November 13, 2014
Until now, big corporations like Apple, Amazon and Microsoft have been able to get away with selling digital content out of countries like Luxembourg which has the lowest rate of VAT in the EU. Starting from January 2015 however, new rules are being put into place and anybody selling digital products directly to customers into the EU will need to be aware of them.
From January onwards, sellers will need to identify where the customer is based and charge VAT based on the rate of the customer’s country, instead of their own. This effectively means that sellers will now need to account for and apply the correct VAT rates for all 28 EU member states.
Paddle has published a helpful FAQ on their blog to help sellers of digital content understand the changes to VAT rules, including who (specifically) is affected and what they can do about it. The FAQ also includes a handy VAT calculator showing the rates applying to sales of digital content in the 28 EU member states, and you can access it via this link
Fortunately for anybody selling through Apple’s App Stores or the Google Play Store, both companies manage VAT on behalf of sellers. If however you’re selling directly to customers, it’s certainly worth seeking financial advice on this.
How do you feel about the changes? Let us know in the comments section below!