E-book prices may rise as VAT law kicks in
thebookseller.com
thebookseller.com
Hand-picked links:
- http://ec.europa.eu/taxation_customs/resources/documents/tax...
- https://docs.recurly.com/eu-vat-2015
- http://theaccountancycloud.co.uk/vat-rules-on-digital-servic...
I agree this looks like a major PITA, but luckily Recurly (which I picked for my billing code) seems to have this supported (did not test yet, though).
That said I do feel your pain. I feel a bit of fatigue with regards to the increasing challenges that bootstrappers (amongst others) face (eg: cookie law, vat).
Once I hit £81k of course, I can probably afford to throw money at accountants to take care of it for me! But that critical first bootstrapping stage has become just that little bit more difficult. It's either block the rest of the EU, or get ready to do some paperwork. Or I guess I could become a zero-revenue startup! ;)
The bad thing is that I will already roughly reach the threshold because of my main income which is coming from consulting.
So bootstrapping based on consulting is becoming a bit harder, paperwork-wise :P
Seeing as I'm not quite localised for Europe anyway, I don't think it's a huge deal blocking them at the moment. I'd much rather provide a good french service to France and a german service to Germany. But obviously I want to open that market up as soon as I possibly can, whether it's perfectly localised or not. This law just adds some delays.
True, but if I want to take VAT numbers I have to be registered for VAT anyway and then do UK quarterly filings.
I don't believe that's true. You have, I assume, been doing both B2B and B2C sales so far, and the law has solely changed in regard to B2C sales on digitally supplied services.
The only new requirement for you to avoid needing to charge VAT should be that you'd need evidence to prove a sale isn't B2C on non-UK EU sales only. For that, all you need is a VAT number in the valid format (HMRC notice 741A section 2.7).
Handily, you do not even need to do any further validation of the VAT number if the VAT that would be ordinarily charged to that customer is cumulatively less than £500 over 3 months (741A section 19.2). (So if you were providing a service of £100/mo, you shouldn't even need to check their VAT number out! :-))
There's definitely stuff & concepts to get your head around with this, but in theory, still accepting B2B sales within Europe could be as simple as collecting, validating the format of, and storing VAT numbers.
If your B2B intra-EU sales are too low to make this worthwhile, of course, then yeah, it makes sense to block them (and in my research, it appears this is legal), but if you're doing several grand's worth, say.. it might be worth considering the above. Good luck whichever way you go! :-)
Ref: http://www.revenue.ie/en/tax/vat/leaflets/printing-and-print...
I've written the usual letters to government ministers and to members of the European Parliament, but have been completely ignored in all cases, not unexpectedly. Unfortunately, I feel that this is going to be another measure pushed through the EP without any public consultation.
Frankly Amazon, Google and the like have taken the piss by using Luxembourg as a tax haven for too long. It's right that VAT is charged in the consumers country.
I'm rather sure that it's mandatory. The thing that sucks is that the VAT-included price is visible only at the end of checkout, which is different than everything else - local stores and web-stores are required to advertise only tax-included prices. Possibly it's because the "same customer" may get different tax rates depending on where I choose to ship the item.
This applies to websites and shops. Europeans will often be surprised in American shops that the tax is added on afterwards — I've had the exact change ready and been caught by this.
The line before "Total" on a receipt shows the amount of VAT paid. Many shops will "*" any items had different rates (things like basic food).
By the way, physical books are vat-free in the UK (presumably because it is seen as a good thing to encourage people to read), whereas e-books have always been standard VAT in the UK, making e-books less competitive.
The only question is about e-books, which are sent to UK customers by a USA company from datacenters most likely in Ireland or Germany. You could argue that UK VAT should be paid whenever an UK customer buys a digital item from abroad, but it's a bit different argument than your post is making now.
A lot of small publishers are basically getting ready to fold their UK-based ebook operations completely at the end of the month. When you sell 10-50 products a month for £2-5 a pop it just isn't worth the hassle. And these are people who refuse to go via Amazon because monopsony. It is to weep.
Let's look at the facts:
- Most paper books are already subject to VAT (90%+).
- The margins on ebooks are already much higher than paper books (due to reduces production, distribution, storage, returns, and tax costs).
- The only reason ebooks cost as much as they do is due to lack of competition and the publishers wanting to continue to sell paper books.
So while publishers might try to exploit this opportunity to raise prices on something which already costs too much, let's not pretend that the VAT (which is effectively already built into the price, since they're 1:1 with paper books which DO pay VAT) has anything to do with it.
The article mentions that paper books in the UK are VAT exempt?
The costs associated with creating and distributing a physical book are probably a smaller % of the price than you assume. This piece http://www.theguardian.com/books/booksblog/2011/aug/04/price... gives a figure of $3.50 for a hardcover which, as I recall, is similar to other breakdowns that I've seen.
So what people are using here is a colloquial sense of the word free. When you walk into the doctor's office to have something checked out, you don't run the risk of having a large bill just for the privilege of seeing a doctor. If you get hospitalized, you don't run the risk of being bankrupted just because your job is too shitty to provide you with health insurance. Free in the sense of not a huge amount out of pocket at time of service and not going to financially cripple you to make extensive use of.