VAT and You

Just when you thought things were settling down a little, comes the news that with effect from 1st January 2015, VAT changes affecting digital downloads (i.e. including ebooks) are to take place, across the EU.

In a nutshell, VAT will be charged at the rate applicable to the consumer’s country of residence, rather than the supplier’s base.

This is to negate examples of major VAT sidestepping, such as Amazon.co.uk, which used its Luxembourg head office’s 3% VAT rate , while selling zillions of pounds worth of ebooks in the UK, where the rate is 20%.

That will no doubt help the UK Treasury, but it’s something to consider for anyone or any organisation in the UK selling ebooks. The main route to selling ebooks is through some form of shopping cart software, and these programs will have to be adapted to cope with this new, more complicated scenario.

Anyone selling by other means will also have to work out how to handle transactions in line with the new legislation.

What I would like to know is, how does one actually find out the purchaser’s country of residence? Presumably the operative factor is the location of the computer that does the buying, but even so, how does a simple shopping cart work that out? That’s all beyond my level of Internet savvy, but as a publisher, I’d be interested if anyone has something to say in the matter.

It’s also interesting for anyone who does any kind of digital selling, whether personally or through a business of any kind. It’s all relevant, because I reckon the taxman is going to be fairly vigilant about this new regulation, especially while we’re in “austerity mode” – in my opinion, that’s for at least the next five years. Simply put, one needs to be in a position to prove you know who is buying from you, whether they live in Spain or Solihull, and whether they were on holiday in Florida when they bought the book…

It will also be interesting to discover if my assumption is correct – that where the sale takes place is the criterion – or whether the consumer’s actual home country will be the prime issue.

Any comments?

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