How the new #EU #VAT rules are hurting buyers!

The new #EU #VAT cross-border digital sales rules don't just affect sellers, they hit buyers too, as if we have to charge VAT you have to pay more when you buy from us! That's no fun, is it?!

But it's even less fun when you realise that these rules are going to be extended to cover sales of anything that goes from one EU country to another, or from one non-EU country into the EU. Are you listening yet America? Canada? Australia? New Zealand? Japan? China? Rest of the world?

Low-turnover businesses have been covered by their home country's VAT threshold until 31.12.2014, and still are for sales they make within their home country, but get caught up in the VAT rules when they sell outside their home country, even if the item is a penny!

OK so what will happen if those digital sellers at the low-turnover end of the marketplace stop selling online? Will it affect you? You may think not, but you'd be so wrong!

Do you buy music from indie bands?
Do you buy apps for your smartphone?
Do you buy games or modifications for games for your computer?
Do you buy software?
Do you buy patterns for your knitting, crochet, craftwork?
Do you buy images for use in your projects?
Do you buy ringtones for your mobile phone?
Do you subscribe to a specialist digital magazine?
Do you buy ebooks from indie authors?
Do you undertake online courses to learn a new skill or hobby?

If you said yes to any of those questions then you are affected by this issue.

Juliet McKenna of the EU VAT Action team has been looking into the issue, after the team undertook a survey of more than 2,000 small traders whoc supply exactly the sorts of digital products I listed above. Her findings are worrying. Here is what she says,

If there’s a big company behind your chosen product, they’ll probably be able to cope. It’ll be a hassle for them, no doubt about it, but they have the resources.

If that business is run by just one person, working on their own? Then it’s unlikely they’ll be able to handle the new rules. Just how many of those resources come under the heading of “automated digital services”. In other words, they’re all now subject to the new rules requiring whoever’s offering them to charge the correct VAT rate where you live.

The administrative burden of trying to figure out, with up to 3 pieces of information, where your customer is and the choosing the correct rate from the EU’s 81 options is enormous. Most small businesses do not have the means to do this.

The people who create these amazing resources, unless they’re a big business with tech support, are more likely to close or to block your country than to be able to comply with the new EU VAT rules.  Here is the link to the full article.

Ahhhh, you say, but I don't buy things I get mine for free...  maybe you do, but not for much longer!  Your "free" product is actually paid for by the advertising revenue that is made by the site from which it is sold, or via ads within the product itself (those ads you see in apps are a prime example).  That advertising revenue now comes under the EU VAT rules so the seller has to register for VAT, and has to account for the VAT on the revenue and pay it to the relevant tax authority.  So what?! you might say... well here's what...  that all takes time to do, it costs money to do, as managing VAT returns means higher accountant's fees, it means registering as a data controller, and a host of other hassles that go with it and take up your time - and as we all know, time = money in a business! 

So, if you believe in a free marketplace where you can buy your digital products you really do need to take notice of what's happening with the EU VAT rules.  The answer is not to pull out of the EU, but rather to shout loudly to your MEPs that the EU has got it wrong. If enough of us shout they might listen.  If we don't shout, then we will all just be shopping for the same old things at Amazon and eBay in the future!