How to decide between VAT OSS and direct VAT registration in the EU?

If you sell goods or services to customers in more than one EU country, you’ll quickly discover that the rules can feel like a maze. Every country sets its own VAT rates, sometimes with multiple reduced rates, exemptions, and special schemes. Each has its own tax authority, reporting formats, and deadlines. Different rates, different rules, different filing systems—keeping up can become a full-time job in itself, even for businesses with a streamlined product offering.

That’s where the EU’s VAT One-Stop Shop and traditional direct VAT registration come into play. Both are legitimate, fully recognised ways to handle VAT compliance, but they operate in completely different ways. Choosing the wrong approach can mean unnecessary costs, wasted admin time, and in some cases, penalties for missed obligations.

In this guide, we’ll break down both options in detail, explain how they work, when each one makes sense, and the trade-offs you’ll want to consider. We’ll look at the scenarios small companies, online stores, and service providers actually face—like selling through marketplaces, shipping from multiple warehouses, or handling mixed B2B and B2C sales. By the end, you’ll be able to confidently decide which route fits your business model, whether you’re a niche B2B operation, a fast-scaling e-commerce brand, or something in between.

Understanding the Basics

What is VAT OSS?

VAT OSS—short for Value Added Tax One-Stop Shop—is the EU’s response to one of the most common headaches for cross-border sellers: how to avoid drowning in VAT paperwork when selling to consumers in multiple countries.

Under traditional rules, if you sell to customers in different EU countries, you might have to register for VAT in each of those countries, submit separate returns, and pay the tax locally. For example, a small online retailer in Spain selling to France, Germany, and Italy could end up juggling three different VAT accounts, each with its own rules and filing deadlines.

VAT OSS eliminates most of that complexity. Instead of registering in every single EU country where you have customers, you register once in a single EU member state—your “OSS country.” From there, you can report and pay all the VAT due on your cross-border sales through one quarterly return. Your chosen country’s tax authority acts like a hub, collecting the VAT and distributing it to the other EU countries where you’ve made sales.

The scheme is available to both EU and non-EU businesses. If you’re outside the EU, you can still use VAT OSS—you just need to choose one EU country for your registration. A Canadian software provider, for example, selling monthly subscriptions to customers in 12 EU countries could register in Ireland, file all EU VAT through that one portal, and avoid 12 separate VAT registrations.

VAT OSS is especially popular with e-commerce stores, digital product sellers, and service providers who sell directly to consumers but don’t keep physical stock in multiple EU countries. It’s not a “no VAT” solution—you still need to charge the correct VAT rate for each customer’s country—but it removes the need to maintain multiple VAT numbers and handle separate filings for each market.

The main advantage? A huge reduction in paperwork and admin time. Instead of building a tax compliance system country by country, you consolidate everything in one place—making it far easier to stay compliant while scaling your business internationally.

What is Direct VAT Registration?

Direct VAT registration is the traditional, country-by-country approach to handling VAT in the EU. Instead of managing everything through one central point, you register separately for VAT in each member state where you have a local VAT obligation. This means dealing directly with that country’s tax authority, understanding their filing requirements, and paying the VAT owed into their national system.

For many businesses, this isn’t a choice—it’s a legal necessity. If your activities create a taxable presence in a particular country, you must register there. For example, if you store goods in a warehouse in France, even if those goods are sold to customers in other countries, you are required to have a French VAT number. The same applies if you use fulfillment services like Amazon FBA that store your stock in multiple EU warehouses.

There are also transactions that OSS simply doesn’t cover. Certain B2B sales, for instance, operate under different VAT rules, such as the reverse charge mechanism, which may still require local registration for compliance purposes. Likewise, if you offer services that don’t fall within the OSS scope—like some event-based activities, real estate services, or domestic supplies—you’ll still need to be registered in the country where those services are taxed.

