Digital Taxes Around The World

One thing’s for sure if you’re a digital business: The rules about digital tax worldwide are constantly changing and yes, they do affect you.

A widespread trend happening across countries is that governments want to charge tax based on the location of the purchaser of the product. These are also commonly called “internet sales tax” rules.

You might be kicking back in your country thinking you’re okay paying taxes locally, but in fact you do need to consider the rules of other jurisdictions, you need to consider sales tax, VAT and GST in other countries.

Sounds a bit complicated when you consider the ease and speed with which we do digital business across borders, doesn’t it?

Regions with new digital tax laws

Regions planning to add digital tax

• Bolivia
• China
• Fiji
• Gulf Cooperation Council
• Israel

Regions with new digital tax laws

These countries have introduced changes to how they charge and administer taxes. Check these out to see how you may be affected:

As of January 1, 2015, Albania has a 20% VAT on digital businesses. There is no registration threshold, so foreign businesses must register for VAT in Albania upon their very first B2C sale. They must also hire a local tax agent.

Algeria levies a 10% VAT on electronic services from non-resident businesses.

The registration threshold is 0. This means foreign businesses must register for VAT in Algeria upon their very first sale.

Armenia has a 20% VAT rate on all digital services supplied by foreign businesses to local customers.

The registration threshold is AMD 115 million. This means foreign businesses that sell to Armenian customers must watch their total B2C sales in the country. When the total surpasses the threshold, that foreign business is required to register for VAT in Armenia.

Angola has a 14% VAT on all sales, including foreign providers of digital services. There is no registration threshold, so foreign businesses must register for VAT in Albania upon their very first B2C sale.

For B2B sales, there's the option of using the reverse-charge mechanism.

Australia has a 10% GST on sales of low-value goods to its consumers by non-resident e-Commerce companies.

This includes:

• digital products such as streaming or downloading of movies, music, apps, games, and e-books
• services such as architectural or legal services.

If you meet the registration turnover threshold of A$75,000 and make these supplies selling B2C, you are required to register for GST.

Anyway, for further information, have a look at the Australian Taxation Office (ATO) site.

The Bahamas levies VAT on electronic services provided by non-resident sellers. The VAT rate is 12%.

The registration threshold is BSD 100,000. This means foreign businesses that sell to Bahamian customers must watch their total B2C sales in the country. When the total surpasses the threshold, that foreign business is required to register for VAT in the Bahamas.

Bahrain is a member of the Gulf Cooperation Council (GCC) and has implemented the group’s policy on digital VAT for foreign sellers.

The VAT rate for digital products is 10% with no registration threshold. Businesses selling B2C must register for VAT within 30 days of their first taxable sale in Bahrain. Businesses selling only B2B do not have to register, though, since Bahrain buyers will handle VAT themselves through the reverse-charge mechanism.

Read more on the National Bureau for Taxation (NBT), Bahrain's tax agency.

Bangladesh has a 15% VAT on digital sales. The VAT registration threshold is BDT 30M, including for foreign suppliers.

Foreign suppliers must select a local tax representative and get approval from the Bangladeshi tax commissioner. (Search for form Mushok 3.4.) The reverse-charge method is available for B2B transactions.

For further information, head to the National Board of Revenue of Bangladesh

Belarus levies a 20% VAT on digital goods and services sold to consumers in the country.

There's no sales threshold, so every foreign business is expected to register for VAT, then collect and remit taxes according to the local guidelines. Business owners can register for VAT themselves, or elect to hire a local tax agent. Some registration materials must be translated into Russian, so hiring a tax representative could be helpful!

For more information, check out the Belarus Ministry of Taxes and Duties website.

In 2021 Cambodia introduced a 10% VAT to non-resident sellers with a threshold of KHR 250 million. This means foreign businesses that sell to Cambodian customers must watch their total annual sales. When the total surpasses the threshold, that foreign business is required to register for VAT in Cambodia.

Cameroon requires non-resident businesses to charge and collect 19.5% VAT if they provide physical goods and electronic services to local consumers and businesses.

The registration threshold is XAF 50 million in digital goods sales. This means foreign businesses that sell to Cambodian customers must watch their total annual sales. When the total surpasses the threshold, that foreign business is required to register for VAT in Cameroon.

