Selling digital products to third countries: what you need to know

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If you sell digital products such as e-books, online courses, apps or software subscriptions, you'll quickly face a question with international customers that rarely comes up with traditional services:

Where is this transaction actually taxable?

For digital products, special rules have been in place for a number of years that fundamentally shift the place of supply - not to where you are based, but to where your customers are based.

For EU customers, the legislature has created a practical solution with the One-Stop-Shop (OSS). For third countries, however, this simplification does not exist. This is exactly where uncertainty often arises - and in some cases, a genuine registration obligation abroad.

Note: This article provides general guidance. If you regularly sell to third countries, have your individual situation reviewed - ideally together with one of our Tax Coaches or, where necessary, a tax advisor.

What actually counts as a "digital product"?

VAT law refers to "services supplied by electronic means" (§ 3a Abs. 5 UStG). This means services that are provided via the internet or a similar electronic network and whose delivery is essentially automated - i.e. without any significant human involvement at the point of use.

Typical examples include:

• E-books, whitepapers, digital downloads

• Pre-recorded online courses (e.g. on-demand video courses without live support)

• Apps and mobile games

• Software, plug-ins, templates

• Cloud services, SaaS subscriptions, web hosting

• Stock photos, presets, digital graphics

• Digital music and podcast downloads

Not included are generally services where personal interaction is the main element - such as live coaching via Zoom, individual consulting via video call, or an interactive live online course. These fall under different rules (usually catalogue services or standard other services) and are treated differently.

The distinction is not always straightforward in practice - a hybrid course combining automated videos with live office hours may need to be split for tax purposes.

The key rule: place of supply is where the customer is based

For digital products, the rule is: the place of supply is always where the customer is based - regardless of whether that is an EU country or a third country (§ 3a Abs. 5 UStG).

This has two implications:

• For private customers in the EU, you must remit VAT in each respective country - this is handled conveniently via the One-Stop-Shop.

• For private customers in third countries, there is no OSS. You need to check what applies locally in each country.

For B2B sales (i.e. to businesses) in third countries, the standard B2B rules apply: your transaction is not taxable in Germany, and the tax liability passes to the customer under their respective national law. This is generally the simpler case.

The real challenge, then, is B2C sales of digital products to third countries.

Why the OSS doesn't work for third countries

The One-Stop-Shop is an agreement between EU member states. It allows you to report and remit VAT for all EU countries centrally via the Bundeszentralamt für Steuern. Third countries such as Switzerland, the UK or the USA are not part of this arrangement - so you need to deal with them directly.

In practical terms, this means that for each third country where you have customers, you need to check:

• Is there a VAT obligation for digital products sold to private customers there?

• From what level of turnover does a registration obligation arise?

• How and with whom do I register?

• How do I remit the tax there?

The good news: most countries have introduced clear rules for digital services to private customers in recent years (often referred to as "VAT on Digital Services" or "Digital Services Tax").

The less good news: the rules are different everywhere.

Country overview: the most important third countries

Here is an overview of the regulations in some of the most common third countries (as of 2026 - details may change, always check for current information):

Switzerland: Since 2018, foreign providers of digital services to Swiss private customers must register in Switzerland and remit Swiss VAT (currently 8.1%) once their worldwide turnover exceeds CHF 100,000 per year - meaning not just Swiss turnover counts, but your total turnover globally. Registration is handled via the Federal Tax Administration (ESTV).

United Kingdom: Since Brexit, the UK is a third country. For digital services to UK private customers: a registration obligation with HMRC arises from the very first pound of turnover. UK VAT (currently 20%) must then be added to the sale and remitted to HMRC. There is no registration threshold for foreign providers in this area, unlike for UK domestic businesses.

Norway: Via the VOEC system ("VAT On E-Commerce"), foreign providers of digital services must register once their annual turnover with Norwegian private customers reaches NOK 50,000.

USA: There is no federal sales tax here - instead, each state has its own sales tax. The obligation to register (and remit sales tax) depends on whether you have a so-called nexus* in a given state - this can be a physical nexus (e.g. an office) or an economic nexus triggered by turnover or transaction thresholds. Thresholds vary widely between states (often USD 100,000 or 200 transactions per year). In addition, each state has its own rules on what is actually taxable for digital products.

