What counts as digital services, 2025 Guide for Bulgarian Businesses
Today we will cover an important question: do you need to charge VAT when selling digital services to customers outside the European Union? Under EU and Bulgarian VAT law, digital services are typically services delivered electronically without human intervention. This includes, but is not limited to:
- Software and applications;
- E-books and digital publications;
- Music and video streaming;
- Online courses and educational content;
- Web hosting and cloud services;
- Digital marketing services;
- Digital platforms for selling goods/services;
- Gaming and virtual goods.
These services are generally subject to VAT if provided within the EU, but the VAT rules differ when they are sold to customers outside the EU.
VAT within the EU versus outside the EU
For EU customers, you must follow EU VAT rules. For B2C sales, VAT is usually due in the customer’s country, managed through the OSS system. For B2B sales, VAT is typically reverse charged. For non-EU customers, the key point is that supplies are outside the scope of EU VAT. However, keep in mind that many countries have their own tax laws for digital services. Some may require foreign businesses to register for VAT or a similar tax, and possibly charge VAT/GST or sales tax depending on local regulations.
What this means for your business?
You do not charge Bulgarian VAT on sales to non-EU customers. On your invoice, you should clearly state: “Supply of digital services to a non-EU customer – outside the scope of EU VAT.” However, always check if the customer’s country applies its own VAT, GST, or sales tax rules. Some countries, like the UK, Australia, or Canada, may require foreign suppliers to register locally if they exceed certain thresholds.
Documentation and proof
To ensure you treat the sale as outside the scope of VAT, you need to maintain sufficient documentation to prove that the customer is located outside the EU. Recommended evidence includes:
- Customer’s billing address: Ensure the billing address is outside the EU;
- IP location: If you can track the customer’s IP address, this can be useful to confirm their location;
- Bank details: Payment details such as credit card billing addresses can serve as proof;
- Contracts/agreements: Written agreements or contracts with customers that confirm their location.
It is essential to keep this documentation organized in case of an audit or if tax authorities question your VAT treatment.
Table with Information on Local Tax Obligations by Country
| Country | VAT Status for Non-EU Customers | Is Local VAT/GST Registration Required? | Examples |
| USA | Outside the scope of EU VAT | No, registration is generally not required in most states | Sales from Bulgaria to customers in the USA |
| UK | Outside the scope of EU VAT, but UK VAT/GST may apply | Yes, if turnover exceeds £85,000 | Sales to UK consumers may require VAT registration |
| Australia | Outside the scope of EU VAT, but Australian GST may apply | Yes, if turnover exceeds AUD 75,000 | Sales to Australian consumers may require GST registration |
| Canada | Outside the scope of EU VAT, but Canadian GST may apply | Yes, if sales exceed CAD 30,000 | Sales to Canadian consumers may require GST registration |
| New Zealand | Outside the scope of EU VAT, but New Zealand GST may apply | Yes, if turnover exceeds NZD 60,000 | Sales to New Zealand consumers may require GST registration |
| India | Outside the scope of EU VAT, but Indian GST may apply | Yes, if turnover exceeds INR 20,00,000 | Sales to Indian consumers may require GST registration |
| Japan | Outside the scope of EU VAT, but Japanese Consumption Tax (JCT) may apply | Yes, if sales exceed JPY 10,000,000 | Sales to Japanese consumers may require JCT registration |
| Brazil | Outside the scope of EU VAT, but Brazilian ISS (Sales Tax) may apply | Yes, if local registration threshold is exceeded | Sales to Brazilian consumers may require ISS registration |
In conclusion, when selling digital services from Bulgaria to non-EU customers, you do not charge Bulgarian VAT. But do not ignore local obligations abroad, as many countries are tightening rules for foreign digital suppliers.
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