VAT Decision Tree
Start here ↓
Question 1: Who are your customers?
B2B (Businesses)
Companies with VAT numbers
→ Reverse charge applies. No VAT to collect.
B2C (Consumers)
Individual customers
→ Continue to Question 2 ↓
↓ (if B2C)
Question 2: What do you sell?
Digital Services
SaaS, downloads, streaming, e-books
→ VAT at customer's country rate
Services
Consulting, freelance work
→ Usually VAT at your location
↓ (if digital services B2C)
Question 3: EU B2C sales volume?
Under €10,000/year
Total EU B2C digital sales
→ Can use home country VAT rate
Over €10,000/year
Above threshold
→ Must use OSS or register in each country
↓
Solution: OSS (One-Stop Shop)
Register for OSS in Estonia. File one quarterly return. Covers VAT for all 27 EU countries. No need to register in each country.
VAT Rates by Country
EU VAT Rates for Digital Services
| Country | Standard Rate | Country | Standard Rate |
|---|---|---|---|
| Germany | 19% | France | 20% |
| Netherlands | 21% | Spain | 21% |
| Italy | 22% | Poland | 23% |
| Belgium | 21% | Sweden | 25% |
| Ireland | 23% | Denmark | 25% |
| Austria | 20% | Finland | 25.5% |
| Portugal | 23% | Greece | 24% |
| Estonia | 22% | Luxembourg | 17% |
| Hungary | 27% | +15 more | 17-27% |
Rates current as of 2024. Some products have reduced rates. Hungary has the highest (27%), Luxembourg the lowest (17%).
OSS vs Individual Registration
OSS (One-Stop Shop)
- ✓ One registration in Estonia
- ✓ One quarterly VAT return
- ✓ Covers all 27 EU countries
- ✓ Xolo handles filing for you
- ✓ Single payment to Estonian tax authority
- ✓ No foreign tax office dealings
Best for: Most digital businesses
Individual Country Registration
- • Register separately in each country
- • File returns per country (monthly/quarterly)
- • Different languages and systems
- • Need local tax representative
- • Multiple payments to different authorities
- • Complex compliance burden
Only if: You have physical presence or specific requirements
B2B vs B2C Quick Reference
B2B Sales (Business to Business)
EU B2B
Reverse charge. Invoice without VAT. Customer reports VAT in their country.
Non-EU B2B
Outside EU scope. Invoice without VAT. No VAT applies.
Estonian B2B
Add 22% Estonian VAT (if you're VAT registered).
Key: Always verify B2B status by checking their VAT number on VIES database.
B2C Sales (Business to Consumer)
EU B2C Digital
VAT at customer's country rate. Use OSS to simplify.
Non-EU B2C
Outside EU scope. No EU VAT. Check local rules.
Estonian B2C
Add 22% Estonian VAT.
Key: Use Stripe Tax or similar to automatically apply correct rates.
VAT Automation Tools
Let Software Handle It
You don't need to manually calculate VAT for each country. These tools integrate with your payment processor:
Stripe Tax
RecommendedBuilt into Stripe. Automatically calculates, collects, and reports VAT. 0.5% per transaction. Handles 50+ countries.
Paddle / Lemon Squeezy
Merchant of Record model. They handle ALL tax obligations. Higher fees but zero tax compliance work for you.
Quaderno / TaxJar
Standalone tax compliance. Integrates with various payment processors. Good if you use multiple payment methods.
Frequently Asked Questions
Everything you need to know before getting started
All information verified as of December 2025. Prices and features subject to change. Always verify current pricing with providers.