Digital taxes became an election issue in Canada in late 2015, and more provinces are passing sales tax laws, such as Quebec, Saskatchewan or British Columbia.

Find more information in this overview of charging and collecting sales tax and in our Canada GST/HST Guide.

British Columbia

British Columbia has a Provincial Sales Tax (PST) on sales made by non-resident providers of digital services to local consumers. The Canadian Revenue Agency confirms the PST rate is 7%. The annual registration threshold is CAD $10,000.

Read more on the Small Business Guide to PST for British Columbia.

Manitoba

Manitoba also has a Provincial Sales Tax (PST) of 7% on sales made by non-resident providers of digital services to local consumers.  The annual registration threshold is CAD $10,000.

Quebec

Any digital service suppliers located outside of Quebec (either elsewhere in Canada or abroad) will have to register, collect, and remit Quebec Sales Tax (QST), if their annual sales exceed the CAD $30,000 threshold. The QST rate is 9.975%.

Read more on Revenue Quebec, Quebec’s tax agency.

Saskatchewan

Saskatchewan imposed its Provincial Sales Tax (PST) on electronic services in January 2019. Saskatchewan PST is currently 6% and there is no sales threshold.

Read more on the Saskatchewan's Ministry of Finance.

Since June 1, 2020, Chile has imposed a 19% VAT on non-resident sellers. There is no registration threshold, so foreign businesses must register for VAT in Chile upon their very first sale.

The tax is collected according to VAT registrations of the non-resident provider, or on a withholding basis by payment providers, including credit card companies.

Colombia levies an 18% VAT on digital services from foreign suppliers. There is no registration threshold, so foreign businesses must register for VAT in Colombia upon their very first B2C sale.

Ivory Coast has an 18% VAT rate for digital services provided by foreign sellers. There is no registration threshold, so foreign businesses must register for VAT in the Ivory Coast upon their very first B2C sale. Registration requires a local tax representative.

Egypt introduced a 14% VAT for non-resident sellers in 2021.

The registration threshold is EGP 500,000. This means foreign businesses that sell to Egyptian customers must watch their total annual sales. When the total surpasses the threshold, that foreign business is required to register for VAT in Egypt.

We’ve written at length about what digital sellers need to know about EU VAT. It’s worth a quick refresher, though, just to make sure you’ve got the key points. These rules have been in place since 1st January 2015:

• Digital businesses who sell to European consumers must apply, collect, and remit VAT against all customer invoices.
• If you sell to VAT-registered businesses, they are exempt under a reverse-charge scheme, but you must have their VAT registration details.
• There is no “EU” VAT rate. The rate you need to charge is the rate of the country in which your customer resides. This means you need to be set up to apply the correct VAT rate to the right country.
• If collecting and paying out VAT to each individual jurisdiction sounds like a headache, you can get set up with an OSS (one-stop shop) to administer your VAT returns and distribute what you have collected.

You can view information and requirements, including links for rules specific to member states, straight from the European Commission here.

While each country can set its own VAT rate for digital services, some EU members have also set reduced VAT rates for specific products:

• Latvia charges e-books and other electronic publications at 5% VAT
• Romania charges e-books and other electronic publications at 5% VAT

The Icelandic Government introduced the VAT rules for electronic suppliers on November 1, 2011.

Here’s what you need to know:

• The standard VAT rate of 22.5% applies to all sales related to electronic services except e-books, which are taxed at the reduced VAT of 11%.
• The VAT registration threshold is 2.000.000 ISK in any consecutive 12-month period.

India classifies all digital products under a different, and very long, name: Online Information Database Access and Retrieval services (or OIDAR).

All products are services are subject to an 18% GST, and there's no threshold for tax registration. That means that if you're selling to customers in India, you must register for Indian GST and charge 18% tax when selling B2C.

For further information, have a look at this article about Indian taxes.

Indonesia levies an 11% VAT on all online transactions.

The registration threshold is IDR 600,000,000. This means foreign businesses that sell to Indonesian customers must watch their total annual sales. When the total surpasses the threshold, that foreign business is required to register for VAT in Indonesia.

