New EU VAT rules change the game for digital businesses

Figure fleeing giant rolling coin

This post has been getting occasional edits, especially resource links added at the end, but this is a continuously-evolving field. If you’re affected, use the links to read further.

A few days ago a chance Facebook post by a friend asked if anyone knew about the new EU rules for VAT on sales of digital products. I hadn’t heard anything about it, so I checked it out. What I found was extremely alarming.

The new rules come into force in a few weeks’ time. They change the landscape of online selling in a big way, to the detriment of independent content creators. And very few people know about them.

From the materials I found, it was difficult to get a clear picture of how it works and what it means for me. This post sets out my current understanding, with the aim of giving others a clearer introduction.

(Please do not rely on it as advice for making important decisions. I’m not responsible for any consequences of acting on it.)

The short version

From 1 January 2015 new rules on VAT (value added tax) come into force across the European Union (EU). These will affect you if:

  • you sell ‘digital services’ – explored in a minute, but yes, it does include ebooks, PDF products, training materials, software and music files
  • you sell business to consumer (B2C) to EU citizens, wherever you are based (B2B, business to business selling, is not covered by these rules).

The essence of the change is that the ‘place of supply’ for VAT purposes will now be the location of the purchaser, not the location of the seller. Sellers will have to add VAT to the purchase price at the rate for the customer’s country, and ensure that the appropriate payment goes to that country.

Due to the effects of harmonising countries’ rules and the way the admin will work, if you fall under the new rules you will have to register for VAT. All your digital sales will be liable for VAT, and once you’ve registered you’ll have to account for it on all your other activities too.

The UK situation

Here in the UK we aren’t normally required to register for VAT until annual turnover reaches a threshold, currently £81,000. VAT registration means extra administration: information collected on every transaction, and quarterly returns submitted to a set deadline. Many microbusinesses prefer to avoid it.

If, somehow, you can filter out non-UK purchasers, I think you can continue as you are now. But that is tricky, and takes away one of the main benefits of selling online in the first place.

What is a ‘digital service’?

These new rules cover (only) three types of activity: broadcasting services, telecommunication services and ‘electronic services’ (or e-services).

E-services are the bits most of us will be interested in. There seem to be two criteria:

  • delivered over the internet or other electronic network
  • delivered through automation that relies on IT, with minimal human involvement.

So if you charge people for a live webinar, that’s not counted because it involves personal input. But if you put a recording of that webinar on sale in a web store on your site, it is counted.

Among specific exclusions are any physical goods (though they want to do something similar there soon); email and similar communications as part of carrying out work; online booking of event tickets and services like accommodation, restaurants or car hire. (If it’s a tangible thing you’re booking online it’s taxed in the country the event takes place.) Software delivered online and some ISP services are included.

Oh, by the way, ebooks are classed as services, not products. We have the situation, here in the UK at least, where physical books are zero rated for VAT but electronic versions of the same books are not. It’ll be interesting to see whether that lasts.

What would I have to do?

You can register for VAT with each EU member state separately. That might make sense if, somehow, your trade is restricted to one or two countries. But for most people it’s an unappealing prospect.

You’d probably want to register with your country’s MOSS (Mini One Stop Shop, a rather rubbish acronym). You submit returns and payments to the MOSS, and it takes care of sending everything to the appropriate countries.

You have to charge VAT at the appropriate rate for each purchaser, keep records of that and the VAT element of goods and services you buy, and submit returns within a few days (20 for the UK MOSS) from the end of each calendar quarter. If you’ve gained more VAT than you’ve paid, you send a payment; if the reverse, you claim a repayment.

Data gathering

You can show that a customer counts as a business if you have a VAT number for them. If you don’t, you have a certain amount of leeway to treat them as a business, but I’ve just read the EU guidance quickly and I couldn’t tell you how this works.

I would want clarification of whether sole traders (the UK terminology) are counted as businesses here, and whether I’d need to collect some info to prove it. (We don’t have business registration numbers for sole traders – I believe the comparable US thing is more formalised.) HMRC guidance warns that member states may take different views of what counts as evidence – if they disagree with you, you’ll become liable for the VAT. The new regime makes VAT numbers a step more important for online business.

You also need to establish a customer location for each transaction. The guidance has some complicated provisions for specific circumstances, and some language about what you ‘could have known and should have known’ – if that is pinned down I didn’t see it. In most cases, especially for e-services, you’ll need to get two pieces of ‘non-contradictory evidence’ – eg billing address, IP address, bank details.

I wonder whether suppliers will be faced with situations where the checkout data gathered by their software contradicts, and they have to contact the customer for a conversation about their location. I can imagine customers feeling as if they’re suspected of doing something wrong. But the guidance does give the seller freedom to interpret the data reasonably, as long as they’re not found to be abusing the system.

You can see there’s a substantial obligation to gather data that you don’t think about if you’re using a simple ecommerce solution. I think it needs an ecommerce provider who warrants that their software will get the right info and output it for you in a nice spreadsheet.

