EU VAT for Digital Products: A Guide to Selling Online

Written by Quaderno

In today’s global digital marketplace, understanding EU VAT laws is essential for anyone selling digital products to customers in Europe. Whether you're based in the EU or abroad, your very first sale to an EU customer may trigger VAT obligations and knowing how it works can help you avoid costly mistakes.

This guide aims to demystify EU VAT for content creators like you. Not only that, we’ll also explain Kajabi’s EU VAT compliance service and walk you through setting up your tax codes correctly.

Why EU VAT Matters When Selling Products Online

EU VAT is a tax paid to individual states for the sales of certain goods and services, with rates and rules varying significantly from one state to another.

For digital content creators that are based outside of the EU, it’s crucial to understand European tax rules because you could be liable for VAT upon your very first sale to an EU-based customer. There are no tax registration thresholds for digital products like those that exist in other countries, such as economic nexus thresholds in the US. Learn more about how VAT registration thresholds work.

Once you understand whether your products are taxable and where your customers are located, you can easily comply with EU VAT obligations through what’s called the One-Stop Shop (OSS) scheme. We’ll cover that in a later section.

How to Know If Your Digital Products Are Taxable Under EU VAT

Generally, physical goods are taxable according to the EU’s distance selling laws, while the taxability of digital products and services is harder to classify.

If you are creating or delivering digital content, whether your services are taxed can depend on how the EU defines and categorizes digital goods or “electronically supplied services.”

The European Commission has four criteria that determine whether something is a digital product:

1. It is not a tangible good.
2. It could not exist without IT or technology.
3. It’s provided via the Internet or an electronic network.
4. It’s fully automated or involves minimal human intervention.

Examples of Digital Products Subject to EU VAT

• Online courses with no human intervention (a.k.a. distance teaching)
• Webinars
• Other streamed content
• Online memberships
• Online coaching and training services
• Consulting
• Digital art
• Photographs or other images
• Subscriptions to blogs, journals, and online newspapers
• Accessed or downloaded books, such as eBooks and Kindle
• Accessed or downloaded music
• Other downloaded electronic goods

How to Find the Right VAT Tax Code for Your Digital Product

For Kajabi users, determining the appropriate tax code for your product is very important. It's crucial to understand these three things:

1. The specific nature of your digital product
2. The tax definitions where you are located
3. The tax definitions where your customers are located.

Setting Up VAT Tax Codes for Digital Products in Kajabi

Once you understand your product category, you can set up your tax codes in Kajabi. Here are some basic guidelines for how to choose the correct tax codes for your business:

Once you understand your product category, you can set up your tax codes in Kajabi. Here are some basic guidelines for how to choose the correct tax codes for your business:

• eService/Service: Your customer location determines the taxability of the product.
• Standard rated/Good: Your own location determines the taxability of the physical product.
• Standard rated/Service: Your own location determines the VAT rules applied to the service.
• Consulting/Service: Your services are taxed when selling inside the EU, but not taxed when selling outside of the EU.

Using the EU One-Stop Shop (OSS) to Simplify VAT for Digital Sales

As a content creator based in Europe or selling to European customers, you need to know about the One-Stop Shop VAT scheme. The One-Stop Shop was introduced in 2015 to streamline digital tax returns, preventing the need to register for VAT in each EU country where you have customers.

To register for OSS, you go through the local tax authority in your home country — or if you're based outside the EU, in any country within the EU you choose. Remember to check with the specific country for detailed registration procedures.

Here's how the tax return process works:

• You file a single VAT return online, through your OSS.
• The OSS calculates how much you owe.
• You pay the VAT you owe online, and your OSS distributes it to the appropriate EU member states and their OSS systems.

It's a remarkably simple method for handling digital taxes across 27 countries!

Note: If you are based in the EU and your annual cross-border sales stay below €10,000, there's no need for you to use VAT OSS. Your tax process is straightforward: register in your home country, apply your local tax rate to all customers, and file returns with your home country. Simple as that.

