Standard VAT rates differ by country
There is no single EU VAT rate. Each member state sets its own standard rate, and the spread is wide: Hungary tops the table at 27 percent, while Luxembourg sits lowest at 17 percent. Most countries land somewhere in the 19 to 25 percent band. On top of the standard rate, states apply reduced and zero rates to specific goods and services, and those lists are not harmonised either.
The mistake is hard-coding one rate across the EU, usually the seller's home rate. If you are a German shop charging 19 percent on a sale that should carry the destination country's rate, you are collecting the wrong tax and your filings will not reconcile. Use the EU VAT calculator to confirm the correct rate per country before you configure anything.
Charge the destination rate on B2C cross-border sales
When you sell to a private consumer in another member state, the supply is taxed where the customer is, not where you are. A French seller shipping to an Italian consumer charges Italian VAT, not French VAT. This is the destination principle, and since the 2021 reform it applies to nearly all B2C cross-border supplies of goods and services once you pass a small threshold.
The common error is applying your origin-country rate to every consumer in the bloc. That undercharges customers in higher-rate countries and overcharges in lower-rate ones, and either way it leaves you owing the destination state the difference. Map each B2C sale to the customer's country rate from the start.
The 10,000 EUR threshold and the One Stop Shop
You do not switch to destination rates from your very first cross-border sale. There is a single EU-wide threshold of 10,000 EUR in annual cross-border B2C sales of goods and digital services combined. Below it you can keep charging your home rate; once you cross it, you must charge the destination rate on everything going forward.
Past the threshold, you do not need to register for VAT in every customer country. The One Stop Shop (OSS) lets you declare and pay all your EU B2C VAT through a single quarterly return in your home state, which then distributes it. The mistake is treating the old per-country distance-selling thresholds as still valid, or skipping OSS and assuming you owe nothing because you never registered abroad. The threshold is one EU-wide number now, and crossing it is your trigger.
IOSS for imported goods up to 150 EUR
For goods shipped to EU consumers from outside the EU, the Import One Stop Shop (IOSS) covers consignments with an intrinsic value up to 150 EUR. Register for IOSS and you charge the destination VAT at the point of sale, declare it in a single monthly return, and your customers get fast customs clearance with no surprise charges on delivery.
The error is assuming low-value imports are VAT-free. The old 22 EUR import exemption was abolished in 2021, so every commercial consignment is now taxable. Skip IOSS and the VAT gets collected from the customer at the border instead, with a handling fee, which turns a smooth purchase into an angry support ticket. Note that IOSS stops at 150 EUR; above that, normal import VAT and duty apply.
Reverse charge on B2B cross-border supplies
When you supply a VAT-registered business in another member state, you generally do not charge VAT at all. Instead the reverse charge applies: the customer accounts for both the output and input VAT in their own return, and the supply is invoiced at zero. Your invoice must state that the reverse charge applies and show the customer's VAT number.
The mistake is charging your domestic VAT to an EU business customer as if reverse charge did not exist. That hands the customer a tax they cannot reclaim through their normal return and forces a credit note. Treat verified cross-border B2B supplies as zero-rated with the reverse-charge note, not as taxable at your home rate.
Validate the customer VAT number in VIES first
Zero-rating a B2B supply is only safe if your customer really is a registered business in another member state. The way you confirm that is VIES, the EU's VAT Information Exchange System, which checks a VAT number against the issuing country's records in real time.[1] No valid number, no reverse charge, you charge VAT.
The error is taking a VAT number on trust and zero-rating the invoice without checking, or checking once and never again. If the number turns out to be invalid or deregistered, the tax authority can come after you for the VAT you failed to charge. Validate at the point of sale and keep the confirmation. The EU VAT calculator and validator runs the VIES check for you.
Place-of-supply rules for digital services
Selling software, e-books, streaming, hosting, or any electronically supplied service to EU consumers follows a strict place-of-supply rule: the supply is taxed where the customer is located, regardless of where your servers or your company sit. There is no warehouse and no shipment to anchor it, so the customer's country is the whole story.
The mistake is treating a digital sale like a domestic one and charging your home rate to every download. A digital seller crossing the 10,000 EUR threshold must charge each consumer their own country's rate and declare it through OSS, exactly like physical goods. Build customer-location detection into checkout, because for digital services it determines the rate.
Keep evidence of location and valid VAT invoices
Everything above depends on records you can produce later. For digital B2C sales you need at least two pieces of non-contradictory evidence of the customer's location, such as billing address and IP address, to justify the rate you charged. For B2B supplies you need the VIES confirmation and a compliant VAT invoice showing both parties' numbers and the reverse-charge note.
The error is charging the right amount but keeping nothing that proves why. When an audit asks why a sale was zero-rated or taxed at a foreign rate, the burden is on you to show the evidence. Store the location proof and the invoices systematically, not in an inbox.
References
- European Commission, VIES VAT number validation. Official tool to check the validity of an EU VAT number. ec.europa.eu/taxation_customs/vies
- European Commission, One Stop Shop (OSS and IOSS). The EU VAT e-commerce schemes for distance sales and imports. vat-one-stop-shop.ec.europa.eu
- European Commission, VAT rates applied in the member states. Reference list of standard and reduced VAT rates across the EU. taxation-customs.ec.europa.eu/taxation/vat/vat-rates