VAT Rules for Cross-Border Services

Ever tried making sense of VAT when you’re offering services across borders? It’s like opening a map with no compass — especially if you’re a freelancer, small business owner, or digital service provider working with clients in the EU or beyond.

Understanding cross-border VAT isn’t just about ticking boxes for HMRC — it’s about staying compliant, keeping your costs transparent, and making sure you’re charging the right amount at the right time. With shifting regulations, post-Brexit changes, and digital services flying across time zones, VAT rules have become more complex — but not impossible to master.

In this guide, you’ll learn:

• How VAT applies to cross-border services
• The difference between B2B and B2C VAT treatment
• When and why you might need VAT registration
• What do EU services mean in the post-Brexit landscape
• Key compliance tips to avoid fines and confusion

Let’s break it down, step by step — in plain English, without the jargon overload.

What Is VAT and Why Does It Get So Complicated Across Borders?

Value-Added Tax (VAT) is a consumption tax applied at each stage of a supply chain — from production to final sale. In your home country, the rules are relatively straightforward. But once you start crossing borders, especially outside the UK, everything changes.

Why? Because:

• Different countries apply different VAT rates
• There are rules about where the “place of supply” is
• Whether you’re selling to a business or an individual makes a big difference

Let’s say you’re a graphic designer in London working for a client in Berlin. Should you charge VAT? Should they pay it? Do you need to register in Germany? These are the kinds of questions that baffle even seasoned professionals.

Cross-Border VAT: Key Terms You Need to Know

To keep things clear, here are a few essential terms:

• Place of Supply: Determines which country’s VAT rules apply
• B2B (Business-to-Business): You’re selling to a VAT-registered business
• B2C (Business-to-Consumer): You’re selling to a private individual
• VAT MOSS (Mini One Stop Shop): Used to be a simplification method for EU-wide digital VAT — now replaced by OSS (One Stop Shop) for EU businesses

Understanding how these definitions apply is key to compliance.

VAT Treatment for Cross-Border Services: B2B vs. B2C

Selling Services to Businesses (B2B)

When you sell services to a VAT-registered business in another country, the Reverse Charge Mechanism usually applies.

This means:

• You don’t charge VAT
• The customer accounts for the VAT in their own country

Example: You’re a UK-based SEO consultant billing a VAT-registered business in France. You issue an invoice with no VAT, stating “Reverse charge applies”.

Why is this great? Less admin for you, and the buyer handles VAT on their end.

Important: The invoice should always include the customer’s VAT number and a note like “Subject to reverse charge.”

Selling Services to Consumers (B2C)

This is where it gets tricky.

When selling to non-business customers (i.e., individuals), you often must charge VAT based on the customer’s location, not yours.

Digital services (e.g. streaming, e-books, software, online coaching) are a key example:

• If your buyer is in Germany, you need to charge German VAT
• You may have to register for VAT in each EU country you sell to unless you use a simplification scheme (e.g., non-Union OSS)

Post-Brexit Alert: UK sellers can no longer use the EU OSS scheme. You might need to appoint an EU fiscal representative and register for VAT in an EU country.

What Services Are Affected by Cross-Border VAT Rules?

Not all services are treated the same. Here’s a snapshot of how VAT applies across categories:

Digital Services (E-services)

• Examples: Software, online courses, downloadable templates, streaming services
• VAT applies where the consumer lives
• Requires VAT registration in each applicable country (or use a third-party platform that handles VAT)

Professional Services

• Examples: Legal, accounting, consultancy
• B2B: Reverse charge
• B2C: Usually taxed based on supplier location (but check local exceptions)

Hiring of Goods, Transport, and Events

• These follow different rules, especially physical services like event entry or hotel bookings
• Always verify specific national guidance

Top Tip: The EU VAT Rules Explained website is a lifesaver for category-specific rules.

VAT Registration: When Do You Need It?

For UK Businesses Selling Abroad

You’re required to register for VAT in the UK if:

• Your taxable turnover exceeds £90,000 (as of April 2024)
• You’re supplying digital services to EU consumers and don’t use a platform like Etsy, Amazon, or Gumroad

But even if you’re under the threshold, you may need to:

• Register for VAT in the EU if selling B2C digital services
• Appoint an EU fiscal representative if required

Using the Non-Union OSS Scheme

Since Brexit, UK businesses must register in one EU country and use the Non-Union One Stop Shop (OSS) to declare VAT across all EU sales. It simplifies things.

But you still need to:

• Collect customer location evidence
• Charge the correct local VAT rates
• Submit quarterly OSS VAT returns

Real-World Scenario: Freelance Copywriter Selling Courses

Let’s look at a common case:

Emma, a UK-based freelance writer, sells:

• One-to-one copywriting services (B2B & B2C)
• An online self-paced course (B2C digital service)

Here’s how VAT applies:

• Her 1:1 B2B services to a client in Spain? No VAT — reverse charge applies
• Her course was bought by a consumer in Italy? She must charge Italian VAT and register through OSS

Emma uses a platform that handles VAT for her, but had she sold directly, she’d have to handle foreign VAT herself.

Moral of the story? Understand your setup, and use platforms wisely if you’re not ready for complex registrations.

What About Services Within the EU? (If You’re an EU-Based Seller)

If you’re based within the EU, the rules are slightly different:

• B2B sales: Reverse charge often applies within the EU
• B2C sales of digital services: OSS (Union scheme) can be used to declare VAT for all EU countries

For non-digital services (e.g., consultancy), check the local place-of-supply rules — not all services follow the same logic.

VAT Invoicing Requirements for Cross-Border Services

Don’t overlook your invoices. They must be:

• Clear and complete
• Indicate customer’s VAT number (for B2B)
• Include a reverse charge note where applicable
• Display VAT amount and rate if charged

Here’s a quick checklist:

Key Tips for Staying Compliant (Without Losing Your Mind)

• Use VAT-compliant platforms: Shopify, Gumroad, and similar tools often handle VAT for you
• Keep evidence of customer location: IP address, billing address, payment country
• Check VAT thresholds: Some EU countries have no thresholds for digital services — VAT applies from the first euro
• Stay updated: VAT rules shift — check HMRC and EU guidance annually
• Get help when needed: A VAT consultant or accountant with international experience is worth their weight in gold

Conclusion: Make VAT Work for You, Not Against You

Navigating cross-border VAT might feel like learning a new language, but once you grasp the basics of B2B vs B2C, the importance of location, and how VAT registration fits into the picture, it becomes far more manageable.

Whether you’re freelancing, running a digital store, or launching an app, understanding your EU services obligations ensures you’re not caught off-guard — or out of pocket. You’ll not only protect your business legally but also come across as more professional to your international clients.

Now it’s your turn:

• Review your client list — are you selling B2C in the EU?
• Check whether you need OSS registration or platform support
• Don’t hesitate to ask for professional help if VAT still feels like a minefield