Let’s be honest, unless you’re an accountant VAT is hardly an exciting subject is it? In fact, even our CFO at work finds VAT a dreary subject!
Well, whether you like it or not, if you’re selling digital products in the EU (regardless of whether you’re based in the EU or elsewhere) you need to be aware of the VAT changes being put into effect from January 2015.
In order to prevent large corporations like Apple, Amazon and Microsoft from selling digital content out of Luxembourg (which has the lowest VAT rate in the EU), sellers will now have to charge VAT based on the rate of the customer’s country, rather than their own country.
That essentially means that if you’re selling a digital product you’ll now need to account for the VAT rates of all 28 EU member states. To do this, sellers will need to identify their end customer’s location in order to determine the correct VAT rate to apply.
There are also changes to the filing regime, which means that instead of filing a single return in the country in which they are VAT-registered, vendors will need to submit an additional return which aggregates all sales made in other EU countries (under mini one-stop shop (MOSS) simplification regime). Otherwise, they will need to file returns in each EU country in which they sell.
To help sellers, Paddle.com has created a handy VAT calculator showing the rates you’ll need to apply based on the 28 countries. You can download it for free here:
How are you planning on handling the VAT changes in 2015? Let us know in the comments below!