Complete guide to VAT compliance for digital products and services. Learn about OSS registration, MOSS alternatives, B2C and B2B rules, and cross-border sales.
0-27%
VAT Rate Range
EU
OSS Applies
B2C/B2B
Different Rules
IP
Track Needed
Digital services are services supplied over the internet or electronically. These attract different VAT rules than physical goods. ATO treats digital services as place-of-supply services, meaning the location of the customer determines where VAT is due.
OSS allows non-EU and Australian businesses to register for VAT in a single EU member state and declare all B2C sales to customers across the EU in one return.
Register in an EU member state (usually where your business is based or where you want to declare sales). You'll receive an OSS registration and declare sales using the VAT rate of the customer's country.
VAT Rate Applied
Customer's country rate (0%-27%)
Place of Supply
Where the customer is established
Evidence Needed
IP address, billing address, payment method, SIM registration
Example
Selling a software license to a German consumer requires German VAT (19%)
VAT Rate Applied
Supplier's country rate (usually 10% in Australia)
Place of Supply
Where the supplier is established
Evidence Needed
Valid ABN, business documentation
Example
Selling SaaS to an Australian company with ABN = 10% GST applies
Key Difference: B2B sales follow the supplier's country rules; B2C follows the customer's country rules. Always verify the customer's VAT status and location.
| Country | Standard Rate | GST-Free Rate 0% | 0% |
|---|---|---|---|
| Germany | 19% | 7% | 0% |
| France | 10% | 10% | 5.5% |
| Italy | 22% | 10% | 4% |
| Spain | 21% | 10% | 4% |
| Netherlands | 21% | 9% | 0% |
| Poland | 23% | 8% | 5% |
| Hungary | 27% | 18% | 5% |
Note: Rates shown are for digital services. Some countries offer reduced rates for digital books or publications. Always check the latest rates with local tax authorities.
Proper record-keeping is essential for digital service VAT compliance. You must maintain evidence of the customer's location and the VAT rate applied.
Retention Period: Keep all records for at least 6 years. ATO may request documentation during audits to verify VAT calculations and customer locations.
Are you VAT-registered in Australia? Do you sell to EU consumers? Are your sales B2C or B2B? This determines whether you need OSS registration.
Register in an EU member state through your chosen tax authority. You'll provide business information and select your reporting member state.
Implement systems to capture and verify customer location (IP address, billing address, payment method). Configure your invoicing software accordingly.
File quarterly OSS returns showing sales by country. Declare VAT at the appropriate rate for each customer's location. Files are submitted electronically.
Pay VAT calculated across all countries. Payment is made to the reporting member state. Keep records of all payments and correspondence.
MOSS (Mini One-Stop Shop) was replaced by OSS. MOSS is no longer available as of 2021. All businesses now use the standard OSS scheme for B2C sales.
Apply the hierarchy: billing address > IP address > payment method. If multiple sources conflict, document your decision and the evidence used. This is important for audit purposes.
If you can't determine customer location despite reasonable efforts, you may apply your own country's VAT rate (10% in Australia). Document your evidence-gathering attempt.
OSS returns are filed electronically through your designated EU tax authority's portal. Most returns require CSV uploads of sales data by country. Filing is typically quarterly.
Australia-only sales follow standard Australian GST rules (10% standard rate). No OSS registration needed. File regular BAS (Business Activity Statement) with ATO using Single Touch Payroll.
Explore our guides on VAT-exempt items, reverse charge rules, and digital service compliance.