VAT/GST Glossary

A reference guide to the key terms used in cross-border VAT/GST compliance. Each definition focuses on practical meaning for businesses selling digital services internationally.

A

Assessment (Self-Assessment)

The process by which a buyer calculates and reports VAT owed on a transaction, rather than the seller charging it. Central to the reverse charge mechanism. The buyer debits and credits VAT on the same return, resulting in a net-zero effect for fully taxable businesses.

Article 44 (EU VAT Directive)

The default place of supply rule for B2B services: the supply is deemed to take place where the customer is established. This is why most cross-border B2B services trigger the reverse charge in the customer's country.

Article 58 (EU VAT Directive)

The place of supply rule for telecommunications, broadcasting, and electronically supplied services (TBE/ESS) to non-taxable persons (B2C). VAT is due where the customer is located, not where the supplier is based. A EUR 10,000 threshold applies for small EU-based sellers.

Article 196 (EU VAT Directive)

The legal basis for the reverse charge on cross-border B2B services within the EU. It requires the buyer to account for VAT when the supplier is established in a different member state.

B

B2B (Business-to-Business)

A transaction where both the seller and buyer are businesses (taxable persons). In cross-border VAT, B2B transactions typically trigger the reverse charge, shifting the VAT obligation to the buyer. See B2B vs B2C VAT Rules.

B2C (Business-to-Consumer)

A transaction where the buyer is a private individual or non-taxable entity. For digital services, B2C sales require the seller to charge VAT at the rate of the customer's country and either register locally or use the OSS scheme.

C

CBS (Contribuicao sobre Bens e Servicos)

The federal component of Brazil's new dual-VAT system introduced under the 2023 tax reform. CBS replaces PIS and COFINS. Together with IBS, it forms a destination-based VAT with a combined rate capped at 26.5%. Full transition runs 2026-2033.

Continuous Transaction Controls (CTC)

A tax reporting model where tax authorities receive transaction data in real time or near-real time, typically through mandatory e-invoicing or digital reporting. Italy's SDI, India's IRP, and the EU's ViDA digital reporting requirements are all forms of CTC.

Cross-Border Supply

A supply of goods or services where the seller and buyer are in different countries. Cross-border supplies trigger specific VAT rules around place of supply, reverse charge, and registration obligations.

D

Deemed Supplier

A rule that makes a platform or marketplace the legal seller for VAT purposes, even though the underlying supply is made by a third-party seller. Under the EU's ViDA package, deemed supplier rules will expand to cover short-term accommodation and passenger transport platforms from July 2028.

Destination Principle

The principle that VAT should be collected in the country where goods or services are consumed, not where they originate. Most modern VAT/GST systems apply the destination principle for cross-border trade.

Digital Reporting Requirements (DRR)

The first pillar of the EU's ViDA package. Requires mandatory e-invoicing for intra-EU B2B transactions and real-time digital reporting to tax authorities. Effective from July 2030.

Digital Services Tax (DST)

Not a VAT/GST, but a separate turnover tax applied to revenues of large digital companies. Countries like France, Italy, and the UK have introduced DSTs. Distinct from VAT on electronically supplied services.

E

E-Invoicing

The issuance of invoices in a structured electronic format (such as XML or UBL) that can be automatically processed by both sender, recipient, and tax authorities. Increasingly mandatory worldwide. See E-Invoicing Requirements by Country.

EC Sales List (ESL)

A periodic report filed by VAT-registered businesses listing their intra-EU B2B sales. Since the 2020 Quick Fixes, filing the ESL is a substantive condition for zero-rating intra-community supplies of goods under Art. 138.

Electronically Supplied Services (ESS)

Also called TBE services (telecommunications, broadcasting, and electronic services). Includes SaaS, digital downloads, streaming, web hosting, and similar services delivered over the internet. Subject to special place of supply rules under Art. 58.

EN 16931

The European standard for the semantic data model of an electronic invoice. Mandated for B2G e-invoicing across the EU and will be the required format for ViDA cross-border e-invoicing from 2030.

