Selling digital services to EU customers from the UK has changed significantly since Brexit. Whether you offer downloads, apps, online tools, or cloud-based platforms, it's crucial to understand the EU VAT rules for UK Tech businesses post Brexit. What's more, without proper registration and reporting, you risk non-compliance, penalties, and lost customer trust. This guide explains what digital services are included within the rules and how to stay compliant with EU tax law.
EU digital services post-Brexit - what to do now
Unfortunately you can no longer use the UK’s VAT MOSS service to declare sales and pay VAT due in EU member states. Therefore, as a UK-based business, you have two main options:
Most businesses will find the first option, Non-Union VAT MOSS, the easiest and most efficient.
Understanding the Non-Union VAT MOSS Scheme
Non-Union VAT MOSS allows non-EU businesses to file a single VAT return covering all EU countries. Instead of registering for VAT in each member state. Therefore, you choose one EU country as your point of contact.
You can choose any EU country, though many UK businesses select countries where English is widely spoken, such as Ireland or the Netherlands. Furthermore, once registered, you’ll charge VAT at the rate applicable in the customer’s country, not the country where you register—unless the customer is located there.
Equally importantly, you must register by the 10th day of the month following your first EU sale. So if you sell your first service in July, you must register by 10 August.
VAT Returns are submitted quarterly, and must be filed within 20 days of the end of each quarter. For example, a VAT return covering April to June) must be filed by 20 July.
Should you decide to leave the scheme, notify your member state at least 15 days before the end of the quarter. Be aware: you cannot rejoin for six months after deregistering.
You’ll find full details on the European Commission’s VAT MOSS guidance here.
What Counts as a Digital Service?
To apply the correct VAT treatment, you must first understand what is regarded as a digital service under EU law. Moreover, according to HMRC, digital services include:
These services are typically fully automated. A classic example is when a customer clicks "Buy Now", pays, and receives their product immediately by download or email—without any human involvement from the supplier.
Similarly, where the sale of the digital content is essentially automatic, with a small amount of manual process involved this will not change the nature of the supply from a digital service.
Conversely, live training sessions, legal advice over email, plus call centre support are generally not regarded as a digital services.
Determining Whether your sales are B2B or B2C
The VAT treatment depends on whether you’re selling to a business or a consumer.
If your client provides a valid VAT registration number, it’s treated as a B2B sale and therefore falls outside these rules. Whilst No EU VAT needs to be charged on a B2B, sale you should nevertheless retain their EU VAT number for your records.
By the same token, where no VAT number is provided, it's by default considered to be a B2C sale. If a customer provides their VAT registration number, it can be accepted that the supply is B2B and not within the rules.
However if a customer cannot provide a VAT number, despite being in business, because they are below the registration threshold, alternative evidence can be accepted that they are in business.
Pinpointing the Customer’s Location
Above all, one of the most critical elements of VAT compliance is identifying where your customer is based. Equally importantly, VAT is due in the country where the customer “usually resides” or is established. As a matter of fact, in straightforward cases, this is their home address or business location. Although in more complex cases, such as mobile purchases or sales on the go, there are specific rules
Notwithstanding where no clear presumption applies, you must collect two non-contradictory pieces of evidence to support your claim. That might include billing address, IP address, credit card country, or mobile phone location.
Record keeping and invoicing
You must keep records for 10 years after the end of the year in which the service was supplied. These records include:
Summary
Even though selling digital services into Europe hasn’t stopped, the rules are different now. Furthermore, the EU VAT rules for UK digital service businesses after Brexit demand action, planning, and compliance.
Don’t get caught out. Choose your route: register for Non-Union VAT MOSS or face country-by-country VAT compliance. Furthermore, ensure you're charging the right rates, keeping the right records, and filing on time.
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