Understanding Cross-EU Border VAT on Digital Sales

What Is Digital VAT?

Digital VAT refers to the value-added tax applied to digital services sold to consumers within the European Union (EU).
Examples of digital services include:

• E-books, downloadable guides, or templates

• Online courses, webinars, or virtual training

• Streaming subscriptions (music, video, gaming)

• Software, apps, or cloud services

If you sell these services across EU borders, special VAT rules apply.

Key Rule: VAT Is Charged Where the Customer Is Located

For B2C (business-to-consumer) sales, EU law requires that VAT be charged in the customer’s EU country, not where your business is based.

This means:

• If you are in Spain and sell an online course to a French consumer, you must apply French VAT.

• The VAT rate depends on the customer’s country.

How the One-Stop Shop (OSS) Helps

Managing VAT across 27 EU countries can be complex.
The One-Stop Shop (OSS) simplifies this by letting you:

• Register once in one EU country

• Report all cross-border EU B2C sales in a single quarterly return

• Pay the VAT due to your tax authority, who then distributes it to other EU countries

Important: OSS is for B2C digital and physical goods sales across EU borders.
If all your sales are domestic (within your own country), OSS does not apply.

The €10,000 EU-Wide Threshold

If your total cross-border B2C sales of digital (and certain physical) goods in the EU are:

• Under €10,000/year → You can charge VAT in your own country and use your domestic VAT return.

• Over €10,000/year → You must apply the VAT rate of your customer’s country and use OSS.

What Counts as "Digital Services" for VAT?

The EU defines digital services as those:

• Delivered over the internet

• Largely automated with minimal human involvement

• Delivered electronically (not physical goods)

Examples:
✅ A self-paced video course
✅ An app download
❌ A live one-on-one coaching session (may be a regular service, not a digital service)

Common Compliance Steps for Digital Sellers

1. Identify your customer’s location – collect 2 pieces of evidence (e.g., billing address and IP address).

2. Apply the correct VAT rate – based on customer’s EU country.

3. Track your sales total – to know if you exceed the €10,000 threshold.

4. Register for OSS – if you exceed the threshold.

5. File OSS returns quarterly – reporting VAT due per country.

Example Scenarios

Example 1 – Below threshold:
You’re in Germany, selling €7,000 worth of e-books to EU customers in a year. You can charge German VAT and report domestically.

Example 2 – Above threshold:
You’re in Portugal, selling €15,000 worth of software to customers in France, Italy, and Spain. You must charge VAT at the rates of those countries and report via OSS.

How hellotax Can Help

hellotax helps digital sellers stay VAT-compliant by:

• Monitoring your EU-wide sales threshold

• Registering you for OSS

• Calculating the correct VAT rates for each sale

• Filing your OSS returns on time

• Offering expert guidance for complex cases

📌 Tip: Even small digital businesses can quickly exceed the €10,000 limit — tracking early avoids surprise compliance issues.

Need help?
Contact our VAT experts to get your OSS registration started and ensure your digital sales are VAT-compliant across the EU.