VAT and tax when your startup sells to customers abroad

This guide explains which country's VAT applies when a UK startup sells services, software or goods to customers abroad, and what you need to register for, charge, keep and file.
By Buzz Accounting · Updated 16 September 2026

How selling abroad changes your VAT

UK VAT is charged on sales that the rules treat as taking place in the UK. When a sale is treated as taking place in another country, no UK VAT is due on it, and that country's rules decide whether VAT or a sales tax has to be paid there. Three questions settle where a sale is taxed: whether you are selling services or goods, whether the customer is a business or a consumer, and which country the customer is in.

The answers change your UK position too. Sales treated as made outside the UK do not count towards the £90,000 UK registration threshold. A UK VAT-registered business can still reclaim UK VAT on costs that relate to those sales, where the sales would have been taxable if made in the UK. Services your startup buys from businesses abroad, such as software and advertising, can count towards the threshold.

The sections below cover services sold to businesses and consumers abroad, digital services sold to consumers in the EU, exporting and importing goods, Northern Ireland, EORI numbers and sales tax in the United States, with a worked example for a software company. Our post on VAT for software companies with overseas customers goes further on subscription businesses, and our VAT service handles registrations and returns for startups.

What this guide covers

Where services are taxed and the reverse charge
Digital services for EU consumers and the One Stop Shop
Exports, imports, EORI numbers and Northern Ireland
A worked example for a software company

Where a service is taxed

HMRC calls the country where a sale is taxed its place of supply, and sets out the rules for services in VAT Notice 741A. Most services follow one of two general rules.

Sales to business customers are taxed where the customer belongs. Consultancy or a software licence sold to a company in Germany is taxed in Germany and is outside the scope of UK VAT.
Sales to consumers are taxed where the supplier belongs. Unless one of the special rules below applies, a UK business selling a service to a private individual abroad charges UK VAT.

Several kinds of service have special rules that take priority over the general ones. They include services connected with land and property, admission to events, restaurant and catering services, passenger transport, the hire of means of transport, and digital services sold to consumers. A further UK rule covers consultancy, advertising, data processing, the provision of information, financial services and the licensing of intellectual property sold to consumers who belong outside the UK. Those sales are treated as taking place where the consumer belongs, so no UK VAT is charged, and the rules of the customer's country need checking.

Business customers abroad and the reverse charge

When you sell a service to a business customer abroad under the general rule, you do not charge UK VAT. Under a system called the reverse charge, the customer works out any VAT due on your invoice and accounts for it on their own return in their own country.

You need evidence that the customer is in business. For EU customers a VAT number is the best evidence, and you can check it on the European Commission's VAT number checker. Where a customer has no VAT number, HMRC accepts other evidence of business activity, such as a certificate from their tax authority or commercial documents. A customer who cannot show they are in business is treated as a consumer.

If you are UK VAT registered, these sales still go on your VAT return, with their value in box 6 (total sales) and no VAT in box 1. You can reclaim UK VAT on the costs of making them, because they would be taxable if made in the UK.

The reverse charge also applies when your startup buys services from a business abroad, such as software, advertising or development work. A VAT-registered business records UK VAT on those services as both due and reclaimed on the same return. A business that is not yet registered must add the value of those services to its own sales when checking the £90,000 threshold.

Digital services sold to consumers in the EU

Digital services sold to consumers are taxed in the country where the consumer lives, at that country's VAT rate. HMRC's guidance on digital services describes them as services delivered automatically over the internet with little or no human involvement. Software subscriptions, apps, downloads, stock images, web hosting and online courses made of pre-recorded videos all count. A live webinar, or a course that includes support from a live tutor, is not a digital service for these rules.

The EU has a €10,000 threshold below which a small business can keep charging its home country's VAT on digital sales to consumers in other member states. According to the European Commission's One Stop Shop guide, the threshold only applies to a supplier established in a single EU member state. A UK business owes VAT in the consumer's country from its first sale.

You can deal with that VAT by registering in every EU country where you have consumer customers, or by registering once for the EU's non-Union One Stop Shop, a scheme for businesses established outside the EU. The scheme works as follows.

You choose any one EU member state to register in, and it passes the VAT on to the other countries.
You file a return for each calendar quarter covering consumer sales of services across the EU, and pay by the same deadline, which is the end of the following month (30 April, 31 July, 31 October and 31 January).
Returns are made in euros, converting other currencies at the European Central Bank rate on the last day of the quarter.
A nil return is still due for a quarter with no sales.
VAT on your costs cannot be reclaimed through the return.
Records of each sale, including the evidence of where the customer lives, must be kept for 10 years.

Registration normally takes effect from the first day of the quarter after you apply. If your first sale comes sooner, you can use the scheme from the date of that sale by telling your chosen member state by the 10th day of the following month, as the Commission's registration rules explain.

