VAT for browser-based game developers selling directly to consumers

The production of browser-based and web-native games is growing, driven by consumers seeking out games that don’t require downloads. This isn’t necessarily down to price, many are spending just as much on in-game purchases as ever, but to the ease-of-use and lack of friction browser games offer.

For new and established game developers alike, this offers an opportunity to promote games far more easily than those walled behind stores or platforms, without compromising on quality. Improved browser technology means web-games can now match platform games in quality, allowing new studios and independent developers to debut without a platform or high price point, while established studios can release browser-based versions of existing titles to gain further traction.

Despite these positives, running a browser-based game without an external platform brings its own challenges, particularly around sales. When developers operate through a third-party like Steam, Google Play, or Apple’s App Store, the platform is often treated as the seller for tax purposes, taking on responsibility for managing VAT domestically and internationally on the developers’ behalf. Web-based games selling directly to consumers don’t have that luxury, they’re responsible for VAT wherever their customers are based.

Operating outside a marketplace creates a materially different picture: developers carry the full responsibility and tax implications of being the direct seller, and this only grows as they expand globally. If things go wrong, the implications can be far-reaching, both financially and legally.

In this blog, our gaming accountants explain exactly how this works, highlighting the specific challenges of operating outside a platform, and how developers can manage VAT and equivalent sales tax implications in the UK, EU and worldwide.

Platform vs direct sales: Who is responsible for VAT?

Sales via a platform or marketplace (B2B)

When operating a game through Steam, Google Play, Apple’s App Store, etc., the platform is generally the “deemed supplier”; it handles VAT and sales taxes across the jurisdictions the game operates in. The developer’s relationship with the platform is treated as B2B,

In practical terms, this means the developer does not usually need to register for VAT separately in every country where the game is purchased, as the platform is responsible for collecting and remitting VAT or equivalent sales taxes to the relevant authorities.

Instead, the developer generally receives royalty income from the platform for the right to distribute the game. Where the platform is established in the UK, UK VAT may apply to that royalty income in the normal way. Where the platform is established outside the UK, the income will generally fall outside the scope of UK VAT, subject to the usual place of supply rules.

Sales direct to consumer (B2C)

When operating without a platform, the developer is responsible for determining and collecting the correct VAT or equivalent sales tax in every jurisdiction a customer purchases from. This applies equally whether selling the game itself or in-game content such as currency, assets or upgrades.

While this may sound straightforward, many jurisdictions have low or nil registration thresholds for overseas digital sellers, meaning even a single transaction from a given country can trigger a VAT or sales tax obligation there. Failing to comply can have far-reaching and serious consequences for developers.

Why might a developer still choose to operate independently?

With that in mind, it’s fair to ask why a developer would take this route at all. In practice, it often comes down to cost and control, weighed against the compliance burden that comes with them.

Platforms like Steam, Google Play, and Apple’s App Store typically take a cut of around 30% of revenue, reflecting, among other things, this compliance infrastructure.
For web-based games specifically, Steam presents an additional technical barrier: they require packaging via wrappers (e.g., Electron, NW.js, Chromium Embedded Framework) to run within the Steam client, which adds development cost.

UK VAT: the straightforward starting point

Having established that direct sellers carry the VAT responsibility themselves, the UK is actually one of the easiest jurisdictions to get right. The standard UK VAT rate of 20% applies to digital services, including games and in-game content. Other key points to note:

Standard UK VAT rate of 20% applies to digital services (including games and in-game content).
UK VAT registration threshold for UK established businesses: £90,000 (2025/26). However, for non-established (overseas) sellers of digital services into the UK, there is no registration threshold and obligations will arise upon the initial sale.
UK filing is via a standard UK VAT return; no simplified scheme equivalent to the EU OSS exists for UK-only sales.

Expanding into the EU: The One Stop Shop (OSS)

Selling a web-based game or in-game purchases directly to EU consumers can create a VAT liability in each of the 27 member states.

For developers selling direct, the EU One Stop Shop (OSS) Non-Union scheme avoids this need by allowing registration in just one country and creating one quarterly return covering all EU sales. Ireland is often the practical choice for UK developers, due to the lack of language barriers.

Unlike EU-established sellers, who benefit from a €10,000 EU-wide threshold before destination-country VAT rates kick in, non-EU developers using the Non-Union scheme don’t get this grace period, VAT at the customer’s local rate applies from the very first sale.

