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Selling online to consumers in the EU: 5 rules on the OSS
Step Inside Accounting · Practical guide
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1. Who this rule is for
This rule is for companies that sell to private individuals in other EU countries:
- Goods sold online and shipped to the customer in another country (e-commerce).
- Electronic services, such as online courses, software subscriptions, apps or digital content.
Sales to businesses in other EU countries follow different rules (see the article on selling to EU businesses).
2. The €10,000 a year threshold
Add up all these sales to private individuals in other EU countries, all countries together. As long as the total stays below €10,000 a year, and also did in the previous year, the company charges Portuguese VAT (IVA).
Once you pass €10,000, the sale that crosses the threshold and all the following ones pay the VAT of the customer’s country. Below the threshold, the company can also choose to apply the customer’s country VAT straight away.
Example
An online shop sells €6,000 to customers in France and €5,000 to customers in Spain during the year. The €11,000 total passes the threshold: from the sale that crosses €10,000 onwards, it charges French or Spanish VAT, depending on the customer, not Portuguese VAT.
3. The OSS saves registering in every country
Without the OSS, the company would have to register for VAT in every country where it has customers. With the OSS, it signs up on the Tax Authority’s portal (Portal das Finanças) and files a single quarterly return, with the sales and VAT for each country.
The return and payment are due by the end of the month after the quarter, and the Portuguese Tax Authority passes the VAT on to the other countries. Registration takes effect from the next quarter, but if you cross the threshold mid-quarter there is a short deadline to register with immediate effect.
4. The invoice uses the customer’s country rate
Each country has its own VAT rate. For example, the standard rate is 20% in France, 21% in Spain and 19% in Germany. Your invoicing software and online shop have to be set up to apply the right rate to each customer.
For electronic services, keep two pieces of evidence of where the customer is that do not contradict each other, for example the billing address and the country of the bank card or IP address.
5. Records and returns, even with no sales
Once in the OSS, you file the return every quarter, even if you sold nothing in that period. Sales records, with customer, country, amount and rate, must be kept for 10 years.
The profit on these sales still pays corporate tax (IRC) in Portugal. The OSS only changes the country where the VAT is paid.
Team tip
If you sell to other EU countries, track the year’s total month by month. When you get close to €10,000, talk to us so we can sign you up to the OSS in time and set up your online shop.
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This article is for information only and does not replace professional advice. Figures and rules are those in force at the date of publication and may change.
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