What is VAT?


VAT stands for "Value Added Tax". VAT is a type of transaction tax levied on goods and services in more than 170 countries around the world. It is an “indirect” or “consumption” tax meaning that the tax is not paid by the business making the sale but by the consumer.

  • Varying VAT rules — Different VAT rules apply to your business depending on where your company is located and what kinds of goods or services you sell.
  • Cross-border vs. Local — Cross-border sales of digital goods and services, like SaaS, to customers located outside of where your business is located, are subject to a different VAT ruleset than the local VAT rules which apply when you sell to customers in your business’ home country.

If you have VAT exposure in a global jurisdiction, Anrok and it's partners (who provide optional registration and filing support for global regions) can help you through the appropriate next steps based on your primary sales. See Next steps after VAT exposure.

What are digital goods & services and how do they relate to VAT?

Digital goods and services have their own set of VAT rules in many countries around the world. The definition of digital goods and services is generally broad and varies slightly depending on the country.

The factors that typically lead to a digital good/service classification are that the product/service is:

  • Delivered over the Internet or an electronic network.
  • Essentially automated and involves minimal human intervention.
  • Would not exist without technology.
  • Is not a physical good.

Some common examples of digital goods and services are:

  • Downloaded or remotely accessed software (such as SAAS).
  • Cloud computing services.
  • Streaming or downloading movies, tv shows, or music.
  • Website hosting or remote maintenance.
  • Electronic supply of images, text, or information like e-books.
  • Downloadable or online games.

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