UPDATE: Jan 23rd, 2015:
1) JVZoo (Fabulous!)
Of all the selling platforms out there JVZoo’s response to the EU VAT rules has been the most innovative and in my opinion it provides the most complete solution.
As a product vendor you can:
a) Block Countries
This is “Solution 4″ in my original blog post below. Particularly useful for UK vendors who sell only a tiny amount into other EU countries – by switching off these sales you don’t have to register for MOSS and you can bypass all of the associated admin work.
[A potential issue here are the anti-discrimination laws in the EU. As I understand it (I am not a lawyer and could be wrong) an EU based business can’t refuse digital sales to customers in other EU countries without a valid reason. I’ve yet to see examples of “valid” reasons or “non-valid” reasons, or indeed any qualified clarification on this – if you have any ideas please do leave a comment!]
…or if you do wish to sell into the EU…
b) Choose to charge VAT or not (obviously switch this on to be compliant with the Jan 1st rules!)
c) If you enable VAT, whether to charge by vendors country or, to be compliant with the rules, customers country.
d) Allow customers to manually override their country (e.g., live in UK but buying in France)
e) Download full reports of transactions by country which can be uploaded into your MOSS account.
In my view this is a brilliant set up and definitely good news: If you want to sell into the EU then it makes the bureaucracy much less time consuming. But if you’d prefer to bypass the admin work altogether then you can simply opt out by switching off all sales to EU countries.
2) WarriorPlus (Disappointing!)
I queried what WarriorPlus are planning to do in response to the rules and they implied that they have no plans to change, at least in the short term.
Essentially if you want to use WarriorPlus to sell into the EU then you need to set up individual tax rates inside PayPal. This is a manual process and of course puts the entire burden on each vendor.
I also asked about a country blocking feature which they said they would consider but again, no firm plans on this to my knowledge.
So in contrast to JVZoo a disappointing response from WarriorPlus I would say.
3) Clickbank (Already Compliant!)
As mentioned in the post below Clickbank has always charged the correct sales tax for every region in the world.
Since they effectively sell your product for you (unlike PayPal, WarriorPlus, JVZoo etc) the responsibility lies with them not you.
So literally nothing changes when it comes to the Jan 1 st EU VAT rules and happy days if, like me, you use Clickbank a lot in your business!
4) UK Government Flow Chart
The UK government have published a handy flow chart to clarify the VAT rules. Here’s a link to it (opens in new window).
ORIGINAL BLOG POST IS BELOW – Ideal for getting up to speed if you’re not yet clear on all this stuff!
This post is most applicable to those of us who live in the EU and especially the UK.
I am not a qualified accountant so this is not advice, only my opinion and nothing more
So, what is happening?
Currently, if a business sells a digital product (ebook, membership site subscription, software etc) VAT (i.e., sales tax) is charged based upon the country where the business is located.
This has led to a lot of tax avoidance by larger companies.
For example, corporations like Apple, Amazon, Microsoft and many others have previously located their EU businesses in Luxembourg where VAT on eBooks is 3%.
This rate has applied to sales in ANY country in the EU. Even though the rates in most of those countries are higher.
To clamp down on this the EU are, from Jan 1st, changing the rules so VAT is charged based upon the buyer’s location.
So continuing with Luxembourg as the example:
Currently: Luxembourg registered business sells to a UK customer. VAT is 3% (Luxembourg’s “Super Reduced Rate”)
From Jan 1st: Luxembourg registered business sells to a UK customer. VAT charged will be 20% (UK’s rate)
It’s certainly a big shake up with Luxembourg set to lose 70% of its VAT revenue while the UK is set to gain £300 million ($480 million) per year!