How VAT Works on Digital Items

VAT stands for value-added tax. It's a tax based on the consumption of goods and services that are commonly found in the EU and select other regions of the world.

VAT is also known as JCT in Japan; GST in New Zealand, Australia, and India; and QST in Canada.

VAT may be charged to buyers on their purchases (“VAT on Items Sold on Etsy”) as well as to eligible sellers on their paid seller fees ("VAT on seller fees”).

The information below is for VAT rules on the sale of digital items delivered via automatic download to buyers in:

  • Australia
  • Belarus
  • the EU
  • Iceland
  • India
  • New Zealand
  • Norway
  • Québec (Canada)
  • Russia
  • Serbia
  • South Africa
  • South Korea
  • Taiwan
  • Turkey
  • Switzerland
  • the United Arab Emirates

This does not apply to physical goods. Learn how VAT works on physical items.

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.

If you sell digital items to buyers in Québec (Canada) and your shop is located outside of Québec, QST will be collected and remitted by Etsy from your buyer.

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:

  • E-books 
  • 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 one of these counties 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 basket, 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 downloads sold to Quebec buyers (Canada) from non-CA sellers

As of January 2019, Etsy collects and remits QST on orders if both of the following apply:

  • The seller is located outside of Québec, Canada
  • The digital item being purchased is by a buyer in Québec

Digital VAT and your Payment account

Etsy Payments

For transactions where Etsy Payments is the payment method, Etsy will automatically collect VAT from the buyer. The VAT will be deducted from the order before the funds are placed in the seller’s Payment account.

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 Payment account.

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 Payment account 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.

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