A Canadian seller shipping goods to customers in Germany, France, or the Netherlands is dealing with a VAT system that changed materially in July 2021. The change eliminated an exemption that previously allowed small-value packages to enter the EU without VAT. Every shipment now has a VAT obligation. What varies is who handles it: the marketplace, the seller, or customs at the border.
This guide explains how EU VAT works for Canadian sellers, what the Import One Stop Shop (IOSS) and One Stop Shop (OSS) registration schemes do, how marketplace facilitator rules interact with those schemes, and what sellers shipping direct to EU customers through their own website need to assess.
How EU VAT Works
Value Added Tax (VAT) is a consumption tax applied at each stage of a supply chain, with the end consumer bearing the final cost. Unlike Canadian GST/HST, which has a single federal rate and harmonized provincial rates, EU VAT has 27 member state rates that vary by country and by product category.
Standard VAT rates across major EU markets as of 2026: Germany 19%, France 20%, Italy 22%, Spain 21%, Netherlands 21%, Belgium 21%, Poland 23%, Sweden 25%. Reduced rates apply to certain product categories such as food, books, and medical devices, and those rates vary further by member state.
For a Canadian seller shipping goods to an EU customer, the applicable VAT rate is generally the rate of the destination country and the applicable product category within that country. A seller shipping the same product to a buyer in Germany and a buyer in Sweden applies different rates to each order.
Before July 2021, there was a de minimis threshold: goods entering the EU with a declared value below EUR 22 were exempt from import VAT. That exemption was widely used, and widely abused, by low-value parcel traffic from outside the EU. It was eliminated entirely on July 1, 2021. Every commercial shipment now attracts VAT from the first euro of value.
The EUR 150 threshold that still exists does not determine whether VAT applies. It is the main threshold for IOSS and for low-value customs treatment. Commercial goods entering the EU from outside with an intrinsic value at or below EUR 150 are generally relieved from customs duty, subject to exclusions, but VAT still applies. Goods above EUR 150 cannot use IOSS and may be subject to customs duty as well as VAT, depending on tariff classification and origin.
The IOSS Scheme
The Import One Stop Shop (IOSS) is a registration scheme introduced alongside the 2021 reform specifically for distance sales of goods imported from outside the EU. It covers only goods shipped in consignments with an intrinsic value not exceeding EUR 150, and only B2C sales (sales to private individuals, not to registered businesses).
The mechanics of IOSS:
A seller registered for IOSS charges VAT at the destination country’s applicable rate at the point of sale, before the order ships. When the parcel arrives at EU customs, the IOSS VAT identification number is provided in the electronic customs data or customs declaration. Customs can validate that VAT has already been accounted for and release the parcel without collecting import VAT from the buyer. The seller files a monthly IOSS return reporting total sales by EU member state and remits the aggregate VAT collected.
Without IOSS registration on a direct sale:
When a seller without IOSS ships to an EU customer, customs must collect VAT on the parcel’s arrival. The courier or postal carrier collects VAT (and a handling fee) from the recipient before releasing the shipment. Handling fees from major carriers vary but commonly run EUR 5 to EUR 15 per parcel in addition to the VAT amount. Buyers in some markets, particularly those accustomed to receiving duty-paid shipments, frequently refuse or return parcels when unexpected charges appear on delivery.
IOSS is not mandatory. A Canadian seller with no EU direct sales, or one whose EU sales are made entirely through marketplaces that handle VAT as the deemed supplier, may have no need for it. For sellers with a Shopify storefront or other direct channel receiving meaningful EU order volume, the IOSS question is worth assessing.
IOSS Registration for Canadian Sellers
Non-EU sellers can register for IOSS, but the process has a requirement that differs from EU-based sellers: Canadian sellers must appoint an EU-established intermediary to register and file on their behalf. This requirement exists because Canada does not have a mutual assistance agreement with the EU that would allow direct IOSS registration without an intermediary.
An IOSS intermediary is a VAT-registered EU business, typically a tax firm or VAT compliance service, that registers for IOSS in the name of the non-EU seller, files monthly IOSS returns, and is jointly and severally liable for the VAT owed. The intermediary charges a fee for this service. Fees among established IOSS intermediaries vary, with most in a range that reflects the monthly filing work and compliance responsibility involved.
