As of 01 January 2015, the VAT rules for the sale of digital goods to the EU have changed. This includes the direct sales of ebooks to an individual customer by a self-publishing author or online publisher.
From 01 January, for sales into the EU, VAT has to be charged on the book price according to the customer’s country, NOT the country of the seller as was previously the case.
The rate to be used is the one from the EU customer’s country i.e. sales may include several countries, several different rates of VAT.
ALL countries are drawn into this arrangement.
ANY amount of sales will provoke the arrangement i.e. 1 book or 1,000 books.
Further details on all of this are on the HMRC website, it’s a good idea to start here:
Anyone selling digitally in this way must register for VAT with HMRC, keep appropriate records, and account for and pay VAT every quarter end (31 March, 30 June, 30 Sept, 31 Dec).
Q&Q Comment: this may be a considerable increase in resources and administrative time for a small business, and some are re-thinking whether to sell directly at all.
Appropriate records: the seller must
– establish the customer’s country from more than one reliable source,
– keep records of this exercise for ten years.
HMRC are offering a one-stop system for accounting for VAT. You would not need to register in every EU country, but just once in your home country. Your single return would list the sales made in each country during the quarter.
HMRC will also provide the VAT rates for EU countries so that you can calculate the VAT payable.
This reporting will be online.
Payments can be made electronically, and must be made by the 20th of the month following the quarter end.
There’s a useful chart below which should tell you if you need to register i.e. if you’ll be selling into the EU and will have to charge VAT.
Sales through distributors:
Goods sold through Amazon, All Romance Ebooks, Barnes and Noble and other online wholesale distributors will be handled by the distributor, not the individual supplier.
There are several group lobbying at present for a period of “grace”, due to the anticipated extra work involved for a lot of small businesses. For example, there are proposals for a minimum threshold of sales, or extra time allowed to set up supporting systems.
At the moment, none of these are in place. ALL digital sales into the EU – unless you are supplying ONLY non-EU customers – will fall into this scheme, and VAT will need to be registered, calculated and paid.
Further interesting queries are brought up on this HMRC Twitter feed:
Want to ask anything? Email Q&Q.