If you sell digital products (for example: downloads, SaaS subscriptions, e-books, templates, online courses, plug-ins, or streaming content) to customers in the European Union, special VAT rules apply.

This article explains:

• what counts as a digital service

• when VAT is due

• where VAT must be reported

• how EU reporting works (OSS)

• what we need from you to support your filings

This information is for guidance only. VAT rules can be complex and may change. Please speak with your tax adviser if you’re unsure about your obligations.

What is considered a “digital product”?

A digital product (also called electronically supplied service) is something:

• delivered online,

• automated, and

• requires minimal or no human involvement.

Examples include:

• software, apps and SaaS subscriptions

• downloadable files (e-books, audio, digital art, templates)

• online courses that run automatically

• streaming content

• website hosting and plug-ins

• paid memberships that unlock digital content

Not included: services carried out by a person (coaching calls, custom design, live classes, consulting).

Where is VAT due?

For digital products sold to private consumers (B2C) in the EU, VAT is due in the country where your customer is located, not where your business is registered.

That means:

• A customer in Spain → Spanish VAT rate applies

• A customer in Germany → German VAT rate applies

• A customer in Ireland → Irish VAT rate applies

Different countries have different VAT rates. These must be applied correctly on checkout and reported.

Do I have to register for VAT in every EU country?

No — not anymore.

To simplify reporting, the EU created the One Stop Shop (OSS).

With OSS, you can:

✔ register in one EU country
✔ declare all EU digital product sales in one quarterly return
✔ pay VAT in one payment

That tax authority then distributes VAT to the correct EU countries.

You must still charge the correct local VAT rate for each sale.

When do I need OSS?

You usually need to use OSS if:

• you sell digital products to EU consumers, and

• your cross-border EU sales exceed the EU distance-selling threshold (currently €10,000 per calendar year, combined across all EU countries).

Below the threshold, you may (in some cases) charge VAT in your own country — but many businesses opt into OSS anyway to keep reporting simple.

What records do I need?

EU law requires two pieces of evidence to determine the customer’s location, for example:

• billing address

• IP address

• bank/credit card country

• country of the SIM card

• delivery/billing country from the platform

You must keep these records for 10 years.

How reporting works in practice

1️⃣ Charge the correct VAT rate at checkout

Your store/platform must automatically apply the VAT rate of the customer’s country.

2️⃣ Collect customer location evidence

Keep the required records safely.

3️⃣ File your OSS return (usually quarterly)

You report:

• total sales per country

• VAT collected per country

• VAT payable

4️⃣ Pay VAT through OSS

The tax authority where you registered handles the distribution.

What hellotax needs from you

To support OSS filings, we will ask you for:

• your OSS registration details

• your sales data (per country)

• confirmation of VAT rates used

• your platform(s) (Shopify, WooCommerce, Amazon, Stripe, etc.)

• evidence storage settings (how you record location data)

The more accurate your data, the smoother your reporting.

Common mistakes to avoid

❌ charging the same VAT rate to every customer
❌ missing the €10,000 threshold and continuing without OSS
❌ not collecting proof of customer location
❌ assuming digital and physical product VAT work the same
❌ mixing B2B and B2C transactions incorrectly

If you sell to VAT-registered business customers (B2B), different rules may apply.

Need help?

If you are unsure whether OSS applies to you — or you’re not sure how to set things up — our team is happy to review your situation and guide you.

Open a ticket and include:

• your business country

• what you sell

• where your customers are located

• your yearly EU sales estimate

We’ll help clarify the next steps.

Key takeaway

If you sell digital products to EU customers, VAT is normally due where your customer is located — and OSS is the main way to report these VAT liabilities across the EU.