Note: VAT is also known as GST in Australia and New Zealand.
Read more about how VAT works on Etsy here.
The information below is for VAT rules on the sale of digital items delivered via automatic download to buyers in:
- the EU
- New Zealand
- South Africa
- South Korea
- the United Arab Emirates
This does not apply to physical goods.
Etsy and digital VAT
Etsy collects and remits VAT on digital items purchased by buyers in Australia, Belarus, the EU, Iceland, India, New Zealand, Norway, Russia, Serbia, South Africa, South Korea, Taiwan, Turkey, Switzerland, or the United Arab Emirates.
If you sell digital items, no matter where your shop is located, buyers in Australia, Belarus, the EU, Iceland, India, New Zealand, Norway, Russia, Serbia, South Africa, South Korea, Taiwan, Turkey, Switzerland, or the United Arab Emirates will be charged VAT.
To be clear, buyers - not Etsy or Etsy sellers - pay VAT as part of their total purchase price when buying digital items.
Some examples of digital items:
- Digital patterns
- Downloadable PDFs
In all cases, Etsy will take the VAT paid by the buyer and remit to the relevant tax authorities. Sellers are not responsible for adding VAT to their digital listing prices.
How digital VAT works for buyers
Etsy automatically detects if the buyer is in Australia, Belarus, the EU, Iceland, India, New Zealand, Norway, Russia, Serbia, South Africa, South Korea, Taiwan, Turkey, Switzerland, or the United Arab Emirates and adds the appropriate VAT to the listing price if the item is a digital file download.
Buyers see the total price with VAT included on each listing that applies, as well as in their cart, invoice, and purchase page.
The price with VAT included will appear on the product listing for the digital item.
Buyers will pay the listing price and VAT for digital items purchased from any seller.
Digital VAT and Etsy Payments
If a buyer pays via Etsy Payments, Etsy automatically collects the VAT from the buyer and reflects it in the seller’s payment account.
Digital VAT and standalone PayPal
For non-Etsy Payments transactions, the buyer pays the full price (listing price plus VAT) directly to the seller. This would apply in cases where the seller accepts payments into their own PayPal account. Etsy doesn’t handle the payment, so there isn’t a way to separate the VAT portion of the payment before it’s sent to the seller.
In cases like these, after the buyer purchases the digital item, Etsy will collect the VAT from the seller through their Etsy bill.
Digital VAT and your Etsy bill
For transactions where Etsy Payments is the payment method, Etsy will automatically collect VAT from the buyer. The seller will not see any VAT charges on their bill for payments made with Etsy Payments.
Standalone PayPal and other payment methods
For transactions made with other payment methods, like the seller's stand-alone PayPal account, the VAT costs are added to the seller’s bill.
Remember, Etsy can't directly collect the VAT charged to buyers when they make a payment to the seller's own PayPal account. If a seller accepts payment in their own PayPal account, applicable VAT will be added to the seller’s Etsy bill once the buyer completes checkout. This way, Etsy can then remit it.
Filing digital VAT on your tax returns
Etsy remits VAT collected on digital items. Sellers do not have to file VAT for sold digital items with on their tax returns.