VAT, GST, and sales tax compliance for international digital businesses. Use when the user asks about: VAT, GST, sales tax, value added tax, goods and services tax, EU VAT, UK VAT, VAT OSS, One-Stop Shop, VAT registration, reverse charge, Merchant of Record, Paddle, Lemon Squeezy, Stripe Tax, digital services tax, DST, IOSS, Import One-Stop Shop, B2C digital VAT, B2B reverse charge, VIES validation, Australia GST, Singapore GST, Japan JCT, consumption tax, Canada GST/HST, US sales tax, economic nexus, SaaS tax, digital product tax, VAT compliance, VAT threshold, EU B2C sales, cross-border VAT, international VAT, when to register for VAT, VAT penalties, late registration, Mehrwertsteuer, TVA, IVA, 消費税, or any question about indirect tax compliance for businesses selling digital products or services internationally.
Written by the OpenAccountants team. Written by the OpenAccountants team from the official sources it cites.
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Every figure is drawn from this Guide and cited to its source.
EU VAT applicability
Selling digital products/services (SaaS, ebooks, courses, software) to EU consumers (B2C); applies regardless of where YOUR company is registered
EU B2C VAT registration threshold
€10,000/year
VAT OSS mechanics
Register in ONE EU country → report all EU B2C sales through one portal; no need to register in each country separately; available to non-EU businesses via "Non-Union OSS" scheme; file quarterly returns
B2B reverse charge and VIES validation
If the EU customer provides a valid VAT number → reverse charge (0% VAT; customer self-assesses). Always validate EU VAT numbers via VIES system before zero-rating.https://ec.europa.eu/taxation_customs/vies/
UK VAT applicability and threshold
Selling digital services to UK consumers (B2C). No threshold for non-UK businesses — must register from first sale. UK businesses: £90,000 threshold.
UK VAT standard rate
20%
US sales tax nexus rules
Selling to US customers (digital or physical). "Nexus" required: physical presence OR economic nexus. Economic nexus: most states trigger at $100,000 in sales OR 200 transactions/year.
DST definition
DST is a revenue-based tax on digital services. Unlike VAT (transaction-level, charged to customers) and corporate tax (profit-based), DST is calculated on gross revenue and comes out of your own revenue.
EU late registration penalty structure
Most EU countries impose penalties for selling above the €10,000 threshold without registration: - **Minimum penalty:** ~€500 (small/first-time violation) - **Maximum penalty:** ~5% of unpaid VAT (sustained non-compliance) - Interest accrues from the date VAT was originally due
Professional help exposure threshold
€5,000
EU physical goods import VAT rules
No de minimis exemption — ALL imports subject to VAT (was €22 before 2021). Customs duty threshold: €150 still applies. IOSS (Import One-Stop Shop): Lets non-EU sellers collect and remit VAT at point of sale for goods <€150. Without IOSS, carrier or customs collects VAT from buyer on delivery (poor customer experience).
US de minimis customs duty exemption
$800 USD
Aggregation of platform income for VAT threshold purposes
If earning across multiple platforms (YouTube, Patreon, Substack, Gumroad), aggregate total EU digital services revenue for VAT threshold purposes: - EU VAT OSS threshold: €10,000/year across ALL EU B2C digital sales (not per platform) - Gumroad and Paddle handle VAT for their platform sales (they are MoR) - Stripe, Patreon, and AdSense do NOT handle VAT — the seller is responsible
Rendered from the canonical facts model. General reference only — confirm with a qualified professional before acting.
Based on work by Artin (@ar-gen-tin), licensed under MIT. Adapted for the OpenAccountants format.
Disclaimer: This skill provides general guidance on VAT/GST compliance for digital services. VAT rules are complex, jurisdiction-specific, and change frequently. Consult a qualified indirect tax advisor before registering, filing, or taking positions on VAT/GST obligations. Errors can result in retroactive assessments, penalties, and interest.