Historically, direct VAT registration was triggered when sales to a country exceeded its distance selling threshold, but since July 2021 those country-specific thresholds no longer apply to intra-EU B2C distance sales. Today, the triggers are usually tied to where goods are stored, where services are performed, or whether the transaction type is eligible for OSS.

The upside to direct VAT registration is control. You can manage your VAT obligations on a country-by-country basis, adjust processes for local rules, and sometimes even respond faster to audits or compliance queries because you’re in direct contact with the local tax authority. Large sellers with significant turnover in certain countries often prefer this approach—it lets them fine-tune pricing strategies, VAT recovery, and compliance processes for each market.

The trade-off is administrative workload. You’re not just managing one return every quarter—you could be filing monthly in one country, quarterly in another, and annually somewhere else. Add in multiple languages, local invoicing formats, and varying record-keeping rules, and the burden grows quickly. Without a dedicated finance team or an experienced VAT service provider, direct registration can be time-consuming and error-prone, but for many businesses with complex setups, it’s still the most appropriate choice.

Key Differences Between VAT OSS and Direct VAT Registration

Although VAT OSS and direct VAT registration both aim to keep your business compliant with EU tax rules, they operate in very different ways and suit different kinds of operations.

VAT OSS is built specifically for B2C sales of goods and certain digital services to customers across multiple EU countries. With OSS, you register once in a single EU member state—your “OSS country”—and use that country’s online portal to submit a single quarterly VAT return for all qualifying cross-border sales. The tax authority in your registration country then distributes the VAT to the other member states where your customers are located. For example, an online shop based in the Netherlands selling to customers in Italy, Germany, and Spain can register for OSS in the Netherlands and manage all its cross-border VAT in one go, instead of having three separate VAT registrations.

Direct VAT registration, in contrast, applies when you have a local VAT obligation in a specific country—whether your sales are B2C, B2B, or both. This means registering separately with that country’s tax authority, filing VAT returns on their schedule, and paying VAT directly into that country’s system. A common example would be a Polish seller storing inventory in a warehouse in France—this automatically triggers the need for a French VAT number, even if the seller also uses OSS for other sales.

When it comes to filing, OSS offers the simplicity of one quarterly return for all your covered EU sales. Direct registration means separate returns for each country, each with its own format, language, and filing deadlines. OSS significantly reduces the administrative burden, whereas direct registration demands more work—multiple systems, varying compliance rules, and more frequent communication with several tax offices.

The €10,000 EU-wide threshold is a key point. If your total annual cross-border B2C sales within the EU are below this amount, you can usually just charge your home country’s VAT and avoid registering in other member states. However, once you exceed that threshold, you must apply the VAT rate of the customer’s country. OSS is the most efficient way to manage that obligation because you can handle it through one registration instead of opening VAT accounts in every country you sell to. Some businesses also choose to opt into OSS voluntarily before reaching the threshold so they can charge destination VAT from the start and avoid changing their invoicing practices later.

As for thresholds in direct VAT registration, the old country-specific limits for distance sales were abolished in July 2021. Today, exceeding a “local threshold” is mainly relevant for domestic supplies, certain types of services, or transactions outside the OSS scope—such as B2B sales or selling goods stored in that country.

Control is another major difference. OSS centralizes compliance and reporting under one tax authority, which can save time but offers less flexibility to adjust processes for specific markets. Direct registration gives you full control over VAT handling in each country, which some larger or more strategically focused businesses prefer—especially if they sell high volumes in a small number of countries.

For complex business models—such as those involving warehouses, fulfillment centers, or permanent establishments in multiple EU countries—direct registration is often unavoidable. OSS works best for straightforward cross-border sales where goods are shipped from a single location. Finally, under OSS, any audits are conducted by your registration country’s tax authority, while direct registration opens you up to separate audits from each country where you’re registered.

When to Choose VAT OSS

VAT OSS is at its strongest when you want simplicity and your business is focused on selling to consumers across borders without setting up local operations in each country. It was designed to remove one of the biggest barriers to EU-wide selling: the need to register for VAT in multiple countries just because your customers happen to live there.

