It looks like VAT MOSS is correctly applied when using the buy button on either the project page, or when using the itch.io custom button api. After selecting your payment method it asks for your address, and then adds on the required VAT.
When using the itch.io widget, you select the payment method then it skips straight to the email and card details screen or paypal screen with no VAT applied and no address asked for.
So at the moment, someone buying from Europe will get my product cheaper if using the widget, as VAT won't be added.
Is this the intended behaviour?