The Japanese tax, known as “consumption tax”, was introduced for digital business on October 1, 2015. The annual threshold for this tax is JPY 10 million.

Here’s what you need to know:

• The consumption tax rate is 10%.
• It is to be charged on all B2C e-commerce transactions delivered by foreign businesses to Japanese consumers.
• Foreign companies must register and designate a tax agent for themselves in Japan.
• B2B transactions apply a reverse-charge mechanism like other countries, where the recipient deals with the tax, not the seller.

Like other countries, the definitions of which electronic products and services are included in JCT (Japan Consumption Tax) are fairly broad. Digital services such as e-books and courses do count under this law. You can check out an English version of their policy changes here.

Since January 1, 2022, Kazakhstan levies a 12% VAT on all foreign companies selling goods and providing online services via the internet or other telecommunication networks to local customers.

There is no registration threshold, so foreign businesses must register for VAT in Kazakhstan upon their very first B2C sale.

In 2021 Kenya introduced a 16% VAT on all non-resident sellers transactions.

The registration threshold is 0. This means foreign businesses must register for VAT in Kenya upon their very first sale.

Kosovo requires all non-resident businesses to collect 18% VAT on sales of digital services to local customers.

There is no registration threshold, so foreign businesses must register for VAT in Kosovo upon their very first B2C sale.

Since January 2022, VAT is applied to the sale of e-services to local Kyrgyz consumers by non-resident businesses. The rate for digital services is 12%.

There is no registration threshold, so foreign businesses must register for VAT in Kyrgyzstan upon their very first B2C sale.

Laos has a 10% VAT rate on all digital services supplied by foreign businesses to local customers.

The registration threshold is LAK 400 million. This means foreign businesses that sell to Laos customers must watch their total B2C sales in the country. When the total surpasses the threshold, that foreign business is required to register for VAT in Laos.

Malaysia levies a 6% VAT on digital services from foreign providers.

The registration threshold is RM 500.000 (circa USD$120,000) over a period of 12 months. This means foreign businesses that sell to Malaysian customers must watch their total annual sales. When the total surpasses the threshold, that foreign business is required to register for VAT in Malaysia.

Since June 1, 2020, Mexico has imposed a 16% VAT on foreign providers. Non-residents must appoint a local representative to help with VAT in Mexico.

Nepal introduced a 13% VAT for non-resident sellers in July 2022. The registration threshold is NPR 2 million. This means foreign businesses that sell to Nepali customers must watch their total annual sales. When the total surpasses the threshold, that foreign business is required to register for VAT in Nepal

New Zealand introduced internet tax laws in October 2016.

The GST rate is 15%. The registration threshold is NZD $60.000 or more in sales across a consecutive 12-month period. Businesses who reach this level will be required to register for GST.

Digital sellers who provide their services to New Zealand-based consumers must also collect two non-conflicting pieces of evidence proving the customer location (for example billing address, IPN location, bank details or country code of phone number). This is very similar to EU VAT requirements.

There doesn’t appear to be any distinction made between B2B and B2C customers. Here’s what Revenue Minister Todd McClay had to say:

“GST should apply to all consumption that occurs in New Zealand. This is what makes our GST system fair, efficient, and simple. To reduce compliance costs, offshore suppliers will not be required to return GST on supplies to New Zealand-registered businesses, nor will they be required to provide tax invoices.”

Nigeria applies a 7.5% VAT on foreign providers. The registration threshold is 0. This means foreign businesses must register for VAT in Nigeria upon their very first sale.

Norway is one of the first countries to introduce tax rules on the digital economy, with laws going into effect back in July 2011.

The Norwegian VAT rate is 25%. Businesses must register for Norwegian VAT if their annual B2C sales in the country exceed the tax threshold of NOK 50,000. Regarding B2B services, they operate a similar scheme to the EU, where VAT is accounted for by the purchaser under a reverse-charge mechanism.

VOES (or VAT on Electronic Services) is where you need to look to ensure you're compliant with their rules.

Russia introduced new laws to tax digital transactions on January 1, 2017.

The VAT rate of 20% applies to all sales. There's no registration threshold, and there is no reverse-charge mechanism available. Therefore, all foreign businesses that sell digital products to Russia-based consumers must collect VAT and report to Russian tax authorities.

