Last updated: 14 October 2026
Is selling a software licence to a customer in Russia subject to UK VAT?
For VAT, a software licence or download sold to a business customer outside the UK is usually outside the scope of UK VAT, because the place of supply is where the customer belongs. Sales to consumers outside the UK are also usually outside the scope for electronically supplied services. But before you sell anything to Russia, you must check UK sanctions. Many software and IT services to Russian persons are prohibited or need a licence under the Russia sanctions regulations, so VAT is not the first question to ask.
Sanctions come first
Since 2022, the UK has introduced wide trade sanctions on Russia. They include restrictions on supplying certain software, IT consultancy and related services, and bans on dealing with designated people and companies. Breaching sanctions is a criminal offence. Check the Office of Trade Sanctions Implementation (OTSI) and the Export Control Joint Unit guidance on gov.uk, and screen your customer against the UK sanctions list before agreeing any sale. Get legal advice if you’re unsure.
The VAT rules for software
| Customer | Type of supply | UK VAT |
| Business outside the UK | Licence, download or SaaS | Outside the scope (no UK VAT) |
| Consumer outside the UK | Electronically supplied service | Outside the scope of UK VAT; local VAT may apply |
| Business in the UK | Any | 20% |
| Consumer in the UK | Any | 20% |
Boxed software shipped on a physical disc is treated as goods and can be zero-rated as an export, with evidence.
What to show on the invoice
For a sale outside the scope of UK VAT, don’t charge VAT. Show the net amount and a note such as “Outside the scope of UK VAT – place of supply is the customer’s country”. Keep evidence that the customer is a business and where it belongs, such as its registration details and address.
How it goes on your VAT return
Outside-the-scope services to overseas customers go in box 6 as net sales; HMRC’s VAT Notice 700/12 explains which supplies to include. You can still reclaim the VAT on your related costs, as long as the supply would have been taxable in the UK.
Local taxes in the customer’s country
Many countries charge their own VAT on digital services sold by foreign suppliers, and may require you to register. Check the rules of the customer’s country before you sell to consumers there.
Example
A UK developer sells a £5,000 annual licence to a business in Canada. No UK VAT is charged, and the invoice states that the supply is outside the scope of UK VAT. The developer reports the £5,000 in line with Notice 700/12 and continues to reclaim VAT on its own costs. For a Russian customer, the developer would first need to confirm that the sale isn’t prohibited by sanctions.
Records to keep
- Evidence of the customer’s business status and location
- Contracts and licence terms
- Sanctions screening results, with the date checked
- Payment records
Frequently asked questions
Do I charge VAT to a US customer for SaaS?
No UK VAT if the customer is a business outside the UK.
Can I sell software to a Russian company?
Only if UK sanctions allow it. Check OTSI guidance and the sanctions list first.
Is SaaS a service or goods?
A service. Physical media are goods.
Do I still reclaim VAT on costs?
Usually yes.
Related: VAT on services outside the UK and VAT on EU sales.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT on international software sales. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
