Please note: We are not tax advisors. This article only explains the technical setup in Magento and does not replace professional tax advice. For binding information, please consult your tax advisor or tax authority.
What is OSS (One Stop Shop)?
If you sell goods or digital services to consumers in other EU countries, at a certain point you must no longer charge your domestic VAT rate but the VAT rate of the destination country instead. The decisive figure is the EU-wide distance selling threshold of EUR 10,000 net per year (counted across all EU countries combined). Once you exceed it, the turnover has to be taxed in the destination country.
So that you do not have to register for tax in every single EU country, there is the One Stop Shop (OSS) scheme: you report and pay the VAT incurred abroad collectively through a single point of contact in your home country. The prerequisite is that your shop charges the correct VAT rate for each delivery country.
Adjusting tax rates in Magento
In most cases your shop already has tax rules and tax rates set up for the EU countries. For OSS you usually only need to review them and adjust them to the respective country rate. Here is how to proceed:
- In the admin panel, open Sales → Tax → Manage Tax Rules.
- Edit the relevant tax rule. In the assigned tax rates section you can see all the country rates that are stored.
- Via Tax → Manage Tax Rates, open the rate for the relevant country.
- Replace the previously stored percentage (often still your domestic rate) with the valid VAT rate of the destination country.
- Save the rate and repeat the process for every EU country you ship to.
- Then clear the cache and verify in the cart, using a test delivery address, that the correct rate is applied.
An example
Suppose your shop is based in Germany and charges 19% VAT domestically. Once you have exceeded the EUR 10,000 threshold and ship to a consumer in France, the French standard rate of 20% applies. In Magento you create a tax rate for France at 20% for this (or adjust the existing one) and assign it to the tax rule. Magento then automatically applies the correct rate based on the delivery address.
The currently valid rates change from time to time and differ depending on the type of product (standard rate, reduced rate). A hard-coded table quickly becomes outdated. Therefore always rely on the official source: official EU VAT rates.
If you ship to many EU countries, maintaining the rates manually quickly becomes time-consuming and error-prone. Our extensions EU VAT Enhanced for Magento 2 and Scheduled Tax Rate Mass Updates help you keep many tax rates up to date centrally and automatically.