When you invoice a client in a VAT-registered country (UK, EU, Australia, etc.), you
need to know whether your quoted price is VAT-exclusive (net) or VAT-inclusive (gross)
and calculate the other. Getting this backwards means either undercharging the client
or accidentally absorbing the tax yourself.
Standard rates are pre-populated for common regions (UK: 20%, EU default: 20%/23%,
Australia GST: 10%, Canada GST: 5%, US: custom). You can also enter any custom rate.
Key concepts
Net price (ex-VAT / ex-tax): The price before tax. This is what you receive as
revenue. VAT paid by the customer goes to the government, not to you.
Gross price (inc-VAT): The total the customer pays, including tax.
VAT / GST registration threshold: In the UK, you must register for VAT when
your 12-month taxable turnover exceeds £90,000 (as of 2024). Below that threshold,
you don't charge VAT and don't need to remit it. US sales tax has no federal threshold
and varies by state.
Frequently asked questions
Do I charge VAT on digital products to overseas customers?
EU rules require you to charge VAT at the buyer's country rate when selling B2C
digital products to EU customers (the "EU Digital Services" rules). Platforms like
Stripe Tax, Paddle, and Lemon Squeezy handle this automatically as "merchant of
record." B2B EU sales typically use reverse-charge (customer self-accounts for VAT).
What's the difference between VAT and sales tax?
VAT is collected at each stage of production and business customers can reclaim it.
US sales tax is collected only at the final retail sale and cannot be reclaimed
by businesses. The end-consumer bears both; the mechanics for businesses differ.
VAT Rates by Country 2024 — UK, EU, Australia, Canada
Complete list of standard VAT/GST rates by country for 2024, including reduced rates for essential goods and digital services rules.
VAT (Value Added Tax), GST (Goods and Services Tax), and sales tax are all
consumption taxes — but the rates, rules, and names vary by country. Here are
the standard rates for the most common trading destinations.
Standard VAT/GST rates 2024
Country
Standard Rate
Reduced Rate
Notes
United Kingdom
20%
5%
0% on food, children's goods
Germany
19%
7%
France
20%
5.5% / 10%
Italy
22%
10% / 5%
Spain
21%
10%
Netherlands
21%
9%
Sweden
25%
6% / 12%
Highest in EU
Norway
25%
15%
Not EU
Australia
GST 10%
N/A
Flat rate
Canada
GST 5%
N/A
Plus provincial PST
New Zealand
GST 15%
N/A
India
GST 18%
5% / 12%
Multiple slabs
United States
0% (federal)
—
State sales tax only
Digital services VAT rules
If you sell digital products (software, ebooks, SaaS subscriptions) to EU consumers,
you must charge VAT at the customer's country rate — not your own country's rate.
This applies even if you're based outside the EU. The EU One-Stop Shop (OSS) scheme
simplifies this by letting you file one EU VAT return.
UK has similar rules post-Brexit: non-UK businesses selling digital services to UK
consumers must register for UK VAT if sales exceed £8,818/year.
Use our VAT Calculator to add or remove VAT at any rate.
VAT on Digital Services — Rules for SaaS and Software Businesses
How VAT applies to SaaS subscriptions, software, and digital products sold to UK and EU customers, including the OSS registration threshold.
If you sell SaaS, software licenses, or other digital services, VAT rules are
significantly more complex than selling physical goods. Here's what you need to know.
EU digital services VAT (the "destination principle")
Since 2015, digital services sold to EU consumers are taxed where the customer
is located — not where you're based. This means:
A US-based SaaS charging a French consumer must charge French VAT (20%)
A UK-based SaaS charging a German business charges 0% (B2B reverse charge)
An Australian developer selling an app to Italian consumers must charge Italian VAT (22%)
EU OSS threshold: If your total EU consumer digital sales exceed €10,000/year,
you must register for VAT (either locally or via the EU One-Stop Shop). Below this
threshold, you can apply your own country's VAT rate.
B2B vs B2C — the crucial distinction
The rules above apply to B2C (selling to consumers). For B2B (selling to
other VAT-registered businesses), the reverse charge mechanism applies:
- You charge 0% (or no VAT)
- The business customer self-reports the VAT in their own country
- You must obtain and verify their VAT registration number
UK rules post-Brexit
The UK operates its own digital services VAT regime. Non-UK businesses with UK
digital sales above £8,818/year must register for UK VAT (currently 20%) and file
UK VAT returns separately from EU VAT.
Use our VAT Calculator to calculate the correct VAT amount
for any rate, and check your country's tax authority website for current thresholds.
How the EU reverse-charge VAT mechanism works for B2B cross-border sales, when it applies, and what has to appear on your invoice.
If you sell digital services or goods B2B to customers in other EU countries, you've
likely seen "reverse charge" on an invoice template — it's one of the most
misunderstood parts of EU VAT for non-EU sellers.
What reverse charge actually means
Normally, the seller charges VAT and remits it to the tax authority. Under reverse
charge, the buyer self-accounts for the VAT instead — they declare it on their own
VAT return as both a payable and (usually) a fully-reclaimable input tax, netting to
zero for a fully-taxable business. The seller charges 0% VAT on the invoice.
When it applies
The sale is B2B (buyer is VAT-registered in another EU country)
The buyer provides a valid VAT ID that you verify (via the EU's VIES system)
It does not apply to B2C sales — those follow the EU Digital Services VAT rules,
where you charge the buyer's country rate
What must appear on the invoice
Both parties' VAT numbers
The words "Reverse charge" or "VAT reverse charge — Article 196, EU VAT Directive"
No VAT amount charged (0%)
Why this exists
Reverse charge removes the need for a foreign seller to register for VAT in every buyer
country for B2B transactions — without it, a US or UK SaaS company selling to
businesses across 27 EU member states would need dozens of local VAT registrations. It
shifts the compliance burden to the buyer, who already has a VAT registration and is best
positioned to self-account correctly.
What can go wrong
Charging VAT when reverse charge should have applied means the buyer can't reclaim it
the normal way and you've collected a tax you shouldn't have. Conversely, applying reverse
charge without verifying the buyer's VAT ID (e.g., it's invalid or the buyer isn't
actually VAT-registered) can leave you liable for the VAT you should have charged.
Frequently asked questions
Do I need to verify the VAT ID every time?
Yes — use the EU VIES lookup tool before each new B2B customer, and keep a record of the
verification for your own compliance file.
What about UK sales after Brexit?
UK-to-EU B2B sales generally still qualify for a similar zero-rated treatment, but UK
VAT rules diverged from the EU framework — check current HMRC guidance rather than
assuming EU rules apply unchanged.
Use the VAT Calculator for standard VAT-inclusive/exclusive
calculations on the transactions where VAT does apply.