Sellers must also collect two non-conflicting pieces of evidence proving the customer location (for example billing address, IPN location, bank details or country code of phone number).

Saudi Arabia is a member of the Gulf Cooperation Council (GCC) and has implemented the group's policy on digital VAT from foreign sellers.

The VAT rate for digital products is 15% with no registration threshold. Foreign businesses must register for VAT in Saudi Arabia.

Read more on the General Authority for Zakat and Tax (GAZT).

Since April 1, 2017, Serbia levies a 20% on non-resident providers of electronic services. There is no registration threshold, so foreign businesses must register for VAT in Serbia upon their very first sale. Foreign businesses may need to hire a local tax representative.

For further information, have a look at the Tax Administration of Republic of Serbia site.

Singapore levies a 8% VAT rate on foreign suppliers of digital services who reach two different thresholds. 

• The first is that their annual global turnover exceeds SGD $1,000,000.
• The second is that their sale of digital services to Singapore consumers exceeds $100,000.

If both thresholds are met, then the foreign business must register for VAT in Singapore.

South Africa introduced their VAT rules for electronic suppliers on July 1, 2014. They do have a lower limit, however, below which VAT is not required to be charged or registered for. The lower limit is ZAR 1000,000.

Unlike other countries, South Africa does not make a distinction between B2C and B2B sales. All foreign businesses are subject to their 14% VAT charge as of the very first sale to South African customers.

South Korea levies a 10% VAT. There is no registration threshold, so foreign businesses must register for VAT in South Korea upon their very first sale.

The Swiss Federal Tax Authority (FTA) introduced their VAT rules for the supply of services from non-resident companies on January 1, 2010. The VAT is the standard Swiss rate of 7.7% and their registration threshold is CHF 100.000 in global sales.

For more information, take a look at the Swiss Federal Tax Authority (FTA).

Since May 1, 2017, Taiwan levies a 5% VAT on digital services provided to consumers by foreign business. The registration threshold is NTD480,000.  This means foreign businesses that sell to Cambodian customers must watch their total annual sales. When the total surpasses the threshold, that foreign business is required to register for VAT in Taiwan.
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For further information, take a look at the Taiwan Taxation Administration site.

Since September 1, 2021, Thailand applied a 7% VAT to non-resident sellers.

The registration threshold is THB 1.8 million (over €60,000) per year. This means foreign businesses that sell to Indonesian customers must watch their total annual sales. When the total surpasses the threshold, that foreign business is required to register for VAT in Thailand.

Tunisia has a 19% VAT rate for all digital services supplied by non-resident businesses.

The registration threshold is 0. This means foreign businesses must register for VAT in Tunisia upon their very first B2C sale. B2B transactions can use the reverse-charge mechanism.

Since January 1, 2018, Turkey levies an 18% VAT on digital goods and services sold to Turkish consumers.

If selling to a VAT-registered business in Turkey, then the foreign business does not need to charge VAT. The buyer will handle all Turkish VAT through the reverse-charge mechanism.

To learn more, visit the website of Turkey's Revenue Administration.

Uganda levies an 18% VAT on all online transactions. The registration threshold is 0. This means foreign businesses must register for VAT in Uganda upon their very first sale.

Ukraine requires 20% VAT added to all supplies of electronic services by non-residents to Ukrainian private individuals.

The registration threshold is UAH1 million for the preceding calendar year. This means foreign businesses that sell to Ukrainian customers must watch their total taxable sales. When the total surpasses the threshold, that foreign business is required to register for VAT in Ukraine.

The UAE has adopted the GCC's Unified VAT Agreement about digital taxes on foreign sellers. Here are the basics:

The VAT rate for digital products is 5% with no registration threshold. Foreign businesses must register for VAT. To do so, first create an e-Services account with the Federal Tax Agency, and then complete the VAT registration form. The UAE has also provided a full guide to VAT registration in English.

The US is undergoing a widespread change in tax policy when it comes to digital products and online businesses.

Some states do charge sales tax on SaaS and digital products. For an up-to-date list of these states, please read US Sales Taxes for Digital Products.