The practical steps for a Canadian seller assessing IOSS: estimate annual EU direct (non-marketplace) sales volume and average order value. If most orders are below EUR 150 and there is meaningful EU direct traffic, IOSS removes the border collection friction. If EU direct sales are small or average order values commonly exceed EUR 150, IOSS may not address the main cases.
What IOSS Does Not Cover
IOSS applies only to goods imported from outside the EU, with intrinsic value not exceeding EUR 150, sold B2C. It does not apply to:
- Goods already located in EU warehouses or fulfillment centers at the time of sale
- Orders with intrinsic value above EUR 150
- Sales to VAT-registered businesses (B2B sales)
- Digital services or downloadable content (those use a different scheme)
- Excise goods (alcohol, tobacco, certain energy products)
A seller with EU-based inventory, such as goods stored in Amazon Pan-EU FBA warehouses, is in a different position and needs to assess the OSS scheme and potentially individual EU country VAT registrations separately.
Goods Above EUR 150
For orders above the EUR 150 intrinsic value threshold, IOSS is not available. Import VAT applies at the destination country’s applicable VAT rate through the normal import process, and customs duty may also apply depending on the product classification, origin, and any available duty relief.
Two shipping approaches apply to this category:
Delivered At Place (DAP) or Delivered Duty Unpaid (DDU): The seller ships the goods and the buyer is responsible for paying import VAT and any customs duty when the parcel arrives. Major carriers present the buyer with a bill before releasing the shipment. Buyers who did not expect this charge frequently refuse the parcel or dispute the transaction. For sellers in categories where average order values commonly exceed EUR 150, this is a material customer experience issue.
Delivered Duty Paid (DDP): The seller takes responsibility for all import taxes and duties as part of the shipment terms. The buyer pays a single price at checkout and receives the parcel without additional charges on delivery. DDP requires the seller or their carrier to accurately calculate and prepay customs duty and VAT at the time of shipping, which requires knowing the applicable duty rates by product and destination country, and managing the cash flow of prepaying taxes on individual orders.
Most sellers shipping high-value goods into the EU do not set up DDP shipping themselves. It is typically handled through a carrier or customs broker as part of a managed shipping arrangement.
Marketplace Facilitator Rules in the EU
For sales made through Amazon EU storefronts, Etsy, and similar online marketplaces, the EU has applied deemed supplier rules since July 2021.
For goods imported from outside the EU, sold through an online marketplace in consignments with intrinsic value not exceeding EUR 150, the marketplace is treated as the deemed supplier. The marketplace collects VAT from the buyer and remits it to the applicable EU tax authorities. The underlying seller does not collect or remit VAT on those transactions.
A Canadian seller dispatching goods from Canada to EU customers through Amazon.de, Amazon.fr, Amazon.it, Amazon.es, or other EU Amazon storefronts at order values below EUR 150 has VAT handled by Amazon under these rules. Etsy similarly handles VAT collection on applicable marketplace transactions. For the purposes of those specific sales, the seller has no IOSS obligation.
The deemed supplier rule means:
- On eligible marketplace sales (below EUR 150, imported from outside EU): marketplace handles VAT. No seller IOSS obligation for those transactions.
- On imported marketplace sales above EUR 150: normal import VAT and customs rules apply. The marketplace is typically not the deemed supplier under the imported-goods EUR 150 rule, and the buyer may face import charges.
- On direct Shopify or website sales to EU customers: the deemed supplier rule does not apply. The seller is responsible. IOSS determines whether VAT is collected at checkout (with IOSS) or at the border (without).
A seller selling through both Amazon EU and a direct Shopify storefront has a split picture: Amazon handles VAT on eligible marketplace sales, but the Shopify sales are the seller’s responsibility. IOSS is primarily relevant for the Shopify side.
Sellers with EU Inventory
A Canadian seller who stores goods in an EU fulfillment center, for example through Amazon Pan-EU FBA, is in a different position from a seller dispatching from Canada.
