Selling to customers in the European Union can be a great opportunity, but EU VAT compliance can be tricky if you’re not careful. In my experience helping Shopify stores expand into Europe, the key is understanding OSS (One‑Stop Shop) and IOSS (Import One‑Stop Shop), and configuring them correctly in your store. Here’s a practical guide based on what actually works.

Understanding OSS and IOSS

If your business is based inside the EU, OSS is probably what you need. It lets you charge VAT based on the customer’s country and file a single VAT return for all EU countries, instead of registering in each one separately. This makes cross‑border sales much simpler.If your business is outside the EU, and you’re shipping physical goods worth €150 or less to EU customers, you should use IOSS. With IOSS, you can collect VAT at checkout, so your customers won’t face surprise VAT or import fees when the package arrives.The main difference is simple:

  • OSS: for EU-based sellers selling across EU countries.
  • IOSS: for non-EU sellers delivering low-value goods to EU customers.

Why Proper Configuration Matters

VAT in Europe is destination-based, meaning the tax rate depends on where the customer is located. If you don’t configure VAT correctly in Shopify, you could run into compliance issues, face fines, or frustrate customers with unexpected import charges.Here’s how I usually break it down for stores:

  • EU-based sellers shipping from within the EU should use OSS.
  • Non-EU sellers shipping low-value goods (≤ €150) to EU customers should use IOSS.
  • Non-EU sellers offering digital products may need Non-Union OSS.
  • Stores with multiple locations need to be careful: Shopify doesn’t support using OSS and IOSS simultaneously. In most cases, OSS should be prioritized for EU orders.

Step-by-Step Setup in Shopify

  1. Register with the Tax Authority
    1. OSS registration is done in an EU member state where your business operates.
    2. IOSS registration can be done through an EU member state or a tax intermediary if you’re outside the EU.
    3. You must have a registration number before you start collecting VAT at checkout.
  2. Enter Your VAT/OSS/IOSS Number in Shopify
    1. Go to Shopify admin > Settings > Taxes and duties.
    2. Find the European Union section.
    3. For OSS, click Collect VAT under cross-border settings and enter your VAT number.
    4. For IOSS, enter your IOSS number under VAT or tax registrations.
    5. Save your changes.
  3. Configure Tax Rules
    1. Make sure VAT is enabled for all EU countries you sell to.
    2. Adjust your store to show tax-inclusive pricing if you want customers to see the total price upfront.
    3. Test with draft orders before going live to make sure everything calculates correctly.

Practical Tips

  • Double-check fulfillment locations because Shopify calculates VAT based on shipping origin.
  • For orders over €150 from outside the EU, IOSS doesn’t apply. Import VAT and duties will apply at delivery.
  • If you’re new to EU VAT, using a tax intermediary or Shopify tax app can simplify the registration and reporting process.

Key Takeaways

Getting OSS and IOSS set up correctly in Shopify will save you headaches and keep your EU customers happy. Once it’s set up:

  • You can charge VAT correctly at checkout.
  • Your customers won’t face surprise import fees.
  • Filing taxes across multiple EU countries becomes manageable.

VAT rules can change, so it’s worth checking in regularly or working with a tax professional, especially if your European sales grow fast.