For each sale you need two pieces of evidence of where the consumer lives that agree with each other, such as their billing address, the internet address of the device they used, their bank details or the country code of their SIM card. HMRC's guidance says that when you sell digital services to consumers through a third-party platform or marketplace, the platform is responsible for the VAT on those sales.

Exporting goods

Goods sent from Great Britain to a customer outside the UK, including customers in the EU, can be zero-rated. Zero-rated means VAT is charged at 0%, and you can still reclaim VAT on the costs of the sale. The conditions are in VAT Notice 703, and parts of it have the force of law.

The goods must leave the UK within 3 months of the date you sent them or were paid in full, whichever came first.
You must obtain evidence of export within the same 3 months.
You must keep evidence of the sale, such as the order, invoice and proof of payment.
Together the evidence must identify you, the customer, the goods and quantities, their value, the destination and how they travelled.

Official evidence is an export declaration on the Customs Declaration Service that has generated a departure confirmation. Commercial evidence includes air waybills, bills of lading and certificates of shipment. For parcels, HMRC accepts a stamped certificate of posting for letter post, a Parcelforce customs declaration with its proof of shipment, or a courier's invoice showing the air waybill number for each shipment with tracking information. If the goods leave late or the evidence is missing, UK VAT is due on the sale.

Selling goods to consumers in the EU

Goods sent from Great Britain to a consumer in the EU are zero-rated in the UK when the export conditions are met, and VAT is then due on import into the EU at the rate of the customer's country. How that VAT is collected depends on the value of the parcel, under the EU's e-commerce VAT rules.

Consignments worth €150 or less can use the Import One Stop Shop. You charge the customer's VAT at checkout and declare it on a monthly return, and the parcel enters the EU exempt from import VAT. A business established outside the EU normally has to appoint an intermediary established in the EU to use the scheme, and goods subject to excise duty cannot use it.
Consignments worth €150 or less sent without the scheme have import VAT collected when they arrive, either from the customer by the postal operator or carrier under simplified arrangements, or through the normal import process.
Consignments worth more than €150 go through the normal import process in the customer's country, with import VAT and any customs duty due.

Since 1 July 2026 the EU has also charged a temporary customs duty, separate from VAT, of €3 per item on goods sold to consumers and imported in consignments worth €150 or less, which is due to run until 30 June 2028.

Importing goods into the UK

A UK VAT-registered business can use postponed VAT accounting to declare import VAT on its VAT return instead of paying it when the goods arrive. The import VAT goes in as VAT due and as VAT reclaimed on the same return, so a business that can reclaim all its VAT has no VAT to pay at the border. HMRC's guidance on accounting for import VAT on your VAT return sets out the rules.

You use it by entering your VAT registration number on the import declaration.
If a freight forwarder, customs agent or courier makes the declaration for you, tell them in writing that you want to use it.
Download your monthly postponed import VAT statement from the Customs Declaration Service. Statements are usually available by the 10th working day of the month and can only be viewed for 6 months.
Goods posted through Royal Mail Group in consignments worth more than £135 cannot use it.

Postponed accounting covers import VAT only. Customs duty, where it applies, is paid separately, and you will usually need an EORI number to import.

Northern Ireland

Under the Windsor Framework, EU VAT rules continue to apply in Northern Ireland for goods, as HMRC's guidance on trading goods in and out of Northern Ireland explains. A VAT-registered business that sells or moves goods between Northern Ireland and the EU must tell HMRC, and then puts the prefix XI in front of its VAT number on invoices and documents for EU customers and suppliers.

Goods sold from Northern Ireland to a VAT-registered business in the EU can be zero-rated, and the sales go on an EC Sales List.
Goods sold from Northern Ireland to consumers in the EU are taxed in each customer's country once total sales of goods to EU customers pass £8,818, using the EU's Union One Stop Shop or a registration in each country.
Goods sent from Northern Ireland to countries outside the UK and the EU are exports.
Moving goods into Northern Ireland from Great Britain usually needs an EORI number starting with XI.

The Northern Ireland rules only apply to goods. Services sold from Northern Ireland follow the same place of supply rules as services sold from anywhere else in the UK.

EORI numbers

An EORI number, short for Economic Operators Registration and Identification number, identifies your business to customs. You may need one starting with GB to move goods between Great Britain and any other country, including the EU, and between Great Britain and Northern Ireland. You also need it if you appoint an agent to deal with customs for you.

You apply online, and a GB number is issued straight away unless HMRC needs to make checks, which can take up to 5 working days. A number starting with XI, for goods moving to or from Northern Ireland, can only be issued once you have a GB number, as the guide to getting an EORI number explains.

Sales tax in the United States

The United States has no VAT. Its states set their own sales taxes, and since the Supreme Court's 2018 decision in South Dakota v. Wayfair, a state can require a seller with no physical presence there to collect its sales tax. The rules differ from state to state, so take advice from a US sales tax specialist before your sales there grow, and record your sales by state from the start.

Worked example for a software company with UK and EU customers

The figures are illustrative. A UK company sells software subscriptions priced in pounds plus any VAT due. In the 12 months to 30 September 2026 it billed these amounts.

