combined and can be crossed during the current year, the shop needs a counter that runs daily. It adds up the consideration for all distance sales to other EU countries; the law speaks of the total amount of consideration. What belongs in it in individual cases, for example shipping costs, is for your tax adviser to decide. Business customers with a valid identification number do not count, cancellations and refunds reduce the sum. Next to it is the previous year's value, which is fixed as soon as the year is closed.

Two warning levels make sense. The first is triggered when the sum reaches about three quarters of the threshold. That is the moment to talk to your tax adviser, check the rate table and prepare the OSS notification. The second is triggered when the threshold is reached. Then the rule of the delivery country must be active, from the point in time set by your tax adviser. Both warnings should not only appear in the admin area but also go by email to a named person so that they do not get lost in day-to-day business. Which key figures a shop should keep an eye on regularly anyway is described in the article Measuring website success.

Not every delivery to another EU country follows the pattern. Section 3c(5) of the German VAT Act excludes, among other things, the supply of new vehicles, goods that are supplied assembled or installed by the supplier or on his behalf, and supplies to which the margin scheme under Section 25a is applied. If you sell second-hand goods under the margin scheme, you need a separate tax class for them, which the counter and the report keep apart. The same applies to goods that are assembled at the customer's premises.

For goods subject to excise duty, such as wine, spirits or tobacco products, additional rules apply that go beyond VAT; here, too, the question belongs with your tax adviser before the first shipment. Anyone who ships such goods must also check the customer's age in addition to tax matters. What matters here is described in the article Age checks for alcohol and nicotine in online shops.

Switzerland and Norway are not part of the EU. Deliveries there are not intra-Community distance sales, they do not count towards the threshold and are not handled via the OSS procedure described here. Export and customs rules apply, which require a separate shipping route with its own tax rule in the shop.