Very likely, if you’re a B2C business and your sales into the EU exceed €10,000. For B2B businesses it’s less likely although you’ll need to complete a separate filing to report your VAT-registered customers and the sales volumes for each of them.
Sales into the EU exceeding €10,000 in a 12 month period.
Yes. You owe tax for the sale of cloud software subscriptions to customers in European Union.
Yes. You owe tax for the sale of software downloads to customers in European Union.
Yes. You owe tax for the sale of eBooks to customers in European Union.
Yes. You owe tax for the sale of digital downloads to customers in European Union.
VAT in the European Union works under a system called VAT MOSS.
For businesses based in the EU, you’ll need to register for VAT MOSS if your sales exceed €10,000 in a 12 month period. For businesses based outside of the EU, a “non-union VAT MOSS” system is one of the simplest and most commonly used options to be EU VAT compliant as the registration, filing and remittance processes are very similar to the EU version.
😐🌶️ It's not that complicated
Filing Frequency: Variable (by member state)
The rate of tax charged under VAT MOSS is the rate charged by the country where the customer is based, rather than the company making the sale. While this means you have to file and remit taxes for every member state you sell into, the ‘one-stop-shop’ system is actually quite straight forward.
For B2C businesses, you can submit your filings to each member state in one upload. However, if any of your customers are businesses, you’ll need to complete a separate filing called the EC Sales List. This is to document all of your sales to VAT-registered customers so that you can report all the B2B sales in one go.
Preparing this data correctly is a manual and lengthy process that involves verifying the VAT number associated with every sale.
😬🌶️🌶️ It's very high / punitive
Penalties for non-compliance with VAT regulations in the EU vary by member state and range from back payment of taxes, to added interest and additional fines.
Things get more difficult if you’re late or fail to submit your returns for three consecutive quarters, as you can be excluded from the VAT MOSS scheme altogether. If this happens, you’ll need to register in all of the member states you sell to, individually.
Registering for VAT in the European Union
😐🌶️ It's not that complicated