With the growth in electronic commerce and the sale of both digital products and tangible products, on the Internet, value added taxes (VAT) represent a lucrative source of revenue for countries all over the world. As countries change their laws to expand their ability to impose VAT on more types of transactions, identifying and complying with VAT collection obligations present increasing complexities.

Nearly all countries outside the United States impose a VAT, also called Goods and Services Tax (GST) or Consumption Tax (CT). VAT is a transactional tax and is levied on practically all goods and services. It applies throughout the supply chain on both business-to-business and business-to-consumer transactions, including the importation of goods and services.

In an effort to secure taxation in the jurisdiction of consumption, the European Union countries were the first to require non-resident suppliers of digital services to register and account for VAT on sales to consumers in those countries. Subsequently, an increasing number of countries around the world have enacted similar rules imposing an obligation to collect VAT on businesses that lack a physical presence within their borders. Business customers generally self-assess VAT on these purchases. However, the obligation to register and account for VAT arises from sales to consumers, though there are countries that apply the same rules to sales to business customers. Compliance obligations vary between countries and range from simplified remote online processes to the requirement to appoint a local in-country fiscal representative for the filing of returns.

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