If most of your activity is B2C sales—whether that’s shipping physical goods, delivering digital products, or providing online services—OSS can dramatically cut down the time you spend on VAT compliance. Its value really shows once your total annual cross-border B2C sales to EU consumers go above €10,000 (EU-wide, per calendar year). At that point, you’re required to apply the VAT rate of the customer’s country, and OSS lets you meet that requirement through a single quarterly return rather than juggling multiple VAT registrations.

If you’re below €10,000, you can simply apply your home country’s VAT and skip OSS altogether. That said, some businesses—especially those expecting to grow quickly—still choose to opt in voluntarily from the start. For example, a new online clothing brand in Belgium selling a small number of orders to France and Germany might join OSS early to get used to charging destination VAT and avoid having to reconfigure their invoicing once they pass the threshold.

OSS is also ideal if you don’t store stock in warehouses or maintain offices in other EU countries. Without those physical presences, your VAT obligations are usually tied to where your customers are, and OSS offers a single, central way to manage them. For instance, a Swedish digital design agency selling downloadable templates across the EU can register in Sweden under OSS and handle VAT for all 27 member states from one portal.

For small and growing businesses, reduced administrative work can be a major advantage. Instead of registering in each country, filing separate returns, and building relationships with multiple tax authorities, you manage everything through one online account. You still need to apply the correct VAT rate for each country, issue compliant invoices, and keep accurate sales records, but the process is far less time-consuming than direct registration.

If your priority is freeing up time to focus on growth, marketing, product development, or customer service rather than navigating tax rules, VAT OSS can be a smart and scalable choice. It’s especially powerful for e-commerce sellers, subscription-based service providers, and digital entrepreneurs who want to expand across the EU without drowning in tax admin.

When to Choose Direct VAT Registration

Direct VAT registration makes sense when your business has specific local obligations that VAT OSS simply doesn’t cover. While OSS is built for simplicity, direct registration gives you granular control in each market—something you may need if your operations are more complex or if your sales structure doesn’t fit neatly into OSS rules.

Local Warehouses or Physical Presence

If you store goods in a warehouse or have a fixed location in another EU country, you’re required to register for VAT in that country. This applies even if the majority of your sales are to customers outside that country. OSS does not replace these obligations because it is designed for cross-border distance sales, not domestic sales from local stock.

For example, a UK business using Amazon FBA might have inventory stored in Germany and Poland. Even if OSS is used for cross-border sales, they would still need German and Polish VAT numbers to handle local orders and any transactions not covered by OSS.

High Sales in Specific Markets

If your sales in a particular country are consistently high, it can be strategically advantageous to register directly. This is no longer about crossing an old country-specific distance selling threshold—those were abolished in July 2021 for intra-EU B2C goods sales—but about market strategy and operational efficiency. A Dutch electronics seller with a dominant customer base in France might prefer to register directly in France to work more closely with French VAT rules, potentially speeding up processes like VAT refunds or handling customer disputes involving tax.

Selling B2B or Complex Business Models

OSS is built primarily for B2C transactions. If you sell B2B or operate a hybrid model, direct registration is often necessary to manage reverse charge transactions, issue compliant local invoices, and meet industry-specific VAT requirements. This is particularly relevant in manufacturing, wholesale distribution, or specialized services like construction, where VAT obligations can be tied to the place where the service is performed.

Greater Control Over Compliance

Direct registration allows you to tailor VAT compliance to each country. You can adapt reporting formats, handle VAT payments directly with local authorities, and even respond more quickly to audits or tax office queries. This can be a real advantage in countries where VAT rates, exemptions, or refund processes are especially important to your margins.

When Administrative Capacity Isn’t an Issue

If you have the resources—whether that’s an in-house finance team or a dedicated VAT service provider—managing multiple VAT registrations can give you the flexibility to optimize for each country’s tax environment. This may be more work, but it can pay off for businesses whose growth relies on a few key markets where local registration offers strategic benefits. For example, a Spanish fashion brand heavily focused on the Italian market may find direct registration worthwhile to maintain control over local compliance and pricing strategies.