When goods are already located in the EU at the time of sale, the transaction is no longer an IOSS import sale. The goods have already entered the EU, so import VAT has already been dealt with at the import stage. The relevant framework may include the OSS Union Scheme, which covers intra-EU B2C sales of goods where the goods are dispatched from one EU member state to a buyer in another.
The Union OSS allows a seller to register once in a single EU member state and report and remit VAT on cross-border B2C sales across all EU member states through a single quarterly return, rather than registering individually in each country only because customers are located there. It does not replace local VAT registration requirements that arise from importing goods, storing inventory, moving stock, or making domestic sales that are not covered by OSS.
For a Canadian seller, using Amazon Pan-EU FBA means Amazon distributes inventory across EU fulfillment centers in multiple countries. Marketplace deemed supplier rules can also apply to EU-located goods sold by a non-EU seller through an electronic interface to EU consumers; that rule is separate from the EUR 150 imported-goods rule. The seller may still need VAT registrations where inventory is imported or stored, and direct sales of EU-located goods through the seller’s own storefront may require local VAT registration and potentially Union OSS. This is a more complex position than selling from Canada.
A seller considering expanding into EU fulfillment should assess the VAT and compliance implications before placing the first inventory shipment, not after.
What to Track
Regardless of the approach taken on VAT registration, Canadian sellers with EU sales need to maintain records that allow them to determine compliance obligations and verify what marketplaces have collected on their behalf.
Records that matter:
- Total sales to EU customers, by EU member state, by calendar month
- The channel through which each sale was made (Amazon EU marketplace, Etsy marketplace, direct Shopify, other)
- For marketplace sales: confirmation from the platform that VAT was collected as deemed supplier on applicable transactions
- For direct sales: whether a valid IOSS VAT identification number was provided in the customs data, or whether the order was subject to border collection
- Order values (intrinsic/customs value) to identify orders above the EUR 150 threshold where deemed supplier rules do not apply
These records support IOSS return filing if the seller is registered, inform decisions about whether IOSS registration makes sense, and document the basis for the seller’s compliance position if questions arise.
OSS and IOSS records generally need to be retained for 10 years from the end of the year in which the transaction was made. Domestic VAT record retention rules outside OSS/IOSS can vary by member state.
The Registration Decision
A Canadian seller assessing whether to register for IOSS should consider:
Direct EU sales volume. IOSS is relevant only for direct (non-marketplace) sales below EUR 150. A seller whose EU presence is entirely through Amazon, Etsy, or similar marketplaces, with no direct storefront selling to EU consumers, has the marketplace handling VAT on eligible transactions. IOSS adds operational cost without addressing the primary issue.
Average order value. A seller whose direct EU orders frequently exceed EUR 150 has most of their value above the IOSS threshold anyway. IOSS may address a tail of small orders but leaves the larger orders subject to border collection regardless.
Buyer experience. In markets where buyers are accustomed to delivered-duty-paid shipping, border collection fees create friction that leads to refusals. If EU return rates or cart abandonment from EU customers is elevated, IOSS may address part of the cause.
Intermediary costs. The recurring cost of an IOSS intermediary should be evaluated against the projected improvement in EU direct sales conversion and reduced return handling. For a seller with small EU direct volume, the math may not support registration.
Scope of This Guide
This guide covers EU VAT obligations for Canadian sellers dispatching from Canada, IOSS and OSS registration schemes, and marketplace facilitator rules under the 2021 reform. It does not cover:
- Individual EU member state VAT registration procedures
- Customs classification or tariff codes for specific product categories
- Duty rates or product-specific reduced VAT rates by country
- UK VAT, which operates separately under HMRC (covered in a separate guide)
- Canadian GST/HST implications on the Canadian side of the business
- Digital services or B2B transactions
The European Commission maintains official guidance on OSS and IOSS for sellers and intermediaries.
For a broader overview of cross-border compliance covering US sales tax and UK VAT alongside EU VAT, see Cross-Border E-Commerce Compliance for Canadian Sellers.
Get in touch if you are selling into the EU and want to assess what your current VAT position looks like.