OSS Scheme for E-commerce: How to handle VAT when selling to other EU countries?

There are two options:

1. Register as a VAT payer in every single country where you sell, which is administratively complex.
2. Register for the OSS (One Stop Shop) system in the Czech Republic, which simplifies the entire process.

What is the OSS Scheme?

The OSS scheme, or „One Stop Shop,” is a voluntary system that allows sellers to remit VAT on sales across the entire EU in one place – through the Czech tax authority. Instead of multiple registrations in every country, you file only one aggregated electronic return.

You collect VAT from the customer at the rate applicable in their country (e.g., 19% in Germany), but you pay the tax in bulk to the Czech financial administration. The Czech authorities then redistribute the funds to the respective member states.

Who is the OSS Scheme for?

This regime is primarily designed for e-shops engaged in the distance sale of goods or companies providing digital services (software, e-books, web hosting) to end users within the EU.

When does it apply to your business?

The key factor is the annual turnover threshold:

1. If the total value of your sales to all other EU countries combined is below EUR 10,000 (approx. CZK 250,000) per calendar year, you can invoice using the Czech VAT rate.
2. As soon as you exceed this limit, you must begin remitting tax in the customer's country. At that point, registration for OSS is the most efficient way to fulfill your legal obligations.

Note: The OSS scheme can also be used by non-VAT payers, who become what is known as an „identified person" for these purposes.

What does implementing OSS mean for your business?

From an e-shop owner’s perspective, entering the OSS system requires several practical changes to your internal processes:

E-shop and invoicing setup

You must ensure that your system can assign the correct VAT rate based on the customer's country. If you sell to Poland, the invoice must show 23%, if to Germany, 19%.

Record keeping and archiving

You are obliged to maintain detailed records of all transactions processed under the OSS scheme and archive them for 10 years. These records must be available electronically upon request.

Important deadlines for OSS

Returns are filed quarterly, always by the end of the month following the end of the quarter (e.g., the first quarter covering January to March must be filed by the end of April). 

❗️Note: Under the OSS regime, the deadline is not postponed if it falls on a weekend or a public holiday.

Payment in Euros

Both the tax return and the actual payment are processed in Euros. Even if you keep your accounting in CZK, the exchange rate of the European Central Bank valid on the last day of the quarter must be used for the conversion.

What to watch out for with VAT in the OSS Scheme

The OSS scheme cannot be used for every situation. For example, if you use foreign warehouses, you still cannot avoid the obligation to register for VAT directly in that country to report the movement of goods between warehouses. OSS only covers the final sale to the end consumer.

Additionally, remember that while you file a special OSS return, the total value of these sales must also be reported in your regular Czech VAT return (specifically on line 24).

Optimize your cross-border business with us

The OSS scheme opens doors to the pan-European market with significantly less bureaucracy. However, correctly setting up currency conversions, tracking thresholds, and timely filings are processes where errors can be costly.

At Cato, we specialize in ensuring your accounting is fully compliant with current standards while you focus on growing your business. Whether you are unsure if the EUR 10,000 limit applies to you or need professional assistance with OSS registration, we are here to help.