If you’re selling online — whether it’s ebooks, templates, courses, or even physical products and you have customers in the EU or UK, VAT compliance is not optional. But don’t worry. Once you understand the basics, most of it can be automated. Let me walk you through it.
What Is VAT and Why Does It Matter?
VAT (Value Added Tax) is a consumption tax applied to goods and services in many countries, especially across the EU and the UK.
Here’s what tripped me up early on:
Even if you’re not in Europe, you’re still required to charge VAT when selling to customers in the EU/UK, especially if you sell digital goods like:
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Ebooks
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Online courses
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Printables
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Software
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Audio/video content
This applies whether you’re a one-person operation or a large store. The tax must be calculated based on your customer’s location, not yours.
If you skip it, you could end up in hot water with EU tax authorities. And yeah, they’ve started cracking down on non-compliant international sellers.
Do You Need to Register?
The short answer? Probably.
Here’s how it breaks down:
EU-Based Sellers:
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Must register for VAT if you exceed your country’s national threshold (varies per country).
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If you sell to customers in other EU countries, you use the One Stop Shop (OSS) system to report VAT across borders.
Non-EU Sellers (like US, Canada, Australia, etc.):
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If you sell digital products to any EU customer, you must register — even if you make one sale.
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You can register through a Non-Union OSS country like Ireland or Estonia.
UK Sellers:
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Must register for UK VAT if you earn over £85,000/year.
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Must collect VAT from EU buyers depending on location and type of product.
If you sell physical products, things get even more complex. Import VAT and customs duties apply, so you might need to register or use a fulfillment partner. This is why it’s helpful to understand how to manage VAT for physical products.
Digital Products: The Trickiest (But Most Common) Case
Let’s say you sell a digital planner. Someone in France buys it. You must:
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Charge the correct French VAT rate (20%)
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Prove the buyer was in France (via IP, billing address, etc.)
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Collect, report, and pay that VAT to the EU
This is where platforms like Payhip are lifesavers. It:
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Automatically detects the buyer’s location
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Calculates the correct VAT rate
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Adds VAT to the price or includes it (your choice)
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Creates proper VAT-compliant invoices
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Stores the required evidence in your dashboard
Honestly? I sleep better knowing it’s all handled behind the scenes.
How to Make VAT Easier? (Without Losing Sleep)
Here’s how I simplified compliance:
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Payhip: Handles VAT automatically for digital and physical products. Here’s exactly how Payhip automates VAT collection.
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Quaderno: Works with Stripe and PayPal to track VAT and generate reports.
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OSS registration: If you’re in the EU, file everything through One Stop Shop.
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Digital product invoices: Generated automatically in Payhip or with tools like Paddle.
You can also use advanced tools to make reporting seamless. Here are the 5 best tools for VAT calculation and compliance if you’re looking to streamline operations.
Don’t Make These VAT Mistakes
I’ve made all of them, so you don’t have to:
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Ignoring the rules because you’re “too small”, nope. Even one sale triggers VAT obligations.
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Not collecting customer location data — you need two pieces of evidence (IP + billing address).
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Using the wrong VAT rate — every EU country has different rates.
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Skipping invoicing — buyers might ask for it (especially business customers).
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Forgetting UK-specific rules post-Brexit — they’re separate now.
Final Thoughts
VAT compliance might sound like a nightmare, but once you set it up — it’s mostly automatic. The key is to start early, use smart tools, and keep solid records.
Whether you sell ebooks or art prints, handling EU/UK VAT correctly isn’t just about avoiding fines, it builds trust with your customers and protects your brand.
So take the time, stay VAT compliant as a small business, and keep building — without the tax drama.
