VAT on Digital Services (OSS)

Key facts

Digital services to EU consumers are taxed where the customer is based.
The One Stop Shop (OSS) lets you register in one EU country and declare all EU sales.
UK businesses access OSS through the Non-Union scheme in any EU member state.
Sales to EU businesses follow the normal B2B place-of-supply rules (reverse charge).

How VAT Applies to Digital Services

HMRC defines digital (electronically supplied) services as services delivered over the internet with minimal human involvement:^[1]

Software downloads and SaaS subscriptions
E-books, digital music, and streaming
Online games and apps
Website hosting and cloud services
Online advertising

Selling to EU Consumers

When you sell digital services to non-business customers in the EU, VAT is due in the customer’s country at that country’s local VAT rate.^[1]

The One Stop Shop

Rather than registering for VAT in every EU country where you have customers, you can use the OSS Non-Union scheme:^[2]

Register for OSS in one EU member state
File quarterly OSS returns declaring all EU B2C digital sales
Pay all EU VAT in a single payment to that member state
They distribute the VAT to each country

Selling to EU Businesses

Sales of digital services to EU businesses follow the normal B2B place of supply rules. The place of supply is where the customer is — the EU business accounts for VAT via the reverse charge. You don’t charge UK VAT or local VAT.^[3]

Tip: You need evidence of where your customer is based (billing address, IP address, payment details). Keep at least two non-contradictory pieces of evidence.

Frequently Asked Questions

Do I need to charge EU VAT on digital services?

If you sell digital services to consumers in the EU, you must charge VAT at the local rate of the customer’s country. Sales to EU businesses follow normal B2B reverse charge rules and you do not charge VAT.

What is the One Stop Shop (OSS) for VAT?

The OSS lets UK businesses register for VAT in one EU member state and file a single quarterly return covering all EU B2C digital service sales, rather than registering in every EU country where they have customers.

What counts as a digital service for VAT?

Digital services include software downloads, SaaS subscriptions, e-books, streaming, online games, apps, website hosting, cloud services, and online advertising — essentially services delivered over the internet with minimal human involvement.

What evidence do I need of where my digital customer is based?

You need at least two non-contradictory pieces of evidence, such as the customer’s billing address, IP address, or payment details, to determine their location for VAT purposes.

Sources

VAT rules for supplies of digital services to consumers — GOV.UK
One Stop Shop (OSS) — European Commission
VAT on electronic services — GOV.UK