VAT on digital products and online courses: EU, UK and UAE rules explained

Selling digital products has one huge advantage: you can sell to anyone, anywhere. It also has a less obvious consequence: VAT follows the customer. An online course sold to a consumer in Germany carries German VAT; the same course sold to a consumer in France carries French VAT — whether your company is in Spain, Dubai or the US.

What counts as a digital service

For VAT purposes, electronically supplied services are those delivered over the internet with minimal human intervention. Typical examples:

• E-books, templates, presets and downloadable files
• Pre-recorded online courses and membership content
• Software, apps and SaaS subscriptions
• Streaming and digital media

Services that involve significant human intervention — such as one-to-one consulting delivered by video call — are not electronically supplied services and may follow different rules.

B2B or B2C: the first question

• Business customers (B2B): if the customer is a VAT-registered business in another country, you generally invoice without VAT and the customer accounts for it under the reverse charge. Check the VAT number — in the EU, through VIES — and keep the evidence.
• Consumers (B2C): you charge the VAT of the country where the consumer is located.

Selling to consumers in the EU

If your business is established in the EU

EU sellers can charge their home country’s VAT on cross-border B2C sales of digital services as long as those sales stay below €10,000 per year across the whole EU. Above that threshold, they must apply the VAT rate of each customer’s country.

If your business is outside the EU

Companies established outside the EU — for example, a UAE company or a US LLC — have no threshold: they must charge the VAT of the customer’s country from the first sale to an EU consumer.

The One-Stop Shop (OSS)

To avoid registering for VAT in every country, you can use the One-Stop Shop: you register in a single EU country and file one quarterly return that includes the VAT of all EU countries. EU businesses use the Union scheme; non-EU businesses selling digital services use the non-Union scheme.

You must also keep evidence of where each customer is located, such as the billing address, the IP address or the country of the payment card.

Selling to consumers in the UK

The UK applies similar rules. Businesses established outside the UK that sell digital services to UK consumers must register for UK VAT from the first sale and charge UK VAT, currently 20% at the standard rate.

Selling to consumers in the UAE

The UAE charges 5% VAT on electronic services supplied to consumers in the country. Non-resident suppliers of digital services to UAE consumers may have to register for VAT regardless of the registration threshold. If your company is based in the UAE, read our overview of the UAE tax system.

Marketplaces and merchant-of-record platforms

• App stores and marketplaces: when they intervene in the sale and set its terms, they are generally treated as the supplier for VAT purposes and charge the VAT.
• Merchant-of-record platforms: services such as Paddle or Lemon Squeezy sell to the customer in their own name and handle the VAT; you invoice the platform.
• Your own website with Stripe or similar: you are the seller: calculating, charging and declaring VAT is your responsibility, even if the tool helps you calculate it.

Quick checklist for digital businesses

1. 1Identify whether each sale is B2B or B2C.
2. 2Collect and store evidence of the customer’s location.
3. 3Check whether the €10,000 EU threshold applies to you — or whether any threshold applies at all.
4. 4Register for OSS if you sell to EU consumers.
5. 5Review the rules of other markets where you have customers, such as the UK or the UAE.
6. 6Keep your invoices and records consistent with what you declare.

VAT on digital products is one of the areas where errors accumulate silently. If you sell online from Spain, our tax management in Spain service covers international invoicing; if your company is in the UAE, see tax management in Dubai.