If you’re a business owner in Europe looking to expand your sales worldwide, you’ve likely encountered the term “VAT” (Value Added Tax). It’s a key factor in international trade, and getting it right can save you headaches, penalties, and unhappy customers. But what exactly is VAT, how does it apply when selling globally, and what do you need to know to stay compliant? Let’s break it down.
What is VAT, Anyway?
VAT is a consumption tax applied to goods and services at each stage of production or distribution. In the European Union (EU), it’s a harmonized system, but rates and rules can vary slightly between member states. For example, as of 2025, standard VAT rates range from 17% in Luxembourg to 27% in Hungary, with most countries hovering around 20-22%. If you’re selling from an EU country, VAT is something you’ll need to factor into your pricing and paperwork, whether your customers are local or halfway across the globe.
Selling Within the EU: The Basics
When you sell to customers within the EU, VAT rules depend on who’s buying:
- Business Customers (B2B): If your customer is a VAT-registered business in another EU country, you can zero-rate the sale (charge 0% VAT), provided they give you their valid VAT number. You’ll still need to report this in your VAT return, but they’ll handle the tax on their end through a process called “reverse charge.”
- Individual Consumers (B2C): For sales to non-business customers (like everyday shoppers), you generally charge the VAT rate of your home country—unless you exceed certain sales thresholds. Once your total sales to another EU country cross the €10,000 threshold (as set by the EU’s One-Stop Shop rules), you must charge that country’s VAT rate and register with the OSS system to simplify reporting.
Since July 2021, the EU’s VAT e-commerce package has made this process smoother with the One-Stop Shop (OSS), allowing you to report and pay VAT for all EU consumer sales in one place, rather than registering in every country you sell to.
Selling Outside the EU: Going Global
Things get trickier—and sometimes simpler—when you sell beyond the EU’s borders. Here’s how it works:
- VAT on Exports: Good news! When you sell goods to customers outside the EU (say, the US, Canada, or Australia), these are typically considered “exports” and are zero-rated for VAT. You don’t charge VAT, but you’ll need proof of export—like shipping documents or customs declarations—to justify this to your tax authority. Without proof, you might have to charge your local VAT rate and sort it out later.
- Digital Services: If you’re selling digital products (e.g., software, e-books, or online courses), the rules shift. For non-EU customers, you usually don’t charge EU VAT. Instead, the tax obligation often falls on the buyer in their home country, if applicable. However, you’ll need to check if the destination country has its own digital tax rules—think Australia’s GST or Canada’s provincial sales taxes.
- Customs and Import Taxes: While you won’t charge VAT on exports, your customers might face import duties or taxes when your goods arrive in their country. For example, in the US, imports over $800 might trigger customs duties, and many countries have their own VAT or sales tax applied at the border. Be upfront with customers about this—it’s not your responsibility to pay, but it affects their final cost.
Key Tips for Staying Compliant
- Know Your Thresholds: For EU B2C sales, track your revenue per country to know when to switch VAT rates. For exports, keep export records pristine.
- Use the OSS: If you’re selling to EU consumers, register for the One-Stop Shop to streamline VAT reporting. It’s a lifesaver for small businesses.
- Price Transparently: Decide whether to include VAT in your listed prices or add it at checkout. For global sales, clarify that import taxes might apply.
- Get Professional Help: VAT rules are complex and ever-changing. A tax advisor familiar with cross-border trade can keep you on the right side of the law.
Why It Matters
Getting VAT wrong can lead to fines, delayed shipments, or frustrated customers stuck with unexpected fees. On the flip side, mastering it can make your business look professional and competitive globally. For example, zero-rating exports can give you a pricing edge over competitors in high-tax regions, while clear communication about costs builds trust with international buyers.
Final Thoughts
Selling from Europe to the world is an exciting opportunity, but VAT is a puzzle worth solving. Whether you’re shipping handmade goods to Japan or selling digital downloads to Brazil, understanding where VAT applies—and where it doesn’t—lets you focus on growing your business instead of wrestling with tax forms. Start small, keep good records, and don’t hesitate to lean on tools like OSS or expert advice as you scale.
Ready to take your European business global? With a little VAT know-how, the world’s your market.