Decision-Making Framework

Choosing between VAT OSS and direct VAT registration isn’t just about picking the easier option—it’s about matching your VAT approach to the way your business actually operates. The right choice depends on your customer base, where your goods are stored, how your operations are set up, and even your future expansion plans.

Look at Your Sales Model

Start by asking whether you mostly sell B2C or B2B. If your customers are primarily consumers in multiple EU countries, OSS could save you significant time and admin work. For example, a Danish online cosmetics shop selling to customers in 10 different EU countries could use OSS to avoid managing 10 separate VAT registrations.

But if you work mainly with other businesses, or your sales mix is evenly split between B2B and B2C, direct registration may give you the flexibility to handle different VAT rules more effectively. This is especially true if you frequently deal with reverse charge transactions or need to comply with local invoicing rules for B2B clients.

Check Where Your Stock Lives

If your products are shipped directly from your home country or from a single EU location, OSS is a strong candidate because it handles all cross-border VAT reporting in one place.

However, if you store goods in multiple EU countries—whether in your own facilities or through third-party fulfillment centers like Amazon FBA—you’ll almost certainly need direct VAT registration in each of those countries. For example, a UK seller using Amazon’s Pan-European FBA program might have stock in Germany, France, Italy, and Poland, triggering local VAT obligations in all four countries, even if OSS is used for other sales.

Measure Your Cross-Border Sales

The €10,000 EU-wide threshold is a key trigger point for OSS. If your total annual cross-border B2C sales are below this figure, you are not obliged to use OSS—you can simply apply your home country’s VAT. Some small businesses still opt in below the threshold to charge destination VAT from the start, which can make future growth smoother.

Once you exceed €10,000, you must apply the VAT rate of the customer’s country. In that scenario, OSS becomes the simplest way to manage compliance without registering for VAT in every member state you sell to. For example, a Portuguese online gadget store that grows from €8,000 to €20,000 in cross-border sales would switch from home VAT to destination VAT, and OSS would let them do that with just one registration.

Consider Your Admin Resources

If you have a lean team and want to spend as little time as possible on VAT paperwork, OSS is appealing—it consolidates your filings into one return every quarter.

But if you have a finance department or work with an experienced VAT service provider, you might handle multiple VAT registrations without much extra effort. In this case, direct registration can give you more market-specific control, which can be useful if VAT rates, recovery processes, or compliance rules in certain countries have a big impact on your margins.

Think About Your Growth Plans

Where do you see your business in two or three years? If you plan to expand into warehousing, establish local partnerships, or significantly grow sales in one or two key markets, direct registration could be the better long-term move.

If you expect to keep selling broadly across several EU countries without local infrastructure, OSS will probably serve you well and keep your compliance processes lightweight. For instance, a digital marketing agency in Ireland selling services to consumers all over the EU could stay on OSS for years without ever needing to manage multiple VAT registrations.

Special Considerations

While most businesses can decide between VAT OSS and direct registration by looking at their sales model and structure, there are a few extra points worth keeping in mind before you commit. These can make a big difference, especially if your business doesn’t fit the typical e-commerce pattern or if you’re operating in a niche sector with more complex VAT rules.

OSS for Non-EU Businesses

If your company is based outside the EU, you can still register for VAT OSS, but which scheme you use depends on what you sell and where the supply takes place.

• Non-Union OSS – Designed for B2C services where the place of supply is in the EU. A common example is a US-based streaming platform selling monthly subscriptions to EU consumers. Even without any physical presence in Europe, they can register for Non-Union OSS in a chosen EU country and handle VAT for all EU customers in one quarterly return.
• Union OSS – Intended for intra-EU distance sales of goods, such as when you hold stock in one EU country and sell to consumers in other EU member states. For instance, an Australian clothing retailer might store inventory in the Netherlands and ship orders to customers in Germany, France, and Spain—Union OSS lets them report VAT for those cross-border sales centrally.

