Selling to the EU from outside it: VAT, IOSS and customs in plain English

General information as of October 2026, not tax advice. Rules change and depend on where your business is established. Check with an accountant before you register or change how you charge tax.

If your store is outside the European Union and you ship to customers inside it, VAT is the part you can't ignore. Since July 2021, every parcel sent to an EU consumer is subject to VAT, however cheap. The only question is who collects it, and when.

The short version

• Every import into the EU carries VAT. The old €22 exemption is gone.
• For orders up to €150, you can charge the customer's VAT at checkout and pay it through the Import One-Stop Shop (IOSS). The parcel then clears customs without the customer paying anything on delivery.
• Without IOSS, the customer pays the VAT, plus a handling fee from the carrier, when the parcel arrives. Many refuse to pay, and the parcel comes back.
• Above €150, IOSS doesn't apply. VAT and any customs duty are collected at import, either from the customer or from you if you ship duties-paid.

Why IOSS matters for conversion

A shopper in Germany sees €39.00 on your page and pays €39.00 at checkout. If you're not on IOSS, a few days later the courier asks them for the German VAT on top, plus a handling fee. That surprise is one of the most common causes of refused deliveries, chargebacks and angry reviews from EU customers.

With IOSS, the €39.00 already includes German VAT. Customs sees your IOSS number on the parcel, knows the VAT was paid, and lets it through.

How IOSS works

1. Register for IOSS in one EU country. Most businesses outside the EU have to appoint an EU-based intermediary to register and file on their behalf (sellers in a few countries with tax agreements, such as Norway, can register directly).
2. Charge VAT at checkout at the rate of the customer's country: for example 19% in Germany, 20% in France, 21% in the Netherlands, 23% in Ireland. Rates differ by country and sometimes by product type.
3. Put your IOSS number on the shipment so your carrier can pass it to customs.
4. File a monthly IOSS return listing the VAT you collected for each country, and pay it in one go.

The €150 limit is the intrinsic value of the goods in one consignment, excluding shipping and insurance (unless they're included in the price). If one order goes over €150, IOSS can't be used for it.

What about customs duty?

Low-value parcels (up to €150) have historically been exempt from customs duty, though not from VAT. That's changing: in 2025, EU governments agreed to end the duty exemption for low-value parcels, with a flat per-item duty planned as an interim step. Check the current rules before you set your prices, because duty on cheap items can noticeably change your margin.

For orders above €150, duty depends on the product's tariff classification and country of origin.

Setting it up on Shopify

Shopify can calculate and collect EU VAT at checkout. In outline:

1. In your Shopify admin, open the tax settings and turn on VAT collection for the European Union.
2. Enter your IOSS number so Shopify can apply it to eligible orders and pass it to supported shipping labels.
3. Decide whether your prices include tax. EU consumers expect prices that already include VAT. Shopify Markets can show tax-inclusive prices per country, so a customer in France sees the French VAT-inclusive price.
4. Set up an EU market with local currency, if you want to sell in euros (see selling in multiple currencies).

Check Shopify's current help pages for the exact steps, as the menus change.

If your business is inside the EU

Different rules apply. EU-based sellers selling to consumers in other EU countries charge VAT at the customer's rate once their cross-border sales pass €10,000 a year across the EU, and report it through the One-Stop Shop (OSS). Below that, they can charge their home-country VAT.

A checklist before you sell into the EU

• Decide: IOSS (recommended for orders under €150), or customers pay on delivery.
• If IOSS, choose an intermediary and register before launch.
• Show VAT-inclusive prices to EU customers.
• Make sure your product is allowed and labeled correctly in the EU. Cosmetics, electronics, toys and anything with a battery have safety and labeling rules (CE marking, for example).
• Write delivery times and return terms for EU customers on your page. EU consumers generally have a 14-day right to withdraw from online purchases.

None of this is hard once it's set up, and it's the difference between EU customers who come back and parcels that come back.