Procedures for electronic services and distance sales
Since 1 July 2021, the European Union (EU) has introduced new VAT rules for cross-border supplies of goods and services in the context of e-commerce.
Among these new measures are the One-Stop Shop (OSS) and the Import One-Stop Shop (IOSS), two mechanisms designed to streamline the collection and declaration of VAT.
In Luxembourg, as throughout the EU, these regimes enable businesses to centralize their VAT obligations related to distance sales.
1. Background and objectives of the new EU VAT Rules
1.1. Simplification and modernization of VAT rules
Before the introduction of the OSS and IOSS, businesses making cross-border distance sales were required to register for VAT in each EU Member State where their annual distance sales exceeded the national threshold of EUR 10,000.
This requirement imposed significant administrative burdens and high compliance costs.
The OSS regime (and its counterpart for imports, the IOSS) aims to simplify these procedures by offering a single digital platform where businesses can declare and pay the VAT due on all distance sales within the EU through one electronic return and a single payment.
1.2. Strengthening the fight against fraud
Another objective of these regimes is to combat VAT fraud and unfair competition. The OSS and IOSS reflect the EU’s commitment to increasing transparency and modernizing e-commerce while ensuring fair and effective taxation.
2. The procedure in Luxembourg
2.1. Definition and general principles
The OSS is a mechanism allowing EU-based companies (and non-EU companies selling to customers within the EU) to declare and pay VAT due in various Member States through a single quarterly return.
There are three distinct regimes under the OSS:
- Union (EU) scheme: For companies established in the EU that sell goods and/or provide services to private consumers in other EU Member States.
- Non-Union scheme: For companies not established in the EU that provide services to private consumers within the EU.
- Import scheme (IOSS): For distance sales of imported goods (detailed in Section 3 below).
2.2. Benefits
- Reduced administrative burden: Businesses engaged in distance sales across multiple EU countries no longer need to register for VAT in each Member State where they exceed the sales threshold.
- Single return: A single OSS VAT return must be submitted quarterly, covering all taxable distance sales in the EU (except in the country of establishment, where the taxpayer continues to file a national VAT return).
- Simplified payment: Once the return is submitted, VAT is paid to the VAT authorities in the country of identification (in Luxembourg, the Administration de l’Enregistrement, des Domaines et de la TVA – AED), which then distributes the VAT amounts to the relevant Member States.
2.3. Who is impacted?
The OSS regime mainly targets:
- Luxembourg companies selling goods or providing services to private consumers in other EU countries.
- Foreign businesses (outside the EU) that wish to use the non-Union scheme to declare VAT on their sales of electronic services to EU private consumers.
Transactions that can be declared through the OSS in Luxembourg notably include:
- Intra-EU distance sales of goods delivered to private consumers in another Member State.
- Electronically supplied services to private end-consumers (telecommunication, broadcasting, television, and electronic services).
2.4. Sales thresholds and the need to register
As of 1 July 2021, a single threshold of EUR 10,000 for annual cross-border distance sales (outside Luxembourg) applies across the entire EU.
Once annual sales exceed this threshold, the taxpayer must apply the VAT rates of the destination country, making the OSS regime particularly advantageous.
Even if the taxpayer does not exceed the EUR 10,000 threshold, it is still possible to opt for the OSS to streamline processes, rather than continuing to charge Luxembourg VAT on all distance sales.
3. The Import One-Stop Shop (IOSS)
3.1. Definition and general principles
The IOSS is a specific scheme applicable to distance sales of goods imported into the EU with an intrinsic value not exceeding EUR 150. Before July 2021, low-value imports could could have been exempt from VAT. The IOSS replaces these exemption regimes by ensuring that VAT is paid at the time of sale rather than upon importation.
3.2. Benefits
- Streamlined import formalities: The consumer is no longer required to pay VAT or specific customs fees upon delivery, as VAT is collected and declared via the IOSS at the point of sale.
- Enhanced customer experience: The final purchase price is transparent at checkout, avoiding any surprise fees upon receipt of the goods.
- Centralized reporting: Sellers opting for the IOSS can declare and pay VAT on all eligible imported distance sales in a single monthly return.
3.3. Who is impacted?
Businesses established in the EU or outside the EU that sell (to private end-consumers in the EU) goods imported from non-EU countries with a value not exceeding EUR 150.
3.4. How to register
If the business is established in Luxembourg:
- Request an IOSS number from the AED.
- Submit a monthly IOSS return detailing all imported goods sold to private consumers in the EU.
- Pay the VAT due to the AED, which then redistributes the amounts to the relevant Member States.
For businesses established outside the EU, it is generally necessary to appoint an intermediary (representative) within the EU to handle IOSS registration and related formalities.
4. Filing VAT returns on the Luxembourg OSS platform
Luxembourg has developed an online platform to help businesses:
- Register for the various OSS schemes (Union scheme, Non-Union scheme) and/or the IOSS.
- Manage their VAT returns (quarterly for OSS, monthly for IOSS).
- Pay the VAT due on their distance sales in the EU.
This platform is accessible via MyGuichet.lu and provides a secure, centralized interface to simplify VAT management.
In addition, the new VAT forms for 2025 include options to select the OSS and IOSS special regimes and directly enter the amount of transactions declared under these specific regimes.
5. Conclusion
The introduction of the OSS and IOSS regimes represents a significant milestone in simplifying VAT collection for cross-border sales to private consumers.
For e-commerce businesses, adopting these schemes offers valuable benefits: saving time, reducing administrative costs, and ensuring compliance with European legislation.
