Blog > Our Top Resources: EU VAT Rules for Digital Products & Services
Posted By Create
Changes to EU VAT rules from 1st January 2015 mean businesses selling digital products or services to EU consumers will now have to charge tax based on place of 'consumption' rather than 'supply'.
Businesses will need to apply the relevant tax to their products based upon the country the customer is purchasing from, then this tax will need to be paid to that country.
Here are our top resources to help you understand the changes and any action you may need to take.
Resources from Create
Read our December 2014 blog post 'Changes to EU VAT rules for Digital Products and Services' for a brief overview on the changes and what this means for businesses.
Small business owners have recognised this may be a vast amount of additional work and administration. At Create we have listened to these concerns and built a tool to do the calculations for you. This will enable businesses to charge the correct rate of tax with ease, as part of our Digital Products tool.
Businesses selling using Create’s Digital Products tool - ‘Downloadables’ are affected by the legislative change, so we have added an option for you to comply with the varying tax rates within your Create account. You will simply need to turn this on to enable it.
The guides below will help you setup your 'Downloadable Products' facility in your Create account to comply with the EU VAT rules:
You may also be unable to deliver to certain countries, see our guide on 'How to Set Your Delivery Countries' for more information.
Resources from the UK Government
The UK Government has developed a Mini One Stop Shop (MOSS) service for sellers of digital services to simplify the process – this allows you to submit a quarterly MOSS VAT return and they’ll do the rest for you.
Businesses will need a valid UK VAT registration number to use the MOSS system however if your UK taxable turnover is below the UK VAT registration threshold (currently £81,000) you will not need to account for or pay VAT on sales to UK customers. In this case, you could use MOSS to account for the VAT due in other EU member states - or you can register for VAT in the relevant EU countries manually.
The Government have released detailed guides and information on the VAT rules, see some of the most useful below:
If you are unsure whether these changes apply to you, view the VAT: Supplying Digital Services flowchart from the UK Government to help you.
Useful resources for understanding and referencing EU VAT
- EU Guidance on all things VAT
- EU Member States and VAT numbers
- EU Member Country Current VAT Rates
- EU Member Country Current VAT Registration Threshold
Appeal the change
As we mentioned in our earlier blog, there has been an outcry from small businesses across the web and as such online petitions, with the aim of suspending the introduction of the new EU regulations for sole traders and micro businesses, have been publicised. Find out more and sign the petitions here and here.
If you're still uncertain about anything we recommend speaking with your Accountant as they'll be able to advise fully.
Let us know how these changes have or will affect your business by posting comments below, we will be continually monitoring this topic and ensuring our Create customers are able to fully comply.