£84,000 to UK business customers
£36,000 to EU business customers, all with VAT numbers checked on the Commission's checker
£18,000 to EU consumers, £10,000 of it in Germany and £8,000 in the Netherlands

It also paid £9,000 to businesses outside the UK for software and advertising.

Checking the UK registration threshold

Only sales made in the UK count, so the £54,000 of EU sales are left out, and the £9,000 of overseas services it had to reverse charge are added. UK taxable turnover is £84,000 + £9,000 = £93,000. The UK sales alone were £6,000 below the £90,000 threshold, but with the overseas services added the total is over it, so the company must register within 30 days of the end of the month in which it went over.

UK VAT once registered

In a year like this one, UK customers are charged £84,000 × 20% = £16,800 of VAT, which they can reclaim. The overseas services create £9,000 × 20% = £1,800 of VAT due and the same £1,800 reclaimed on the same returns, so they cost nothing in VAT. If the company pays £4,800 of UK VAT on £24,000 of UK costs, it pays HMRC £16,800 − £4,800 = £12,000 over the year, including VAT reclaimed on costs that support the EU sales.

EU business customers

No UK VAT is charged on the £36,000. Each customer accounts for VAT in its own country under the reverse charge, and the company keeps the VAT number checks with its invoices.

EU consumers

VAT is due from the first sale, at 19% in Germany and 21% in the Netherlands. For Germany, £10,000 × 19% = £1,900. For the Netherlands, £8,000 × 21% = £1,680. The company registers for the non-Union One Stop Shop in one member state and pays the £3,580 over four quarterly returns, converted into euros.

If the company had charged EU consumers a flat price with no VAT added, the VAT would come out of the £18,000 instead, at £10,000 × 19 ÷ 119 = £1,596.64 for Germany and £8,000 × 21 ÷ 121 = £1,388.43 for the Netherlands, leaving £15,014.93. Adding local VAT to the price at checkout would have kept the full £18,000 as revenue.

How a software subscription is taxed for each type of customer

Customer	Where the sale is taxed	UK VAT once registered	Who accounts for the VAT	Counts towards the UK threshold
UK business	UK	20%	You, on your UK return	Yes
UK consumer	UK	20%	You, on your UK return	Yes
EU business with a VAT number	Customer's country	None	The customer, under the reverse charge	No
EU consumer	Customer's country, at its rate	None	You, through the One Stop Shop or a local registration	No
US business or consumer	Outside the UK	None	No VAT, though state sales tax may apply	No

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Common questions

Do I charge UK VAT to business customers in the EU?

You do not charge UK VAT on most services sold to a business customer in the EU, because the sale is taxed in the customer's country. The customer accounts for any VAT there under the reverse charge. You need evidence that the customer is in business, and a VAT number checked on the European Commission's VAT number checker is the best evidence. A customer who cannot show they are in business is treated as a consumer. Goods sent to EU customers follow the export rules instead.

Do overseas sales count towards the £90,000 VAT threshold?

Sales treated as made outside the UK do not count towards the £90,000 threshold. That covers services sold to business customers abroad and digital services sold to consumers abroad. Services your startup buys from businesses abroad and has to reverse charge do count, so heavy spending on overseas software or advertising can take you over the threshold before your UK sales do. Once registered, you can reclaim UK VAT on costs that relate to overseas sales which would be taxable in the UK.

Is there a threshold before I charge VAT to consumers in the EU?

There is no threshold for a UK business selling digital services to consumers in the EU, so VAT is due in each consumer's country from the first sale. The EU's €10,000 threshold only applies to businesses established in a single EU member state. You can register for VAT in each country where you have consumer customers, or register once for the non-Union One Stop Shop and declare all your EU consumer sales of services on a quarterly return.

How does the non-Union One Stop Shop work?

The non-Union One Stop Shop lets a business established outside the EU register in one EU member state and declare the VAT on all its consumer sales of services across the EU. Returns cover each calendar quarter and are due, with payment, by the end of the following month, in euros. The member state you register in passes the VAT to the other countries. You charge each customer their own country's rate, file nil returns for quarters with no sales, and keep records for 10 years.

Can I zero-rate goods I send to customers abroad?

Goods sent from Great Britain to a customer outside the UK can be zero-rated if they leave the UK within 3 months and you obtain evidence of export within the same period. The evidence can be an export declaration with a departure confirmation, or commercial transport documents such as air waybills, certificates of posting or courier invoices with tracking. You also need evidence of the sale itself, such as the order and invoice. Without the evidence, UK VAT is due on the sale.

Do I need to collect sales tax in the United States?

You may need to collect sales tax in some US states. The United States has no VAT, and each state sets its own sales tax rules. Since a 2018 Supreme Court decision, a state can require a seller with no physical presence there to collect its sales tax. Because the rules differ between states, take advice from a US sales tax specialist before your US sales grow, and keep a record of your sales by state from the start.