IOSS, OSS, and DDP: Comparison and IOSS Benefits for Dropshippers

If you're shipping small-value products from outside the EU into European markets, IOSS is a practical necessity. Introduced in 2021, the Import One-Stop Shop (IOSS) simplifies your VAT filings and speeds up customs clearance, which has changed the world of B2C Ecommerce.

This article will help you:

·Understand what IOSS is and who it’s for

·Learn the differences between IOSS and OSS

·Compare IOSS with DDP and when to use each

·See why IOSS is especially helpful for dropshipping businesses

·Get a step-by-step guide on how to register and maintain IOSS correctly

Let’s dive in.

1. What Is IOSS?

IOSS, Import One-Stop Shop, is an EU tax system designed to simplify VAT collection for low-value (under €150) goods non-EU sellers sell to EU-based customers.

Before IOSS, when a customer ordered a product from outside the EU, they paid VAT upon delivery. But with IOSS, sellers will instead, collect VAT at the checkout and submit it directly to EU authorities. 

Note: If you sell through a marketplace, the platform usually handle IOSS for you. But if you're running your own store, you will have to manage it on your own.

2. How Are IOSS and OSS Different?

Although looking similar, IOSS and OSS are designed for different seller profiles and logistics paths.

OSS: For EU Sellers

OSS is for EU-based sellers who sell to consumers in multiple EU countries. Before OSS, a seller needed to register for VAT in every EU country they sold to. Now, OSS allows them to handle all intra-EU VAT filings in a single member state.

IOSS: For Non-EU Sellers

IOSS, on the other hand, is built specifically for non-EU sellers shipping goods from outside the EU into the Union. It focuses on low-value goods and simplifies VAT collection on these imports.

Let’s break this down further with explanations:

·Location of the seller: OSS is for those with a tax presence in the EU. IOSS is for sellers with no physical or legal presence inside the EU. It affects who can register, how they register, and what type of sales are covered.

·Type of sale: OSS applies to intra-EU sales—for example, a German company selling to France. While IOSS applies to imports—for example, a Chinese seller shipping directly to an Italian customer.

·Customs involvement: OSS has no impact on customs because the goods already circulate within the EU. On the contrary, IOSS directly affects customs clearance since VAT has already been paid when customers place an order.

·Limitations: IOSS can only be used for goods below €150. OSS has no such cap but cannot handle import VAT.

Summary Table: IOSS vs OSS

3. IOSS vs DDP: What’s the Real Difference?

IOSS and DDP seem to both prevent customers from dealing with taxes or customs surprises. But they actually operate in different ways and cover different responsibilities.

What Is DDP?

DDP, Delivered Duty Paid, is in fact a shipping agreement. When you—the seller—ship a package under DDP terms, you agree to pay all import costs, including VAT, duties, customs clearance, and handling fees. In such circumstances, you will tend to work with a logistics partner or customs broker to help handle everything.

Key Differences Explained

·Scope of responsibility: IOSS only deals with VAT. But DDP includes VAT and customs duties, courier handling charges, and all delivery-related fees.

·Who pays what: In IOSS, the seller collects and remits VAT. In DDP, the seller prepays everything, often through the courier (like DHL or FedEx), and bills it as part of the shipping cost.

·Logistics flow: IOSS packages often go through standard postal or enjoy simplified customs declaration. While DDP requires coordination with shipping agents and often more paperwork.

·Transparency: With IOSS, VAT is clearly listed at checkout. With DDP, taxes are often included in the shipping price.

Summary Table: IOSS vs DDP 

4. Why IOSS Matters for Dropshipping Sellers

If you run a dropshipping business targeting the EU, IOSS can be one of your biggest advantages. Here's why:

a. It Avoids Surprise Charges

Customers dislike being asked to pay extra fees when their order arrives. With IOSS, the VAT is collected during checkout. This means the delivery is smooth, and there’s no need for the customer to interact with customs.

b. It Speeds Up Shipping

With the IOSS number already printed on the shipping label, EU customs verify whether VAT has been paid and thus clearance could be allowed faster. Delivery times will be likely to be much shorter and more predictable.

c. It Simplifies Your Paperwork

Without IOSS, you would need to register for VAT in each EU country you sell to or use complex DDP arrangements. IOSS allows you to declare all your VAT in a single monthly return through one EU country.

d. It Boosts Conversion

A transparent checkout process—where the customers see total costs upfront—allows them to see the taxed bill while placing an order, thus minimizing the possibility of rejection upon delivery.

5. How to Use IOSS and What to Watch Out for

Step-by-Step: How to Register for IOSS

1. Select an EU country to register in – Popular choices include Ireland, France, or the Netherlands due to efficient digital tax systems.

2. Appoint an intermediary – Non-EU sellers are required to use a VAT intermediary who submits your filings and represents you to the tax authority.

3. Receive your IOSS number – Once your application is approved.

4. Update your checkout process – Ensure your website or platform collects VAT from EU buyers at checkout and tags shipments with the IOSS number.

5. File monthly returns – Submit a breakdown of all EU sales and VAT collected via the intermediary.

What to Watch Out For

Many businesses run into trouble not because they don’t understand the rules, but because they forget the details. Here are a few common errors:

· Missing or incorrect VAT amounts at checkout: Always use up-to-date tax rates per EU country.

·Forgetting monthly filings: These are due even if you had zero sales. Late filings may result in penalties or loss of IOSS status.

·Shipping goods over €150: IOSS cannot be used. These packages may be held at customs.

·Using the wrong currency: VAT payments must match the currency of your registered EU country.

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Conclusion

For dropshipping businesses that want to sell smoothly into the EU, IOSS offers a practical, transparent, and customer-friendly VAT solution. Compared to OSS and DDP, it turns out to be a good option for non-EU sellers selling low-value goods.

While it requires careful setup, it’s worth the effort: faster shipping, better customer experience, and simplified compliance. With the right management, IOSS can turn tax from a burden into a competitive advantage indeed.

With years of experience helping global sellers optimize their VAT cost structure, we're ready to help your business run more smoothly.

FAQ: Common IOSS Questions

1. Can IOSS be used for wholesale or B2B sales?
No. IOSS is only for business-to-consumer (B2C) transactions.

2. What if I sell via multiple platforms?
Yes, but you must keep transaction details and report all sales in your monthly return.

3. Is it mandatory to use an intermediary?
Only for non-EU sellers.

4. What if my goods worth over €150?
In such cases, IOSS will not valid. You’ll need to handle VAT and customs separately (e.g., through DDP).

5. How long does it take to get an IOSS number?
Typically 1–2 weeks, depending on the your market country and intermediary you choose.

6. What happens if I stop using IOSS but still keep selling?
Then it will be your customers who pay for VAT upon delivery.

7. Can I cancel my IOSS registration?
Yes, but you must file all pending returns and pay any outstanding VAT.

8. Will my courier handle IOSS?
Not necessarily. Some express couriers ask for your IOSS number but won’t help manage VAT filings.

9. Does IOSS replace the need for EORI?
No. EORI is still needed for customs identification; IOSS is for VAT declaration.

10. Where can I find official EU guidance on IOSS?
Visit: Europa