Value Added Tax (VAT) in Europe is about to get complicated for e-product sales

Readers in the USA, Canada & Australia can tune out – unless you are selling in Europe (in which case, see your accountant).

NOTE: This is essentially the same article as I posted on http://www.steven-lucas.com but I wanted to get the message out as widely as possible.

European legislation on selling ebooks is about to get complicated in regards to VAT – Value Added Tax and it will have an effect on you if you sell digital products within European states. Effectively, you will have to charge VAT at the buyers state rate (currently 20% for UK buyers, but varies from country to country). The best explanation I’ve found is here: http://rachelandrew.co.uk/archives/2014/10/13/the-horrible-implications-of-the-eu-vat-place-of-supply-change/ but this is one person’s interpretation, albeit well researched.

What it means is that no matter how small a seller you are, you may have to figure a way of identifying where your European buyers for your e-products (books and videos, but not streaming live training, strangely) are and register for VAT in each of those countries so you can send them the payments you are having to add to your products, or take the easy way out and only sell to people within your country or outside the European Union.

Already I have seen many affiliate sellers exclude Canada from their advertising and sales due to the necessity of declaring that they will make a commission if a sale is made, but surely that is just a matter of being polite to your readers and telling them somewhere around the ‘Buy’ button. 99.9% of them will know anyway that almost everything for sale on the internet is on a commission basis, especially e-products.

Now people are claiming that this is to make life difficult for Amazon, who famously in the UK have managed to avoid many of the taxes that should have been paid based on their claimed revenue, but since every country’s branch of Amazon is a separate entity and cross-country buying is difficult then it should be easy for them to sort out – even for Kindle e-book authors who need to opt-in for each territory separately. All it is really doing is either creating an administration nightmare for trans-European small sellers or just pushing them out of the market. Anyone who is VAT registered in their home country and selling to a VAT registered company elsewhere in Europe will be fine as VAT is not charged or claimed – essentially business to business sales as such will be unaffected by the law coming in 2015.

No one seems quite sure yet how this may affect EU affiliates selling USA based products, but someone may try and make it stick. For now your main worry is if you create e-products within the EU and sell them within other EU countries.

So what can we, as small sales merchants selling e-books from our little websites do? Well if you’re writing in English, in the UK, then probably losing sales by not selling in Germany, France or Spain is not going to be a big loss to you. A few lines apologising that you cannot accept sales from outside your country will probably be enough and if your sales processor allows it, then excluding those countries is merely a belt and braces exercise.

If however, you are a go-getting entrepreneur who cleverly gets his e-books translated into other languages specifically to catch those areas who are less well supplied, but still eager, in your niche then you will have some serious thinking or paperwork to do if you are to avoid the taxmen from other EU countries from knocking at your door with demands for tax you are supposed to have added and collected on their behalf.

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