The answer depends on three factors:
Compliance Strategy by Revenue Level
| Revenue Level | Recommendation | Estimated Cost |
|---|---|---|
| <€10,000 from any single jurisdiction | Monitor only — below most thresholds | $0 |
| €10,000–€100,000 with global customers | Use a Merchant of Record (Paddle, Lemon Squeezy) — they handle all tax | 5–10% of revenue |
| >€100,000 with concentrated markets | Self-register in top 2–3 markets + Stripe Tax for automation | $2,000–5,000/year in accounting |
Merchant of Record (MoR) Decision Framework
| Revenue | Complexity Tolerance | Recommendation |
|---|---|---|
| <$50,000 | Any | MoR (Paddle / Lemon Squeezy) |
| $50,000–$200,000 | Low | MoR |
| $50,000–$200,000 | High | Self-register top markets + Stripe Tax |
| >$200,000 | Any | Self-register + accountant + Stripe Tax |
MoR services (Paddle, Lemon Squeezy, FastSpring) act as the legal seller:
EU VAT Rates (Digital Services)
| Country | Standard Rate |
|---|---|
| Germany | 19% |
| France | 20% |
| Netherlands | 21% |
| Spain | 21% |
| Italy | 22% |
| Ireland | 23% |
| Sweden | 25% |
US has NO federal sales tax — it is state-by-state (45 states + DC) Digital products/SaaS taxability varies by state:
Solutions
| Tool | Cost | Detail |
|---|---|---|
| Stripe Tax | $0.50/transaction | Automatic calculation and collection |
| TaxJar / Avalara | Varies | Full compliance automation |
| Paddle / Lemon Squeezy | 5–10% of revenue | MoR handles everything |
Australia GST
| Factor | Detail |
|---|---|
| Trigger | Selling digital services to Australian consumers (B2C) |
| Threshold | AUD 75,000/year in Australian sales |
| Rate | 10% on digital supplies |
| Filing | Quarterly BAS (Business Activity Statement) |
| Non-resident suppliers | Must register for GST if above threshold |
Singapore GST
| Factor | Detail |
|---|---|
| Trigger | Taxable turnover >SGD 1,000,000/year (mandatory); voluntary registration available |
| Non-resident digital services | Must register if >SGD 100,000 in SG consumer sales |
| Rate | 9% (increased from 8% in 2024) |
| Filing | Quarterly |
Japan Consumption Tax (JCT — 消費税)
| Factor | Detail |
|---|---|
| Trigger | Foreign businesses selling digital services to Japanese consumers |
| Threshold | Must register regardless of revenue threshold |
| Rate | 10% (8% reduced rate for some items) |
New Zealand GST
| Factor | Detail |
|---|---|
| Trigger | Non-resident suppliers of digital services to NZ consumers |
| Threshold | NZD 60,000/year in NZ sales |
| Rate | 15% |
Canada GST/HST
| Factor | Detail |
|---|---|
| Trigger | Non-resident suppliers selling digital services to Canadian consumers |
| Threshold | CAD 30,000/year in Canadian sales |
| Rate | 5% GST (federal) + 0–10% provincial (HST combined up to 15%) |
| Registration | Simplified registration available for non-residents |
Filing Deadlines Summary
| Jurisdiction | Filing Frequency | Typical Deadline |
|---|---|---|
| EU VAT OSS | Quarterly | End of month after quarter |
| UK VAT | Quarterly | 1 month + 7 days after period |
| Australia GST | Quarterly | 28 days after quarter |
| Singapore GST | Quarterly | 1 month after quarter |
| Japan JCT | Annually or semi-annually | 2 months after fiscal year end |
| Canada GST/HST | Annually or quarterly | Varies by reporting period |
| US Sales Tax | Varies by state | Monthly / quarterly / annually |
DST Rates and Thresholds
| Country | DST Rate | Global Revenue Threshold | Local Revenue Threshold |
|---|---|---|---|
| UK | 2% | £500M global | £25M UK |
| France | 3% | €750M global | €25M France |
| Italy | 3% | €750M global | €5.5M Italy |
| Spain | 3% | €750M global | €3M Spain |
| Turkey | 7.5% | €750M global | TRY 20M Turkey |
| India (Equalization Levy) | 2% | No threshold | ₹2 crore (~$240K) |
| Kenya | 1.5% | No threshold | KES 0 (all digital services) |
For most small businesses: The high global revenue thresholds in Europe (£500M, €750M) make DST irrelevant.
Exceptions — India and Kenya have NO global revenue threshold:
Your India/Kenya Revenue action table
| Your India/Kenya Revenue | Action |
|---|---|
| <$10,000/year | Monitor; enforcement limited at this scale |
| $10,000–$50,000/year | Consult tax advisor; weigh registration cost vs exposure |
| >$50,000/year | Register and comply; enforcement risk is real |
Voluntary Disclosure Programs
| Jurisdiction | Program | Penalty Reduction |
|---|---|---|
| EU (most countries) | Voluntary correction | 50–75% reduction |
| UK | Unprompted disclosure to HMRC | Best terms (~30% of maximum) |
| Australia | Voluntary disclosure | Significant reduction; no penalty if minor |
| US | Voluntary Disclosure Programs (VDP) | Varies by state; generally 50%+ reduction |
"Unprompted" means you contact the authority before they contact you. Once an audit begins, voluntary disclosure terms are lost.
Physical Goods — Key Differences from Digital Services
| Dimension | Digital Services | Physical Goods |
|---|---|---|
| Delivery | Instant, borderless | Shipping, customs clearance |
| VAT trigger | Customer location | Import entry |
| Additional taxes | DST (rare) | Customs duty, tariffs |
| Complexity | Medium | High |
Data reflects 2024–2026 rules. VAT/GST thresholds, rates, and registration requirements change frequently. Verify all figures with official sources and a qualified indirect tax advisor. Original content: Artin (@ar-gen-tin) — MIT License. OpenAccountants — open-source accounting skills for AI — info@openaaccountants.com
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