Exempt Supply

A supply of goods or services that is not subject to VAT. Unlike zero-rated supplies, exempt supplies do not allow the seller to reclaim input VAT on related purchases. Examples include financial services, insurance, and healthcare in most EU member states.

F

Fiscal Representative

A locally established entity appointed by a foreign business to handle VAT obligations in a country. Some EU member states (e.g., Italy, Poland, Portugal) require non-EU businesses to appoint a fiscal representative. The representative is jointly liable for the VAT.

Fixed Establishment

A place of business other than the principal place that has sufficient human and technical resources to make or receive supplies. Having a fixed establishment in a country can create VAT obligations there, separate from the head office location.

G

GST (Goods and Services Tax)

A consumption tax similar to VAT, used in countries including Australia (10%), India (variable rates from 5-28%), Canada (5% federal), New Zealand (15%), and Singapore (9%). Functionally equivalent to VAT with different administrative structures.

I

IBS (Imposto sobre Bens e Servicos)

The state/municipal component of Brazil's dual-VAT reform. Replaces ICMS and ISS. Managed by the Comite Gestor. Together with CBS, forms the new destination-based consumption tax.

Import One-Stop Shop (IOSS)

An EU scheme that allows sellers of low-value imported goods (up to EUR 150) to collect VAT at the point of sale and file a single monthly return in one member state, instead of collecting VAT at customs in each destination country.

Input VAT

VAT paid by a business on its purchases of goods and services. In most cases, registered businesses can deduct input VAT from their output VAT liability. The right to deduct input VAT is a fundamental feature of VAT systems worldwide.

Intra-Community Supply

A supply of goods from one EU member state to a VAT-registered business in another member state. Zero-rated under Art. 138, provided the buyer has a valid VAT number and the goods physically move to another member state. The EC Sales List must be filed.

K

KSeF (Krajowy System e-Faktur)

Poland's National e-Invoicing System. Mandatory for large taxpayers from February 2026 and for all VAT-registered businesses from April 2026. All B2B invoices must be issued through the KSeF platform in structured XML format.

M

Merchant of Record (MoR)

A third-party entity that becomes the legal seller of record for a transaction, taking on responsibility for VAT collection, invoicing, and remittance. Companies like Paddle, FastSpring, and Gumroad operate as MoRs. See MoR vs Self-Remitting.

Mini One-Stop Shop (MOSS)

The predecessor to the current OSS scheme. MOSS was introduced in 2015 for TBE services and was expanded into the broader OSS and IOSS regimes from July 2021.

N

Non-Union OSS

The variant of the One-Stop Shop for businesses established outside the EU. Allows non-EU sellers of B2C services to a single EU member state for VAT registration and file quarterly returns covering all EU sales. Registration is in any member state of choice.

O

One-Stop Shop (OSS)

An EU simplification scheme that allows businesses to file a single quarterly VAT return covering B2C sales across all 27 member states, instead of registering separately in each country. See OSS Explained.

Output VAT

VAT charged by a business on its sales of goods and services. The amount of output VAT collected minus input VAT deductible equals the net VAT liability owed to the tax authority.

P

Place of Supply

The country where a supply is deemed to take place for VAT purposes. This determines which country's VAT rules apply and at what rate. Rules differ depending on whether the supply is B2B or B2C, and whether it involves goods, general services, or digital services. See Place of Supply Rules.

Peppol

Pan-European Public Procurement OnLine. An international framework for exchanging electronic business documents, including e-invoices. Widely adopted for B2G and increasingly for B2B e-invoicing. Used by Singapore (InvoiceNow), Australia, and several EU countries.

R

Reduced Rate

A lower VAT rate applied to specific categories of goods and services. EU member states can apply up to two reduced rates (minimum 5%) and a super-reduced rate where historically applied. Common reduced-rate categories include food, books, and medical supplies.

Registration Threshold

The level of taxable turnover below which a business is not required to register for VAT. Thresholds vary by country. For foreign digital service providers selling B2C, many countries have zero or very low thresholds, meaning registration is required from the first sale.

