Amazon and Apple, amongst other corporate giants in the ebook marketplace, have located themselves for EEC tax purposes in Luxembourg for the last few years. With a local rate of VAT (Sales tax) of 3% this is much lower than the 20%+ payable in most EEC countries. Now action has been taken to close this loophole but it does mean that every publisher selling to consumers in the EEC must be aware of the changes and take appropriate action.
Sales of ebooks from businesses to consumers (B2C sales) must have VAT added when the purchaser is located in any of the 28 EEC countries. Until the start of 2015 this VAT has been added at the rate applicable in the Publishers/Suppliers home country, not the Purchasers. As a result, companies like Amazon have been able to add 3% instead of 20%+ to their prices and substantially undercut similar publishers based in the targeted countries. To close this loophole the EEC now requires VAT to be charged at the rate applicable in the customer’s country, not the suppliers. This means applying the correct rate for each country for the product sold, and ensuring that the home country of the purchaser is known and recorded.
To avoid a publisher or service provider having to register with the tax authorities in all 28 EEC countries, a system known as VAT MOSS (Mini One Stop Shop) has been introduced. With this system we now add VAT at the appropriate rate to sales of secure PDFs made via our Managed Services facilities within the EEC. We then report the amount, country-by-country, via the MOSS service in the UK, and the UK tax authoriities will reconcile the taxes due to each EEC member state. What this means is that customers of our Managed Services will not have to worry about the new regulations, but DIY service publishers will need to register for the VAT MOSS service and account for VAT if they are selling to EEC consumers.
The UK VAT people (HMRC) expected 5000+ businesses to register for VAT MOSS – it is claimed that c.350,000 have done so!
If you would like to discuss our managed services please contact us
There has been a massive amount of discussion about the introduction of these charges, as evidenced by topics on Twitter #VATMESS and press articles. For more information on the UK implementation of VAT MOSS please click here