New EU VAT Rules for Digital Products

From 1 January 2015, new EU VAT rules for digital products will come into force. European Union VAT for digital products will be charged based on the country where the buyer is located, as opposed to based on the sellers location, as it was previously.

Essentially, as a seller of digital goods, you have three options:

  1. register to pay VAT in every EU member state that you sell to;
  2. register for the VAT mini one stop shop scheme (VAT MOSS);
  3. stop selling to the customers in EU altogether.

The easiest way to comply with the new rules is to register for Mini One Stop Shop scheme (VAT MOSS). For more information and a full list of MOSS registration portals, including one in your country, visit European Commission website.

Important note: This is not a legal advice. Please consult your lawyer and/or accountant, who will be in a better position to tell you about your legal rights and liabilities.

If you choose to do go ahead with VAT MOSS, you’ll only have to submit a single calendar quarterly return and VAT payment, and the Member State will then take care of the rest, by sending all the “appropriate information and payment to each relevant member state’s tax authority.”

What does Sellfy do to help?

Starting with the 1st January, we’re going to enable some of the features to make the whole process less painful for you.

Advanced setting will be available under Settings -> “Location & Tax”, where it will be possible to do the following:

  1. choose to either include the tax in the display price or add it during the checkout;
  2. block the sales from EU countries.

Keep in mind, that you won’t be able to edit the VAT rates for EU countries, as we’ll do that for you and make sure that all the rates are up to date.

Following the European Commission requirements, we’ll store two non-contradictory identifiers of the buyer’s location, based on:

  1. the IP address;
  2. customer’s own choice of country;
  3. credit card (or Paypal) information.

Reports on your customers location and the precise amount of taxes to pay will be available in the Orders -> “Export order data“.

Further Reading

The Guardian article on New EU VAT regulations
European Commission website
EU-VAT GitHub repo with relevant links

Yuri is a Content Crafter at Sellfy. He's focused on inbound marketing, copywriting, CRO and growth.