Changes to EU VAT rules for Digital Products and Services

Blog > Changes to EU VAT rules for Digital Products and Services

Posted By Rebecca Kimber

Tags: law, selling online, ecommerce

On January 1st, 2015 new EU VAT rules were put into effect which updated the place of supply legislation for digital products and services. Businesses selling using Create’s Digital Products tool - ‘Downloadables’ will be affected by this change so please take the time to read this important blog post.

 

What are the changes to the VAT rules?

The EU is introducing legislation which means that VAT for digital services will now be due in the country where your buyer is and no longer at the rate where your business is based.

Previously if a customer in France purchased a digital product from your shop and you were based in the UK, then VAT would have been due at the UK rate. From January 1st VAT on the same sale will be due at the French rate and payable to France.

Because of this change businesses selling digital products and services will need to be registered for VAT either in all EU countries (if you’re in the UK you can do this through the new HMRC service VAT MOSS - more info here ) or in the countries within the EU individually as you reach their sales thresholds, which in some countries like Spain and Sweden is zero. For a full list of VAT thresholds click here.

 

What are we are doing about this at Create?

We have been working hard behind the scenes for the last few months and will shortly be rolling out an update to our Downloadable Products tool, this update will enable you to comply with the new legislation.

When a customer places a digital order through the Downloadable Products tool on your website, the Create checkout will calculate the applicable VAT based on your customer’s country, display this on your orders in Order Management and on the customer’s order email and dispatch notes.

Our system will also validate and store your customer’s VAT number (for business to business sales), along with the two pieces of information you need to verify the customer’s country and keep as evidence against all European orders.

We’ll be providing additional features and guides on how to use these new tax tools at the beginning of next week so please look out for an update to this blog or get in touch with your Account Manager to find out more.

At Create, we can see the effects this new legislation will have on businesses of all sizes but particularly those of you running an independent or micro business where the additional accounting practices will be burdensome.

There has been an outcry from small businesses across the web and you may like to consider signing the online petitions aimed at suspending the introduction of the new EU regulations for micro businesses and sole traders. Find out more and sign the petitions here and here.

If you are concerned about what the changes mean for your business we recommend discussing this with your Accountant as they will be able to fully advise you.

Please share your thoughts on how your business may be affected by these changes in the comments below. We’ll be continually working to help ensure your websites can comply with these new rules.


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