*Nexus is the tax connection between a business and a state that obliges you to collect and remit sales tax.

Canada, Australia, New Zealand, Singapore, UAE, Japan, South Korea and many other countries also have their own rules, which typically work in a similar way: a threshold above which foreign providers must register, often specifically tailored to digital services.

These regulations change regularly - if you generate turnover in a particular country, it's worth doing targeted research or a quick check with a local service provider.

How do you know where your customers actually are located?

VAT law requires you to correctly determine where your customers are based. In practice, the rule is: you need two independent pieces of evidence confirming where your customer is resident.

These can include, for example:

• The billing address

• The IP address at the time of the order

• The country of the bank account or credit card used

• The country of the mobile phone number (for app purchases)

• The country of the SIM card or internet connection

If you sell via a platform such as Gumroad, Teachable, Stripe or your own shop, these usually collect customer data automatically.

Make sure this data also arrives cleanly in your accounting records - it is your evidence if the tax office ever asks. It's best to store it in your document archive.

Invoicing in practice

If you sell digital products to third countries, you generally do not charge German VAT, because the place of supply is not in Germany. Instead:

• For B2B customers in third countries, it is usually sufficient to add a note such as "Place of supply in third country - not taxable in Germany". If you issue the invoice via Accountable, the system automatically adds such a note.

• For B2C customers in third countries, you need to check whether you are required to charge VAT in the destination country. If yes, you show the local VAT (not German VAT). If no (for example because you remain below the registration threshold), you invoice without VAT.

If you are required to charge foreign VAT, you would currently need to handle invoicing outside of Accountable, as the platform does not support foreign VAT rates.

In the German VAT pre-submission, these transactions are typically reported in line 36, field 45 (other non-taxable transactions - place of supply not in Germany).

What this means for your pricing

An often overlooked point: if you sell to a country where a registration obligation applies, you must add the local VAT on top of your net price. Depending on the country and tax rate, this can significantly affect your prices.

Two strategies are common in practice:

Uniform gross price: You show all customers the same final price and absorb the tax burden yourself depending on the country. Simple for customers, but your margin will vary.

Country-specific pricing: Your shop automatically calculates the final price based on the customer's location. Fair, but technically more complex.

Which option works better depends on your product, your sales channel and your pricing strategy.

Special case: sales via platforms

Many digital products are not sold directly, but through platforms such as the Apple App Store, Google Play, Amazon KDP, Udemy or similar. In many of these cases, the platform acts as the deemed supplier - meaning the platform handles VAT in the destination countries, not you.

For you, this often means: you only invoice the platform (usually as B2B), and the platform takes care of the end customer VAT in the destination country.

This is a significant administrative advantage - but you should always check exactly how the platform handles VAT, as this affects your own reporting obligations.

Your roadmap for digital third-country transactions

1. Check whether your service is actually an electronic service - or whether, for example, a live element makes it a catalogue service or standard other service.

2. Get an overview of which third countries you have customers in - and which ones are relevant (by turnover volume and frequency).

3. Check the local registration obligations and thresholds for those countries.

4. Clarify whether you are selling via a platform that takes this issue off your hands.

5. Issue your invoices correctly - without German VAT, with a clear note, and where applicable with local VAT.

6. Document your customers' location with two independent pieces of evidence.

7. Get support if you need to register in a country - the effort is almost always worth it compared to dealing with back-claims later.

Conclusion

Digital products are a great opportunity for self-employed persons - precisely because they scale globally. From a VAT perspective, however, that global scale also brings complexity, as every country now has its own rules for digital sales to private customers.

If you keep an eye on your key destination countries, structure your invoices cleanly, and get professional support early enough when registration obligations arise, you'll have a good handle on the topic.

If you have questions about your individual situation, feel free to reach out to our Tax Coaches or contact a partner tax advisor from the Accountable network.

Author - Valesca Wilms

As content marketing lead at Accountable Belgium, Valesca writes about freelancing, self-employment, and taxes based on her own experience as a freelancer.

Who is Valesca ?