If you store goods in an EU country, you will still need local VAT registration in that country for domestic sales and for any transactions outside the OSS scope. OSS doesn’t remove those obligations—it simply centralizes reporting for eligible cross-border sales so you avoid multiple registrations for those transactions.

OSS Doesn’t Replace All VAT Obligations

OSS is designed specifically for cross-border B2C sales. It doesn’t cover:

• Local sales from stock stored in another EU country.
• Domestic transactions within a single country.
• Certain services that are taxed based on where they are performed, such as event admission or real estate services.

In these cases, direct VAT registration will still be required, sometimes in addition to using OSS. For example, a Canadian software company might use OSS for EU-wide online sales but still need a VAT number in Germany if they run a live conference there.

The Import One-Stop Shop (IOSS) for Non-EU Goods

If you’re shipping goods with a value of €150 or less directly to EU consumers from outside the EU, the IOSS scheme can simplify VAT handling for imports. Instead of customers paying VAT at the border (which can delay delivery), you collect it at checkout and declare it through IOSS. This makes for a smoother buying experience and can improve conversion rates for international e-commerce.

As of 2025, the EU is actively encouraging wider use of IOSS and tightening supplier responsibility for VAT collection on imports. This means sellers outside the EU are expected to handle VAT more proactively, reducing the reliance on couriers or customs authorities to collect it from buyers.

You Must Still Apply Correct VAT Rates

Whether you use OSS or direct registration, you’re still responsible for charging the correct VAT rate for each customer’s location. OSS only changes how you report and pay VAT—it doesn’t harmonize rates across the EU. This means a business selling physical books to France (5.5% VAT) and Spain (4% VAT) must apply those specific rates in each sale, even if filing everything through OSS.

OSS is Voluntary

Unlike direct registration, which can be mandatory if your activities meet certain criteria, OSS is optional. You can choose to use it or stick with multiple local VAT registrations. Once you opt in, you must apply it consistently for all eligible sales within its scope. Businesses sometimes choose to combine the two approaches—using OSS for cross-border B2C sales while maintaining direct VAT registrations for local stock and domestic transactions.

Summary & Conclusion

Choosing between VAT OSS and direct VAT registration ultimately comes down to how your business sells, where your products are stored, and how much administrative work you’re prepared to take on. It’s not just a tax decision—it’s an operational strategy that can affect how quickly and smoothly you scale in the EU.

If your business is built around B2C sales across multiple EU countries, doesn’t store goods locally in more than one place, and you’re looking for a simpler way to handle VAT, OSS is often the most practical route. You’ll benefit from a single registration, one quarterly return, and fewer points of contact with different tax authorities—freeing up more time to focus on growth, marketing, and customer service.

For example, a Spanish subscription box company delivering to customers in 12 EU countries can handle all their cross-border VAT through OSS, avoiding the need for a dozen separate VAT accounts.

Direct VAT registration, on the other hand, becomes the clear choice when you store stock in multiple EU countries, have high sales volumes in specific markets, or operate in a B2B-heavy model that requires more control and flexibility over compliance. While it demands more paperwork and ongoing management, it gives you market-specific precision—allowing you to tailor your VAT processes to local rules, recover VAT where possible, and maintain close compliance relationships with key markets.

A Dutch fashion brand, for instance, selling heavily in Italy and France with local warehouse storage, would find direct registration unavoidable—and even strategically beneficial.

Whichever path you choose, the most important thing is to base your decision on current operations and realistic growth plans. Switching between systems is possible, but it’s smoother and more cost-effective to set up the right approach from the start.

VAT compliance might never be the most glamorous part of running a business, but getting it right early prevents costly mistakes, avoids unnecessary administrative headaches, and keeps your expansion plans on track. Whether you take the streamlined OSS route or the hands-on direct registration approach, understanding the rules puts you firmly in control—and in the EU market, control is a major competitive advantage.