5 Simple Steps to Handle EU VAT for Digital Products

EU VAT may seem complex, but the process can actually be broken down into five clear steps:

1. Register for VAT and obtain a VAT registration number
2. Confirm your customer’s identity and location
3. Apply VAT to transactions when required
4. Maintain accurate invoices and records
5. File VAT returns on a quarterly basis

Let’s explore each step in more detail.

Step 1: Register for an EU VAT Number to Sell Digital Products

Before selling digital goods in the EU, your business must register for VAT. The registration process varies depending on where your company is based.

For businesses within the EU, simply register in your home country.

Non-EU businesses can register in any EU country of their choice and must enroll in that country’s OSS system.

Choosing an EU country for VAT registration

With multiple options available, here are some factors to consider:

• Language accessibility: If you speak a specific EU language, registering in that country can simplify tax compliance.
• English-friendly registration: Ireland is a good option, but some other countries, like Spain, also provide English-language tax resources.
• Online efficiency: Every EU country must have a VAT OSS portal, but some function better than others.

Obtaining a VAT Number

It’s important to distinguish between a local tax number (valid only within a single country) and a VAT number (which allows cross-border sales). Some countries issue a VAT number automatically, while others require a separate application.

Step 2: How to Verify Customer Location for EU VAT

This step is crucial for EU VAT compliance, as it determines whether tax should be charged and at what rate.

Identifying the customer type

• If the buyer is a business (B2B), ask for their VAT number and verify it through the European Commission’s validation tool, VIES. Kajabi Payments does this for you.
• If they are an individual (B2C), VAT must typically be charged.

Confirming customer location

You always charge the tax rate of the customer’s location, so it’s crucial to confirm where the buyer is. To do this, you must collect two pieces of evidence that show a matching location. This evidence could be:

• Billing address
• Bank location
• Credit card issuing country
• IP address
• SIM card country (for mobile transactions)

Retain records of customer evidence

Keep this evidence for 10 years to remain compliant.

Step 3: When and How to Charge VAT on Digital Sales in the EU

In the EU, tax calculations depend on the type of sale you’re making. Here’s when to charge VAT and how much:

• B2C Sales: Always charge VAT. If you’re an EU-based business selling less than €10,000 annually in the EU, apply your home country’s VAT rate. Otherwise, use the VAT rate of the customer’s country.
• B2B Sales: If the buyer is outside your home country and has a valid VAT number, VAT is not required. The reverse-charge mechanism shifts VAT responsibility to the buyer.

Step 4: What to Include on EU VAT Invoices for Digital Products

Every EU sale requires a VAT invoice, even if no tax was charged (such as in reverse-charge B2B transactions). VAT invoices must include:

• Business name, address, and VAT number
• Invoice date and number
• Buyer’s details and VAT number (if applicable)
• VAT rate and amount applied
• Final total

Storage Requirements

Invoices must be kept for five years and should be digitally accessible.

Step 5: How to File EU VAT Returns for Digital Sales

Thanks to the OSS system, businesses can file VAT returns online in a streamlined process.

Your registered OSS portal calculates the VAT owed for each country where you made sales. You submit a single payment to your OSS, which then distributes VAT to the relevant countries.

VAT returns must be filed by the following dates:

• April 20 (for Q1: Jan-Mar)
• July 20 (for Q2: Apr-Jun)
• October 20 (for Q3: Jul-Sep)
• January 20 (for Q4: Oct-Dec)

Note: For businesses selling less than €10,000 annually in the EU, VAT returns can be filed directly with the home country’s tax office, bypassing OSS.

If you need some help with filing, check out how to file an EU VAT return.

EU VAT Rules by Country for Digital Products

Though EU member states generally share the same rules about product taxability, they do have some differences, such as tax rates varying from 17-27%. Here’s a brief explanation of EU VAT rules by country, with links for more information.

Note that in this list we are referring to e-services or digital products such as online courses, software, e-books and subscriptions, among others. Physical goods are not included in this list, because they’re almost always taxable, no matter where you’re located or where you’re selling.

