Told you 'must charge VAT in the customer's country'? VAT on digital products sold to EU buyers, explained

What counts as a digital product, and who the rule is about

EU VAT law calls these 'electronically supplied services': products delivered over the internet that are essentially automated and involve minimal human intervention. The European Commission's examples include downloaded software, images and screensavers, music and films, and 'the digitised content of books and other electronic publications'. Automated distance teaching that needs little or no human intervention is included too, which covers most pre-recorded courses. Teaching where a teacher delivers the course content over the internet is listed as not electronically supplied, and follows different rules.

For these services sold to a private customer (a 'non-taxable person'), the place of supply is the Member State where the customer is established, has their permanent address or usually resides. That is where the VAT is due, at that country's rate. The Commission points to its Taxes in Europe Database (TEDB) for checking rates.

• Business customers: if the buyer is VAT-registered and gives you their VAT number, the Commission's guidance says they account for the VAT themselves under the reverse charge mechanism.
• Marketplaces: if you sell through a marketplace, the Commission's guidance treats you as supplying the marketplace operator, who then has the VAT obligations in the customers' countries. If you sell through your own checkout, the sale is yours.

If you are based in the EU: the €10,000 threshold

Since 1 January 2019 there has been an annual €10,000 threshold for cross-border sales of these services to consumers. The Commission's OSS guidelines set three conditions. You are established in only one Member State. You sell these services to consumers in other Member States. And the total of those sales does not exceed €10,000, without VAT, in the current and the preceding calendar year. Since 1 July 2021 the same €10,000 also includes intra-Community distance sales of goods, so if you ship physical products to other EU countries as well, both count towards one total.

If you meet the conditions, those sales are taxed under the rules of your own country, as if they were domestic sales, and OSS isn't used for them. Three details catch people out:

• It counts only sales to consumers in other EU countries. Sales to customers in your own country don't count towards it.
• It is not a yearly allowance you reset. 'As soon as the threshold is exceeded, the general rule applies without exception', in the guidelines' own words, and from then on the place of supply is the customer's country.
• You can choose to apply the customer's-country rule even below the threshold, for example if you expect to cross it soon. That choice binds you for two calendar years.

If you are outside the EU: there is no threshold

The threshold requires the seller to be established in a single EU Member State, so a seller in the UK, the US or anywhere else outside the EU can't use it. From the first sale of a digital product to a private customer in the EU, the VAT of that customer's country is due.

The non-Union OSS scheme exists for exactly this. You can choose any Member State as your Member State of identification. That country gives you an identification number in the format EUxxxyyyyyz, which can only be used to declare supplies under the non-Union scheme. France, for example, asks non-EU businesses to complete form n° 3563 and email it to tva.e-commerce@dgfip.finances.gouv.fr. You then receive identifiers to create an espace professionnel and join the 'Guichet de TVA UE' service. Germany handles the non-Union scheme through the Bundeszentralamt für Steuern (BZSt).

How OSS registration works, and what it asks of you

EU-established sellers use the Union scheme. You register in the Member State where your business is established, with the same VAT identification number you use for your domestic VAT. The scheme is optional, but once you opt in it covers all your qualifying sales to consumers in every Member State. Without it, you would have to register for VAT in each country where you have customers.

In Germany, the application goes through the 'BZStOnline-Portal' and you enter your Umsatzsteuer-Identifikationsnummer. In France, in your espace professionnel go to 'Gérer les Services', then 'Adhérer aux services en ligne', and subscribe to the 'Guichet de TVA UE' service. An activation code arrives by post, and then you submit the registration from 'Mes services'.

Registration normally starts on the first day of the calendar quarter after you apply. If your first qualifying sale comes before that, for example because you crossed €10,000 mid-quarter, you can start from the date of that sale, provided you tell your tax office by the tenth day of the following month. The BZSt says plainly that registering backdated after that tenth day is not possible. Once registered:

• Returns are quarterly under both the Union and non-Union schemes, due by the end of the month after the quarter: 30 April, 31 July, 31 October and 31 January. The deadline does not move for weekends or public holidays, and payment is due by the same date.
• If you had no qualifying sales in a quarter, you still file a 'nil return'.
• The return is in one currency, generally euro. Sales made in other currencies are converted at the European Central Bank rate published on the last day of the quarter.
• The OSS return is in addition to your domestic VAT return. It does not replace it.

The evidence you need of where each customer is

For a digital download, you usually can't be certain where the buyer lives, so the rules let you rely on a presumption. The one most online sellers use is two pieces of non-contradictory evidence. The European Commission's illustrative list is:

• the customer's billing address
• the IP address of the device they used, or any other method of geolocation
• bank details, such as where the account used for payment is held, or the billing address that bank holds
• the mobile country code stored on the SIM card they used
• the location of their fixed landline, where the service reaches them through it
• other commercially relevant information

Germany's Kleinunternehmerregelung and France's franchise en base

Both countries let small businesses skip charging VAT at home. Germany's §19 UStG, rewritten from 1 January 2025, applies when total turnover did not exceed €25,000 in the previous calendar year and does not exceed €100,000 in the current one. France's franchise en base, with the thresholds that apply from 1 January 2025, covers service businesses up to €37,500 in the previous year, and you lose it from the date your current-year turnover passes €41,250 (for sales of goods the figures are €85,000 and €93,500). Invoices under the French scheme carry the mention 'TVA non applicable, article 293 B du CGI'.

Here is how they interact with the EU rule. While your cross-border digital sales to consumers stay within the €10,000 threshold, they count as sales in your own country, so your home exemption can cover them. Once you are over €10,000, those sales are taxed in each customer's country, and your home exemption doesn't reach there. The Commission's guidance for microbusinesses is direct about it: even if your business is not registered for VAT at home, you still have to account for VAT in the other Member States where your customers are.

Since 1 January 2025 there is a second option for EU-established sellers: the EU small-business scheme. Germany's BZSt (the EU-KU-Regelung) and France's DGFiP (the 'franchise en base TVA européenne') let you apply to be exempt in other Member States too. Your EU-wide turnover must not exceed €100,000 in the previous and current year, each country checks its own national threshold and conditions, and you report your EU turnover every quarter. In Germany you apply through the BZSt Online-Portal. In France you subscribe to 'Franchise en base TVA UE' in your espace professionnel, then send the exemption request it points you to.

Prevent it next time

Most VAT surprises with digital products come from not noticing a line being crossed. A little bookkeeping each month avoids that.

• Keep a running total of sales to consumers in other EU countries, without VAT, for this year and last year. If you're in the EU, that number decides whether the €10,000 threshold still applies.
• If you cross it, register for OSS by the tenth day of the following month, so you can start from the sale that took you over.
• Capture two pieces of location evidence at checkout, such as billing country and IP country, and keep them with each order.
• Ask business buyers for their VAT number, and keep it with the order.
• Records for OSS sales must include the country of consumption, what was supplied, when, the VAT due and the evidence of location. Keep them for 10 years from the end of the year of the sale, even if you later leave OSS.
• Put the four quarterly deadlines in your calendar, and file a nil return for any quarter with no qualifying sales.

Selling your digital products with OneSol

If you want a simple page to list your ebooks, templates or courses, OneSol is a free link-in-bio page, and on Pro ($9/month) you can sell and take payments through your own Stripe or PayPal account, with the money going straight to you. OneSol does not collect VAT, file returns or give tax advice, so the steps above remain yours.

This is general information, not tax or legal advice, and your situation may differ. Check with your tax authority or an accountant before you act on it.