Oh, and you have to store this data for 10 years. I think I saw that this is because it’s the requirement in Portugal, and there’s some hope of reducing it later.

Why is this happening?

Fundamentally, governments see the digital economy going on and feel they’re not getting their piece of the pie.

It’s also about the increasing public dissatisfaction with the way large digital companies like Amazon and Google operate tax-wise.

Amazon is the most obvious example. VAT rates vary across the EU, I think from 15% to 27%, and Luxembourg has a special rate for ebooks of 3%. So Amazon based its European operation in Luxembourg, so it adds 3% VAT to ebook sales and other countries where ebooks are purchased get nothing. Points to Luxembourg for grabbing that opportunity while it lasted.

There’s an inevitable process of regulation, taxation, etc being applied to online activity. Countries have been slow to respond to this new and strange territory, but it has to shake out sooner or later. The question is how well it’s done, and whether it’s done in a way that actually fits today’s world.

Problems and punishments

Different member states have different time limits for submitting quarterly VAT returns and making payments. You have to ensure you meet the most stringent deadline of the countries where you’ve sold stuff.

Even if you submit returns through the MOSS hub, if something goes wrong or there’s an underpayment or overpayment, you’ll have to deal direct with the country in question to sort it out. That means dealing in their currency (not all use the euro), which your financial set-up might not be able to do, and could involve language difficulties.

If you don’t comply with your VAT obligations you can be fined, under the law of the member state whose rules you have broken. In some countries that’s an amount proportional to the VAT due. In other countries it’s a fixed payment, with upper limits of tens of thousands of Euros or even more.

Here’s a scary article by Taxamo about penalties for non-compliance.

The thing that leaps out at me about all this – being a very small and vulnerable operation – is that you open yourself up to a lot of bad stuff if something goes wrong. And we know that things do go wrong. You have to understand what you need to do, remember to do it at the right time, and carry it out properly. What if life intervenes, like you get ill at just the wrong time? What if, through no fault of yours, the official systems have a glitch, or you can’t get help when you need it?

Sellers outside the EU

These rules affect anybody in the world who sells direct to consumers in the EU. The EU guidelines page says it in black and white.

If you have a nexus/HQ in the EU, you’re expected to register there. If not, you can register with a MOSS in a country of your choice. I’d guess common language and existing connections would guide this, so US folks will tend to look at the UK.

This article at Taxamo may help: US digital companies and their EU VAT challenge.

I wonder whether this could give rise to a situation where a supplier pays two lots of sales tax, if their home country or state charges one where the service is originated.

Self-publishing authors

If you publish through a platform like Amazon’s Kindle store, your relationship with it is probably business to business, making it responsible for the relationship with consumers and therefore the VAT. Make enquiries of any platforms you depend on. (And be aware that the pricing of your book will vary for different customers.)

I fired off a message to Kindle support, asking if they were going to take care of the VAT. The response was that they weren’t aware of this issue, and could I send more information. Taken at face value that’s rather alarming. Have they been preparing for the change? But given Amazon’s central position in the VAT issue, it’s hard to believe the company is unaware of any aspect of it. More likely, it just hasn’t filtered through to the support staff. Or, possibly, the company is saying as little as possible while it works on things behind the scenes.

If you’re selling work through your own site instead or as well, then you may be caught by these rules and should consider what action to take.

Edit 21/11/14. Heard from Amazon Kindle publishing support last night that it is aware of the changes and will provide detailed information to Kindle publishers in the coming weeks. Hopefully not too many weeks…

Edit 3/12/14. In the last couple of days people have reported letters from Amazon confirming that it will be taking care of the VAT for Kindle ebooks. It is going to change the way pricing is set – I think you set a VAT-inclusive price for purchasers in a store’s home country (eg 20% on Amazon UK), and purchasers from elsewhere will get a price adjusted for their home VAT rate.


On a Facebook comment someone said they’d heard that the people drafting these rules had assumed that everyone would be selling through online platforms that would handle the VAT for them; not that there would be lots of small businesses registering for VAT. That sounds very plausible.

Certainly, as I read up on this, there was a growing sense that it was drafted by people who didn’t really understand the internet in general and small-scale online business in particular. And of course that fits the profile for politicians and bureaucrats. (If you’re a small business you tend to find the only people who are really on your side are other small businesses.)

Someone with a cynical conspiracy theorist viewpoint could easily claim that this is an attempt to shut down emerging models of business that empower individuals rather than plugging them into established patterns of toil. I think you can explain it as lawmakers with worldviews that take no account of small businesses and independent content producers, but the effect will be the same.

A particular problem is that they seem to assume access to web pages is compartmentalised, whereas one of the main points of online selling is that it is not. If I put up a web page selling a digital product, anyone who finds it, is able to read it, and has a suitable payment method can buy and download that product. The internet connects you to a global audience interested in your kind of material, which enables people in niches to succeed.

