Cross-border consumption tax — why the right tax makes the fair price

The observation. For decades, consumption tax followed a rule convenient for the seller : charge the VAT of your own country, and the customer paid it without seeing it. That model has given way. Since 1 July 2021, the European Union applies a destinationprinciple : VAT on a sale to a private individual is generally due in the country where the good is consumed. The One-Stop-Shop (OSS / IOSS) made this logic workable across a continent. This is not an accounting nicety : it is what makes a displayed price honest, or not.

Origin or destination : a question of principle

A consumption tax can attach to the place of departure (origin) or the place of arrival (destination). The OECD's International VAT / GST Guidelines have, since 2017, established the destination principle as the international norm : the tax accrues to the jurisdiction where consumption occurs. The logic is economic as much as moral : VAT is a tax on the consumer, not on the producer ; it should therefore be levied at the rate and for the benefit of the country where the consumer lives.

For domestic trade this distinction is invisible. It becomes structural the moment a sale crosses a border. The same item shipped to five countries can carry five different rates — and that is correct, not an anomaly.

The European turning point of July 2021

Before 2021, each distance seller had a threshold per destination country : below it, they charged their home VAT ; above it, they had to register in the country of arrival. That system multiplied registrations and invited arbitrage. The VAT e-commerce package, in force since 1 July 2021, replaced it with a single EU-wide threshold of €10,000 for intra-EU distance sales. Above it, destination VAT applies — but it is declared and paid through a single window.

The OSS (One-Stop-Shop) lets a seller declare in one member state the VAT due in all the others. The IOSS (Import One-Stop-Shop) covers imported goods below €150, removing the old low-value consignment relief. The principle is the same : right rate, right country, one return. Directive 2006/112/EC recast, as amended by directives 2017/2455 and 2019/1995.

The displayed price : honesty is a rule

In Europe, the price shown to a final consumer must be tax-inclusive. Directive 98/6/EC on price indication requires a final selling price, VAT included. This is not merely a legal obligation : it is the basis of a fair relationship. The customer must see what they will pay, with no surprise at checkout — unlike the North American practice where tax is added at the end.

The practical consequence is demanding : if the rate depends on the country of delivery, then the displayed price must adjust to the country of delivery. Selling the “same” item to a French customer (20 % VAT) and a German one (19 % VAT) at an identical net price produces two different gross prices. The reverse — a single gross price — silently varies the margin by destination. Neither option is “wrong,” but it must be chosen deliberately and displayed clearly.

The Andorran special case : IGI

Not every European market falls under VAT. The Principality of Andorra, which is not an EU member, applies its own general indirect tax, the IGI (Impost General Indirecte), established by law 11/2012. Its standard rate is 4.5 %, one of the lowest in Europe, with reduced and increased rates for certain categories. For a house based in Andorra, IGI is not a “cheaper VAT” : it is a distinct regime, with its own rules of liability and territoriality. A cross-border sale from or to Andorra therefore means reasoning in customs and IGI, not in intra-EU VAT.

Why the right tax makes the fair price

Applying the right rate to the right country is not an administrative burden : it is the condition of a sincere price. An under-taxed price lies to the customer and is a debt to the authorities ; an over-taxed price overcharges. The correct tax is therefore the backbone of commercial trust — especially when serving several jurisdictions from a single catalogue.

Where we stand

Montandor Andorra serves customers across several tax jurisdictions — EU countries under destination VAT, markets with their own currency, and the Principality of Andorra under IGI. Our principle is simple : the displayed price reflects the regime of the country of delivery, tax included, and the customer's currency. We do not compile a static rate table ; we apply the destination rule, because it is the only way to show a price that is both accurate and honest.

“A fair price begins with the right tax. Serving a French, German, Swiss or Andorran customer means accepting that the same product does not carry the same displayed price — and saying so plainly. Tax is not the enemy of commerce ; misapplied, it is the enemy of trust.”
— Wouter Meijboom, CEO, Montandor Andorra.

Sources

• Council Directive 2006/112/EC on the common system of VAT, recast (and e-commerce amendments 2017/2455 and 2019/1995).
• European Commission — VAT e-commerce package and OSS / IOSS one-stop-shop, in force since 1 July 2021 ; single €10,000 threshold.
• Directive 98/6/EC on the indication of prices of products offered to consumers (tax-inclusive prices).
• OECD — International VAT / GST Guidelines, 2017 (destination principle).
• Principality of Andorra — law 11/2012 establishing the Impost General Indirecte (IGI), standard rate 4.5 %.

Published 29 May 2026 by the Montandor team — research led by Florian Aubert (Pricing, Tax & Currency Analyst), in collaboration with Solène Marchand (Pricing & Revenue) and Ségolène Charpentier (Legal & Compliance Advisor).