VAT for E-commerce in the EU
A complete guide to EU VAT obligations for Estonian online sellers — place of supply rules, the 2021 reform, B2B reverse charge, IOSS for imports, marketplace deemed supplier rules, and every threshold that matters.
5 Key Takeaways From This Page
For physical goods, it is usually where the goods are located when control transfers. For services, it depends on whether the customer is a business or consumer. Getting this wrong means charging the wrong rate — or failing to charge at all.
Selling to a VAT-registered business in Germany triggers reverse charge — you charge 0% and the client accounts for their own VAT. Selling to a German consumer means you owe German VAT. The buyer type determines everything.
Stock held in an EU warehouse — even via Amazon FBA — creates a local VAT presence. OSS does not cover sales where both the goods and the buyer are in the same EU country. Warehouse locations and VAT registrations must align.
After the 2021 reform, Amazon, Etsy and other EU marketplaces act as deemed supplier for many cross-border B2C sales. They collect and remit VAT — but specific conditions apply. Understanding which transactions they cover prevents double-charging.
Electronically supplied services (e-books, software downloads, streaming, SaaS) have their own place-of-supply rule — always where the consumer is located. This rule applies regardless of whether you use a marketplace or sell direct.
What EU VAT rules apply to an Estonian e-commerce business? An Estonian OÜ selling goods or digital products across the EU faces a layered VAT framework: Estonian registration for domestic sales, OSS for cross-border B2C sales above €10,000, IOSS for imports of goods under €150, reverse charge for all EU B2B sales, and potentially local VAT registration in countries where stock is held. This page explains every layer — from first principles to the specific rules for physical goods, digital services, and marketplace sales.
Section 1 — The 2021 EU VAT Reform: What Changed and Why It Matters
How the Single EU VAT Area replaced 27 national thresholds and created OSS as the compliance mechanism
Before 1 July 2021: The Old System
Before the reform, each EU member state had its own distance-selling threshold — the revenue level above which a seller from another EU country had to register for VAT locally and charge local VAT. Thresholds ranged from €35,000 (Germany, Netherlands, Luxembourg) to €100,000 (the UK while still in the EU). Below the threshold, the seller charged their home country’s VAT (22% Estonian VAT) on all EU B2C sales.
| System | Distance-Selling Thresholds | VAT on EU B2C Sales Below Threshold | VAT on EU B2C Sales Above Threshold |
|---|---|---|---|
| Pre-2021 (old) | 27 different thresholds (€35K–€100K per country) | Home country VAT (22% Estonian) | Local country VAT — local registration required |
| Post-2021 (current) | Single EU-wide threshold of €10,000 total B2C | Home country VAT (if below €10K total EU B2C) | Destination country VAT — use OSS or register locally |
🔄 OSS (One-Stop-Shop) | 📦 IOSS (Import OSS) | 🏪 Deemed Supplier Rules | 🗑️ Abolition of €22 Import Exemption
Section 2 — Place of Supply: Physical Goods
The rules that determine which country’s VAT applies to each goods transaction
The General Rule for Physical Goods
For physical goods, the place of supply is generally the location of the goods at the time control transfers to the buyer. The distance-selling rule states that when goods are dispatched from one EU country to a buyer in another EU country, the place of supply moves to the destination country for B2C sales above the €10,000 threshold.
When you use Amazon FBA and your goods are stored in a German warehouse, a sale to a German consumer is not a distance sale from Estonia — it is a domestic German sale. This transaction is completely outside the OSS scheme and requires a German VAT registration.
Section 3 — Place of Supply: Digital Services and E-content
Special rules for electronically supplied services — what qualifies and how VAT applies
What Counts as an Electronically Supplied Service
Electronically supplied services (ESS) have their own place-of-supply rule that overrides the general service rule. For ESS, the place of supply is always where the consumer is located — regardless of where the seller is established or where the service is technically delivered from.
If your digital product requires significant human input per customer delivery — a custom design, a one-to-one coaching call — it is not ESS. If it is automated delivery of a standardised product (a download, an access key), it is ESS.
Section 4 — The €10,000 EU B2C Threshold
How to measure it, what counts, what happens when you cross it, and the decision to register early
Exactly What the Threshold Measures
The €10,000 threshold applies to the total value of cross-border B2C supplies of goods and electronically supplied services to consumers in other EU member states. It is an EU-wide cumulative threshold — all EU countries added together, not any individual country.
| Scenario | EU B2C Sales | OSS Required? | Action |
|---|---|---|---|
| New seller | €0 | No | Charge 22% Estonian VAT on all EU B2C sales |
| Small seller | €6,500 | Optional | May choose to register OSS voluntarily |
| Crosses €10K mid-year | €10,001 | REQUIRED | Register for OSS immediately |
| Established seller | €45,000 | Active | File quarterly OSS return |
Section 5 — B2B Reverse Charge: Selling to EU Businesses
Why 0% is the correct rate on EU B2B invoices, how to verify the buyer, and what happens if verification fails
How Reverse Charge Works
When you supply goods or services to a VAT-registered business in another EU country, you charge 0% VAT. The VAT is not lost — it is ‘reversed’: the buyer is responsible for declaring the VAT in their own country as if they had supplied the service to themselves.
Section 6 — IOSS: Import VAT for Low-Value Goods
When to use IOSS, how it simplifies customs, and whether it makes sense for your business model
What IOSS Is and Who Needs It
The Import One-Stop-Shop (IOSS) is a scheme for selling physical goods valued at €150 or less that are imported from outside the EU directly to EU consumers. With IOSS, the seller collects VAT at the point of sale (at checkout), declares it monthly, and customs clearance is simplified because the VAT is already accounted for.
If you sell through Amazon or Etsy, and the marketplace is the deemed supplier, the marketplace holds the IOSS number — not you. You only need your own IOSS if you sell directly through your own website.
Section 7 — Marketplace Deemed Supplier Rules
When Amazon, Etsy, and Zalando collect VAT on your behalf — and when they do not
The Deemed Supplier Framework
Under the 2021 EU VAT reform, online marketplaces are treated as ‘deemed suppliers’ for VAT purposes on certain transactions. When the marketplace is the deemed supplier, it collects VAT from the buyer and remits it — you do not charge or remit VAT on those specific transactions.
Record gross sale as revenue. No VAT liability on your balance sheet for these transactions. The marketplace fee is recorded as COGS.
Section 8 — EU VAT Compliance Calendar
Every filing obligation, deadline, and penalty for an Estonian e-commerce business
Annual EU VAT Filing Calendar
| Return | Frequency | Deadline After Period End | What It Covers | Penalty for Late Filing |
|---|---|---|---|---|
| Estonian KMD | Monthly | 20th of following month | Estonian domestic VAT: output minus input | Up to 3% of VAT due; min €30 |
| OSS Return | Quarterly | 30 days after quarter end | EU cross-border B2C goods and services sales | €250 + 0.06%/day interest |
| IOSS Return | Monthly | End of following month | Imports ≤ €150 to EU consumers | IOSS deregistration risk |