What changed?
When selling services cross border, it is first important to check what Place of Supply (PoS) rule applies to that particular sale as this determines which country’s VAT applies to a particular sales transaction. The PoS varies depending upon the nature of the service and, potentially, the nature of the customer, or where the supplier performs the service.
Due to the special post-Brexit rules for Northern Ireland, Northern Ireland is treated as part of the EU in relation to goods, but for services it is not; any references to the EU in this article do not include Northern Ireland.
When selling to consumers, if the PoS is an EU country, the supplier would ordinarily be required to register for VAT with that specific country. To avoid businesses having to register in a lot of EU countries however, simplification rules have been introduced.
Simplification started with the Mini One-Stop-Shop (MOSS) from 2015 for dealing with sales of digital services, namely telecoms, broadcasting and electronic services (inc. digitised products) to EU consumers. From July 2021 this was replaced with the Union One-Stop-Shop (OSS) and the Non-Union One-Stop-Shop (NUOSS); at the same time, these schemes were expanded to cover all types of cross-border B2C services with an EU PoS. The OSS is for businesses with a physical establishment in the EU, and the NUOSS is for those based outside the EU.
Following the explosion of (live) virtual online events and activities during the Covid pandemic, the EU has also changed the PoS rule for virtual (live) cultural, educational entertainment and sporting type activities to be determined by where the consumer resides, rather than where the event physically takes place, or the supplier belongs. This change applies from 1 January 2025.
From 1 January 2025 the EU widened the ability of member states to use reduced rates of VAT for certain products. It also introduced an optional SME VAT scheme for small to medium EU-based businesses. This enables qualifying businesses selling goods and services within the EU to avoid VAT registration, thereby enabling them to sell free of EU VAT. As at February 2025, the UK has not implemented this scheme so it is only available to businesses with a physical presence (beyond mere stockholding) in the EU.
If you also sell goods to EU consumers, please also see our separate article on goods.
1. How do I know the PoS of my services?
For services sold to EU consumers, the default position is that the PoS is where the supplier establishment selling the services belongs. So for UK-based suppliers, this would suggest UK VAT is chargeable rather than EU VAT (subject to checking the UK rules as there are some differences between EU and UK rules). However, there are a lot of exceptions to this in a B2C scenario. Common examples of services that will be subject to EU VAT when sold by UK-based suppliers to EU consumers are:
- digital services (i.e. telecoms, broadcasting and electronically supplied services including digitised products like downloads and apps)
- services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities (inc. fairs and exhibitions and the services of the organisers of such activities)
- that take place live and in-person (e.g. a physical event or activity)
- that take place live but virtually / remotely from 1 January 2025)
- services directly related to land or buildings in the EU e.g. construction services, property design, property conveyancing, rent, use of a hotel room.
- Transport, catering or work on goods that is physically taking place in the EU
2. The launch of the NUOSS for certain services B2C
On 1 July 2021 the EU launched the NUOSS as a way for non-established businesses to register for and account for EU VAT appropriately on sales of services to consumers, without the need for registering in lots of EU countries. Prior to this, the MOSS served a similar purpose, but only for digital services to EU consumers. From 1 July 2021, the NUOSS can be used for all types of service (where the PoS is the EU). There is an EU-wide threshold of €10,000 for cross-border sales of services to EU consumers, but this only applies to businesses physically established in the EU.
UK-based businesses can register for the NUOSS via an EU member state of their choice, but may need to appoint an EU-based representative; these rules vary by member state.
3. What if I sell digital products via an online marketplace?
Generally, when you sell digital products via an online market place (OMP), the marketplace will be deemed to be buying the services from you, and then selling them on to the EU consumer. As a result, the marketplace is the party responsible for the EU VAT (usually via its own NUOSS or OSS registration) on the sale to the consumer, and you will just be making a sale from your non-EU establishment to the marketplace. This deemed sale to the marketplace will be subject to VAT based on the location of the marketplace and the relevant B2B PoS rules; for non-UK marketplaces the UK supplier would not normally have to worry about VAT on this deemed sale. Check with your marketplace for more information on this.
What do these rules mean for me?
- Selling through a marketplace like Amazon or Etsy? Check with your marketplace to see how the deemed seller rules will affect you and their associated fee. Many online platforms have variable VAT rate functionality built in.
- Selling direct? Work out the PoS of your services and whether your sales are subject to EU VAT. Decide if you want to register for NUOSS. If you do not use NUOSS you may have one or more EU VAT registration obligations. You will also need to ensure your website pricing is sufficiently high to cover the potential EU VAT rates, or has variable VAT rate functionality; the VAT payable will be different depending on the EU country of residence per customer.
Where can I go for more advice?
- The European Commission has published guidance on the OSS and NUOSS, available here.
- HMRC guidance on selling digital (telecoms, broadcasting and electronic) services to EU consumers, available here.
- Further guides to selling into the EU are available in the VAT area of the Resource Library on FSB Legal and Business Hub for FSB members (FSB Members should access this service through their dashboard).