Thanks to a Supreme Court ruling that allows state governments to tax out-of-state sellers, individual states across America are adopting a new internet tax law called economic nexus. The policies generally look like this: *

Retailers with annual sales exceeding $100,000 or with more than 200 separate transactions in the state must register, collect, and pay sales taxes there. Annual sales amounts include both B2B and B2C transactions. Remote sellers that stay under this “minimum presence” threshold don’t have to worry about taxes!

*Some states set their own threshold amounts. Please check with each state where you think you might have nexus.

States who already have the new law in place, or are in the process of adopting it, include: Washington, Wyoming, Wisconsin, Virginia, Vermont, Texas, Tennessee, South Dakota, Rhode Island, Pennsylvania, North Dakota, North Carolina, New Mexico, New York, Mississippi, Missouri, Maine, Louisiana, Kentucky, Iowa, Indiana, Illinois, Idaho, Hawaii, Georgia, Connecticut, California, Arkansas, and Alabama.

Check out our Guide to US Economic Nexus for more information.

Uzbekistan applies a 12% VAT to all online transactions. The registration threshold is 0. This means foreign businesses must register for VAT in Uzbekistan upon their very first sale.

Since January 1, 2022, Vietnam levies a 10% VAT rate on e-commerce and digital businesses who are not physically located in the country. The registration threshold is 0. This means foreign businesses must register for VAT in Vietnam upon their very first sale.

Regions planning to add digital tax

Other countries intend to implement similar internet tax laws to those above. Here are a few you should be aware of as a digital business owner:

In November 2022, Bolivia plans to require 13% VAT on digital services provided by remote sellers. There will not be a registration threshold, so once the law is official, foreign businesses must register for VAT in Bolivia upon their very first B2C sale.

The Chinese tax authority is working on reforming of its VAT system and they continue investigating how to tax the digital economy.

At least for now, China postpones the full implementation of the new VAT regime for products purchased by consumers in the online marketplaces.

The Fiji VAT Bill 2020 includes a provision to impose VAT on the non-resident providers of digital services.

This extends to facilitating online marketplaces which take receipt of payment by the Fujian customer.

The VAT rate would be 9% and the threshold: FJD$300,000 (circa £106,000, €125,000, or USD$137,000).

You'll get further information on the Fiji Revenue & Customs Service (FCRS)

Not all the Gulf Cooperation Council's six member states have implemented the Unified VAT Agreement, which decided that foreign sellers of digital products must begin charging 5% VAT once they pass an annual sales threshold.

Saudi Arabia, Bahrain, and the United Arab Emirates has VAT in full effect, and you can read about it above. Here's the current status of the other member states:

• Kuwait has not announced a date yet.
• Oman planned to implement VAT in 2021, but that is delayed.
• Qatar has not announced a date yet.

We will keep updating as the GCC members implement their versions of the VAT digital tax policy.

Since early 2016, Israel has been working on the proposals to levy 16% VAT on supplies of digital services to Israeli consumers by foreign companies.

Currently, the Israeli parliament continues reviewing this proposal and it is only a matter of time to know the new rules for digital transactions for non-resident companies in Israel.

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A Note For Digital Business Owners

One of the biggest killers of shopping cart conversion rates can be costs that pop up out of the blue, whether those are shipping costs or added taxes. If you’re concerned about these taxes affecting your conversions, one of the best ways to tackle it is simple – don’t surprise people.

Consider whether you need to account for VAT in the pricing of your goods in the first place, or whether you let it be known prominently on your website that tax will be charged at checkout. (For example, by saying that the price is $9.99 + sales taxes at checkout). The idea is that by letting people know beforehand, hopefully their first instinct isn’t to click away from the checkout when they see taxes added.

Final Thoughts

As a digital business owner, you really do need to recognize and understand where foreign taxation rules might apply to your business.

While it’s unclear what the consequences of non-compliance might look like in each country, in general, tax departments don’t muck around. Just as an example, New Zealand consumers can now be automatically fined up to $25,000 for using VPNs to try to hide their true location to avoid GST. What might the penalty then be for businesses who don’t file taxes?

For most of these, the best source to ensure you don’t get into any trouble will be a qualified accountant or agent within that country. Quaderno specializes in these tax issues – contact us today to ensure you’re compliant!