What’s changing under ViDA

Studios planning long-term direct-to-consumer sales within the EU should be aware of the VAT in the Digital Age (ViDA) package. Adopted March 2025, it will gradually reshape OSS rules through to 2035. Some key dates for game developers to watch include:

1 July 2028: Single VAT Registration (SVR) reforms broaden OSS coverage and add a correction mechanism for return errors.
1 July 2030: Digital Reporting Requirements extend to cross-border B2B transactions, relevant if selling licences or engine tech to EU studios.
1 January 2035: Domestic real-time digital reporting systems align with the EU model.

ViDA should work in favour of web-based game studios selling directly. SVR expansion means fewer registration gaps and better correction tools for OSS filings, cutting into the compliance overhead that makes direct EU sales harder than going through a platform in the first place.

Cross-border complexity: markets beyond the EU

The four largest video game markets are the US, China, Japan and South Korea. With each running its own unique tax regime for digital sales, the compliance requirements vary substantially between them:

United States: No federal VAT, but sales tax obligations vary state by state, creating a patchwork that catches out developers used to the EU’s single-registration model.
China: Digital sales sit within a tightly controlled regulatory environment, where tax compliance is only one part of a broader approval and licensing process for foreign game publishers.
Japan: Consumption tax applies to digital services sold to Japanese consumers, with registration obligations that differ from the UK’s familiar VAT framework.
South Korea: VAT applies to digital goods, with its own registration and reporting mechanics that require local expertise rather than assumptions carried over from EU rules.

Not every market is worth entering on day one, especially without the right preparation, some jurisdictions carry significant penalties for non-compliance.

Geo-blocking by IP address is a legitimate, technically simple way to hold off launching in a jurisdiction until compliance costs are justified by expected revenue. The takeaway for developers is straightforward: you don’t need to launch everywhere at once, and where you do expand, local advisors should be lined up before sales go live, not after.

Practical steps for independent developers

For developers looking to sell directly, the most valuable way of dealing with these complexities is getting the groundwork right from the outset, rather than adapting as problems appear. The following steps explain exactly what that looks like for a developer setting up or scaling a direct-to-consumer operation:

Design your back end for jurisdiction tracking from day one

Capture each customer’s jurisdiction using evidence such as billing address, IP data and payment card country. This is simple to design in early, much harder to retrofit later.
Use this data to calculate VAT or sales tax accurately and give local advisors what they need for each relevant jurisdiction.

Stagger your geographic launch

For UK-based developers, a phased expansion strategy is often the most practical approach: UK first, then the EU via OSS, before moving into selected non-EU markets once the appropriate compliance processes are in place.
Where you’re not yet ready for a market, geo-blocking by IP address is a straightforward way to hold it off until the numbers justify the cost.

Register for UK VAT early

If you’re approaching the UK VAT threshold, register proactively rather than scrambling once you cross it, and factor in-game purchases into that calculation alongside base game pricing.

Set up EU OSS registration

For EU expansion, register under the Non-Union OSS, typically via Ireland, to cover all 27 member states through a single return rather than 27 separate ones. While this removes the need for multiple VAT registrations, it does not remove the requirement to apply the correct local VAT rate based on where the customer is located.

Assemble a network of local advisors for key markets

Beyond the UK and EU, each major market needs its own local expertise. A developer selling into five to ten jurisdictions could realistically need just as many specialist advisors.

This is where our IAPA network comes in, connecting you with vetted local advisors who already understand digital taxation in their market.

Assess commercial viability by market before committing to compliance

If a country represents a small slice of sales and the cost of registering, filing and appointing a local representative outweighs the revenue it generates, geo-blocking that country is a legitimate commercial decision.

Getting the right support in place

For web-based game developers operating without a platform, managing VAT across the UK, EU and beyond can be a significant challenge without the right knowledge and preparation. Getting it right from the start means having advisers who understand both the tax regulations and how games are actually built and sold.

Our team can help with:

UK VAT obligations, from registration timing to how in-game purchases factor into your position.
EU One Stop Shop registration, so direct sales to European consumers stay compliant without the burden of separate registrations in each member state.
Introductions to trusted local advisors in key markets beyond the UK and EU, through our membership of the IAPA international network.

If you’re weighing up direct-to-consumer sales against distributing through a platform, now is the time to get the tax and compliance picture clear, before you launch, not after.

Get in touch with our team for an initial conversation about your plans, whether you’re just starting to think about EU expansion or preparing to go live in multiple markets at once. Fill in the contact form below to get started.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information on this page is intended as a general guide only. While we work to keep our content accurate and up to date, we cannot guarantee that it reflects the position at the time you are reading it. No responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm. For more information on our editorial process, click here.

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