Reverse Charge

A mechanism that shifts the obligation to account for VAT from the seller to the buyer. Standard for cross-border B2B services in the EU under Art. 196. The buyer self-assesses VAT on their return and simultaneously claims input VAT deduction. See Reverse Charge Explained.

S

SAF-T (Standard Audit File for Tax)

An OECD-developed standard for the electronic exchange of accounting data between businesses and tax authorities. Countries including Portugal, Poland, Romania, Norway, and Lithuania require periodic SAF-T submissions.

SDI (Sistema di Interscambio)

Italy's electronic invoicing hub, operated by the Agenzia delle Entrate. All domestic B2B and B2C invoices in Italy must pass through the SDI in FatturaPA XML format since January 2019.

Single VAT Registration

The third pillar of the EU's ViDA package. Aims to eliminate the need for multiple VAT registrations across EU member states by expanding the OSS to cover more transaction types, including B2B transfers of own goods. Effective from July 2028.

Standard Rate

The default VAT rate applied to most goods and services in a country. EU member states must maintain a standard rate of at least 15%. Current rates range from 17% (Luxembourg) to 27% (Hungary). See Global Rate Changes.

T

Tax Point (Time of Supply)

The date on which VAT becomes due on a transaction. Determines which VAT return period the transaction falls into and which rate applies. Rules vary by country and transaction type (invoice date, payment date, or delivery date).

Taxable Person

Any individual or entity that carries out an economic activity, regardless of whether that activity is profitable. Being a taxable person is what determines whether a buyer qualifies for B2B VAT treatment (such as the reverse charge) rather than B2C treatment.

TBE Services

Telecommunications, broadcasting, and electronically supplied services. A category of services subject to special EU place of supply rules (Art. 58) that tax these services at the customer's location for B2C sales.

Threshold (EUR 10,000)

The combined annual threshold for intra-EU B2C distance sales of goods and TBE services. EU-based sellers below this threshold may charge VAT in their home member state instead of the customer's country. Non-EU sellers cannot use this threshold.

V

VAT (Value Added Tax)

A consumption tax levied at each stage of the supply chain on the value added to goods and services. Collected by businesses on behalf of the government. Used in over 170 countries worldwide, with rates ranging from 5% to 27%.

VAT Gap

The difference between expected VAT revenue and the amount actually collected. The EU VAT gap was estimated at EUR 128 billion in recent European Commission studies. Reducing the gap is a primary driver behind e-invoicing mandates and the ViDA reforms.

VAT Group

A provision allowing closely connected entities (financially, economically, and organizationally) to be treated as a single taxable person for VAT purposes. Intra-group supplies are then outside the scope of VAT. Not all EU member states offer VAT grouping.

VAT Identification Number

A unique number assigned to a VAT-registered business by a tax authority. In the EU, it consists of a two-letter country code followed by up to 12 digits/characters. Validating a customer's VAT number (via VIES) is essential for applying the reverse charge.

VIES (VAT Information Exchange System)

The EU Commission's online system for verifying the validity of VAT identification numbers. Used by businesses to confirm that a customer's VAT number is active before applying the reverse charge or zero-rating an intra-community supply. See VIES API Guide.

ViDA (VAT in the Digital Age)

A comprehensive EU legislative package adopted in 2024, reforming VAT administration across three pillars: digital reporting requirements (mandatory e-invoicing), platform economy rules (deemed supplier expansion), and single VAT registration. Phased implementation from 2027 to 2035. See ViDA Explained.

Z

Zero-Rated Supply

A supply that is taxable at a VAT rate of 0%. Unlike exempt supplies, the seller of zero-rated goods or services can still reclaim input VAT on related purchases. Exports and intra-community supplies of goods are typically zero-rated.

ZATCA (Zakat, Tax and Customs Authority)

Saudi Arabia's tax authority, responsible for administering VAT (introduced at 5% in 2018, increased to 15% in 2020) and the FATOORA e-invoicing platform.