Austria

The Austrian VAT rate for digital products is 20%. Learn more about VAT in Austria.

Belgium

The VAT rate for digital goods in Belgium is 21%. Learn more about VAT in Belgium.

Cyprus

Digital services in Cyprus are taxed at a VAT rate of 19%. Learn more about VAT in Cyprus.

Czech Republic

The VAT rate for digital services is 21%. Learn more about VAT in the Czech Republic.

Denmark

The Danish VAT rate for digital goods is 25%. Learn more about VAT in Denmark.

Estonia

The VAT rate for digital services in Estonia is 20%. Learn more about VAT in Estonia.

Finland

Digital products in Finland are subject to a 24% VAT rate. Learn more about VAT in Finland.

France

The VAT rate for digital goods in France is 20%. Learn more about VAT in France.

Germany

Digital services in Germany are taxed at a VAT rate of 19%. Learn more about VAT in Germany.

Greece

The VAT rate for digital services in Greece is 24%. Learn more about VAT in Greece.

Hungary

Hungary has a high VAT rate of 27% on digital products.  Learn more about VAT in Hungary.

Ireland

The Irish VAT rate for digital services is 23%. Learn more about VAT in Ireland.

Italy

Digital goods in Italy are taxed at a standard VAT rate of 22%. Learn more about VAT in Italy.

Latvia

The VAT rate for digital services in Latvia is 21%. Learn more about VAT in Latvia.

Lithuania

Lithuania applies a 21% VAT rate to digital transactions. Learn more about VAT in Lithuania.

Luxembourg

Digital services in Luxembourg are taxed at a VAT rate of 17%.  Learn more about VAT in Luxembourg.

Malta

The VAT rate for digital goods in Malta is 18%. Learn more about VAT in Malta.

Netherlands

The Dutch VAT rate for digital services is 21%. Learn more about VAT in the Netherlands.

Poland

Digital products in Poland are subject to a 23% VAT rate. Learn more about VAT in Poland.

Portugal

The VAT rate for digital services in Portugal is 23%. Learn more about VAT in Portugal.

Slovakia

The VAT rate for digital goods in Slovakia is 20%. Learn more about VAT in Slovakia.

Slovenia

Slovenia applies a 22% VAT rate to digital products. Learn more about VAT in Slovenia.

Spain

The VAT rate for digital services in Spain is 21%. Learn more about VAT in Spain.

Sweden

Digital products in Sweden are subject to a 25% VAT rate. Learn more about VAT in Sweden.

Digital Product Tax Rules Outside the EU

Australia GST

As a content creator selling to Australian customers, you may be obligated to charge and collect Goods and Services Tax (GST) if you pass the tax registration threshold. Check this Australia GST guide to learn more.

Canada GST

Selling to Canadian customers involves adhering to GST/HST rules, explained in this guide to GST in Canada. Some Canadian provinces also have their own specific rules for foreign sellers or taxes on digital products. Learn about rules in these specific regions here:

• British Columbia
• Saskatchewan
• Manitoba
• Quebec

United Kingdom VAT

Selling digital products to UK customers requires VAT compliance once you’ve passed a certain threshold of sales to British customers. Learn more in this United Kingdom VAT Guide for Businesses.

United States sales tax

The US sales tax rules vary by state. Each state determines its own list of taxable digital products, and each place has its own tax rate. Learn more about when and where your business is liable in this Sales Tax Guide for Digital Creators.

How Kajabi Helps You Handle EU VAT on Digital Products

Kajabi provides content creators with tools for automatic EU VAT compliance, including tax calculations, tax invoices, and reporting capabilities. All of these solutions are built into our platform and apply to all of your sales. 

Learn more about how Kajabi’s sales tax tool works.

Not only does Kajabi keep you compliant across the European Union, but it allows you to focus more on your content and clients – not on taxes.

This guide aims to provide a clear and foundational understanding of EU VAT considerations for content creators. But given the complexity and variability of tax laws, consulting with a tax professional is always a good idea.

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