The EU's VAT rules for digital services are some of the most globally significant tax rules in modern commerce. Whether you sell software, streaming content, e-books, or online courses, this guide explains exactly what you need to do — and why.
The EU defines digital services (formally "electronically supplied services") as services delivered over the internet or an electronic network where the supply is essentially automated with minimal human intervention. This covers a wide range: software and apps, SaaS platforms, streaming services for music and video, e-books and digital publications, web hosting, online courses that are pre-recorded, cloud storage, digital images and templates, and online marketplaces.
Services involving significant human input — consulting delivered by video call, or custom software development — are generally not classified as digitally supplied and are subject to different place-of-supply rules.
For digital services, VAT is charged at the rate of the country where the customer is located — not where the supplier is based. This rule applies globally, catching EU-based suppliers selling cross-border and non-EU businesses selling into the EU alike.
For B2B sales to VAT-registered business customers, the reverse charge applies: you do not charge VAT; your customer self-accounts in their country. Always verify the customer's VAT number using VAT-Scan before applying reverse charge treatment.
For B2C sales to consumers, you must charge VAT at the consumer's country rate — and this is where OSS becomes essential.
Before July 2021, businesses had to register for VAT in every EU country where they had consumer customers. OSS replaced this with a single registration. You register in one EU member state and file a single quarterly return covering all EU-wide B2C digital service sales. Each country's VAT is declared separately, and you make a single payment which is distributed by the OSS country.
EU-based businesses use the EU-OSS scheme. Non-EU businesses can register for Non-Union OSS in any EU member state.
Small businesses established within the EU benefit from a threshold: if your total cross-border B2C digital services and physical goods across all EU countries are below €10,000 per year, you can charge VAT at your own country's rate through your domestic return. Once you exceed €10,000, register for OSS.
This threshold does not apply to non-EU businesses — they must apply the destination rule from the first euro of sales.
EU rules require you to obtain at least two pieces of non-contradictory evidence of the customer's location. Acceptable evidence includes the billing address, IP address geolocation, bank country, SIM card country code (for mobile services), and landline location. For platforms facilitating digital service sales, deemed-supplier rules may make the platform responsible for collecting and remitting VAT rather than the underlying seller.
Businesses selling digital services to EU consumers must keep records of each transaction for 10 years, including evidence of the customer's location. These records must be available to any EU tax authority — not just your OSS registration country. For more on terms used in this guide, see our VAT Glossary.