Key takeaways

  • Digital services are taxed where the consumer lives: UK VAT for UK consumers, local VAT for consumers abroad.
  • A digital service is delivered automatically over the internet with little or no human involvement, such as downloads, apps, streaming and software subscriptions.
  • UK businesses selling digital services to EU consumers must account for EU VAT from the first sale, usually through the EU's non-Union One Stop Shop.
  • Sales to overseas business customers are generally outside the scope of UK VAT; the customer accounts for any VAT.
  • If you sell through an app store or marketplace, the platform is usually treated as the supplier and handles the VAT.

Selling software, courses, downloads or subscriptions online can expose a small business to VAT in dozens of countries. The rules are built around one idea: digital services are taxed where the consumer is, not where the seller is. This guide explains what counts as a digital service, how UK VAT applies, and what UK sellers need to do for customers abroad.

What counts as a digital service

For VAT, digital services means broadcasting, telecommunications and electronically supplied services. An electronically supplied service is one delivered automatically over the internet or an electronic network, with minimal or no human intervention. Examples include:

  • software, apps and software updates, including software as a service
  • downloads of music, films, games, e-books, images and PDF documents sent automatically
  • streaming and on-demand content
  • online subscriptions and memberships delivered automatically
  • website hosting and advertising space on a website
  • pre-recorded online courses that run without a live teacher

Using the internet to communicate does not by itself make a service digital. These are not electronically supplied services:

  • advice from a lawyer, accountant or consultant sent by email
  • live online teaching or coaching where a person delivers the content in real time
  • a PDF the seller emails manually to each customer
  • booking services for hotels, events or car hire
  • physical goods ordered online

The distinction matters because non-digital services follow the general place of supply rules, which usually mean UK VAT for consumer sales by a UK business.

Selling to UK consumers

If you supply digital services to consumers in the UK, UK VAT applies at the normal rate, usually 20%. A UK business does this through its normal VAT registration once it passes the £90,000 registration threshold.

Overseas businesses selling digital services to UK consumers must register for UK VAT from their first sale, because there is no registration threshold for businesses not established in the UK.

E-books and e-publications

Since 1 May 2020, electronic publications such as e-books, e-newspapers, e-magazines and academic journals are zero-rated in the UK, matching printed versions. Audiobooks are not included: they remain standard-rated whether supplied physically or digitally. An e-publication that is more than half advertising, audio or video content is also standard-rated.

Selling to EU consumers

For a UK business, the place of supply of digital services to an EU consumer is the consumer’s member state, so that country’s VAT applies. The EU’s €10,000 annual threshold is only available to businesses established in the EU, so UK sellers must account for EU VAT from the first sale.

You have two options:

  1. Register for the non-Union One Stop Shop (OSS) in one EU member state. You file one quarterly OSS return listing sales and VAT by country, and pay it to that state, which passes it on. The OSS replaced the Mini One Stop Shop (MOSS) in July 2021.
  2. Register for VAT separately in each EU member state where you have consumer customers.

Most small UK sellers use the OSS or sell through a platform that handles EU VAT for them.

Evidence of the customer’s location

You must charge the rate of the customer’s country, so you need evidence of where they live. In practice sellers collect two pieces of non-contradictory evidence, such as:

  • the billing address
  • the IP address of the device used
  • the country of the customer’s bank
  • the country code of the SIM card used

Selling to customers elsewhere

Many other countries charge VAT or GST on digital services bought by their consumers from overseas sellers, often with low or no registration thresholds. Norway, Switzerland, Australia, New Zealand, Canada and several US states are examples. Check the rules for each country where you have meaningful consumer sales.

Business customers

Sales of digital services to business customers follow the general business-to-business rule: the supply is made where the customer belongs.

  • Overseas business customers: outside the scope of UK VAT. You do not charge UK VAT; the customer accounts for any local VAT under its own reverse charge. Record the net value in box 6 of your VAT return.
  • UK business customers: UK VAT applies as normal.

Keep evidence that the customer is in business, such as a valid VAT number or other business identification, because without it the sale may be treated as a consumer sale.

Buying digital services from overseas suppliers works the other way round: a VAT-registered UK business usually accounts for the VAT under the reverse charge.

Platforms and marketplaces

If you sell digital services through an app store, online marketplace or other platform that sets the terms, authorises payment or handles delivery, the platform is generally treated as the supplier to the consumer for VAT. It charges and accounts for the VAT, and you are treated as supplying the platform. Read your platform’s terms to confirm how it treats VAT before you register anywhere.

Practical checklist

  • Decide whether each product is a digital service or not, using the automatic delivery test.
  • Record each customer’s country and status (business or consumer) at checkout.
  • Charge UK VAT to UK consumers if you are UK VAT-registered.
  • Register for the non-Union OSS before your first sale to EU consumers, unless a platform handles it.
  • Review other markets where you have consumer customers.

Frequently asked questions

Do I charge VAT on digital services to customers in the EU?

Not UK VAT. You charge the VAT of the customer’s EU country if they are a consumer, usually through the non-Union One Stop Shop. If they are a business, you do not charge VAT and they account for it themselves.

Is there a threshold before UK sellers must charge EU VAT on digital services?

No. The €10,000 threshold only applies to businesses established in the EU, so UK sellers must account for EU VAT on consumer sales from the first one.

Are online courses digital services?

Pre-recorded courses delivered automatically are digital services. Live teaching delivered by a person in real time is not, and follows the general rules.

Do I charge VAT on e-books in the UK?

No. E-books and other qualifying e-publications have been zero-rated since 1 May 2020. Audiobooks are still standard-rated.

Who pays the VAT if I sell apps through an app store?

Usually the app store, which is treated as the supplier to the consumer and accounts for the VAT.

Sources

Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.