The sales page is not only available to people from certain countries. Neither does it distinguish between businesses and individuals. Perhaps we’re going to have to use a plugin or something that does control access. Although if it makes a mistake – and how could you guarantee 100% accuracy? – and we run afoul of the VAT regulations as a result, we could suddenly be liable for interventions and fines from some zealous EU state.

Will they be zealous in looking for non-compliant small fry to chase? Who knows. But it is a source of income for them in cash-strapped times. It seems likely that states will set up small teams to chase this, and they may not always be sympathetic to foreigners.

The more I dug into this, the more a scary mess emerged that, as a small content creator, I really want to avoid getting involved in. At the moment my plan is to take products down from my site so that I do not fall under these regulations. That’s an easy decision at the moment because I haven’t managed to get sales going. What about someone who feels the same way and has an established income stream there? This might shut down their business.

It doesn’t help that with, what, six weeks before these rules kick in (including the Christmas period), very few people have any idea that it’s happening. I think that HMRC should have mailed everyone registered as self-employed for income tax. I wondered if they had and I’d overlooked it, but I’m sure there would have been conversation among people I’m connected to.

The big-picture conclusion might be that VAT is a stupid tax that isn’t fit for the emerging modern world. I think I’ve seen commentary that it is a regressive tax because it penalises everyone, as opposed to income tax which takes account of ability to pay.

It’s certainly an illustration that the bittiness of the EU doesn’t always work well.

What do I do now?

I guess there are three paths, and the one you choose depends on how invested you are in the way you’re doing things now (and how you feel about financial administration).

Do nothing and brazen it out. I wouldn’t. Remember that you’re dealing with people who think what they do is Important and everyone is obliged to know about it, even if they were never actually told. Also, note that this gives the state apparatus of 28 countries licence to take an interest in your activities. That’s a lot of different ideas and cultures about how government is conducted, and a lot of different personal attitudes toward your country. You can’t make assumptions about how they will approach this.

Get into the system. Register for VAT. I would guess only a few people in special situations will want to deal with member states separately, so most will want to hook up with the MOSS in the appropriate country. Get admin systems in place. Find out what info your shopping system needs to collect and make necessary changes.

Steer clear of the system. Stop doing things that will make you liable, and wait to see what happens. As the effects of the new rules become clear, they may be changed to give more palatable options. You could regard this as a short-term damage limitation exercise. Or perhaps you can hook up with services that take care of the VAT for you and let you carry on with modest adjustments.

Platforms are coming back in

I’m guessing that these changes are going to put a stop to people setting up their own sales pages with a simple payment button. We’re going to be looking for platforms/storefronts/marketplaces that will let us sell materials to our audience and reassure us that we’re on the right side of the VAT rules.

If you sell through a platform there is a question of whether you are making the supply to the platform or the customer. It looks like if the platform takes care of all the details of payment and delivery and puts its name on the invoice, it will be counted as making the supply to the customer.

I don’t have experience of platforms that cover training materials for heart-centred entrepreneurs and personal growth, but the new rules make this more of a niche so it’s likely something will spring up.

Ironic link – I’ve just seen someone suggest I don’t know it but it looks good and is the only platform I’ve seen explicitly mentioning EU VAT so far. If you know any others please leave a comment.

Playing with options

I expect people will try different combinations of things to work around the rules. That’s one reason why we need to get really clear info about how digital services are defined.

For instance, if I have a PDF training product I’m selling, I might shift to charging for a live webinar on the topic and giving the PDF free to people who register. A trainer might use pre-recorded videos and interact with people on a Facebook group. Would these be accepted as legitimate, or penalised as evasion?

The EU guidance refers to a bundle consisting of more than one element. It must be decided whether it counts as a single supply or several distinct supplies, and that’ll have to be on a case by case basis (ie we need to build up precedent).

I guess there will be a period of settling down, with various uses becoming clearer.


I hope that has helped. When I heard about this a few days ago I felt ambushed. Then I tried to find out more and felt frustrated at the difficulty of understanding what it might mean for me and people I know.

You probably feel ambushed too. I hope this post has at least made it easier to understand what’s going on.

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Useful links

(Sept 2015) For the latest updates, check out the EUVATAction site. It’s run by owners of small businesses who have been doing amazing work lobbying the UK government and the EU. The current position from the authorities is that there will probably be changes (a positive shift) but they’ll take years to come through. The campaign says small businesses need help right now.

The rest of these links are about understanding the scheme as it came into force, and people’s commentary as they found out about it in late 2014.

Guide by HMRC (the UK tax authority) – VAT: Supplying digital services and the VAT Mini One Stop Shop.  This is a decently readable introduction, though it’s not great at explaining what e-services are.

EU guidance page – contents may hurt your head

Rachel Andrews – The horrible implications of the EU VAT place of supply change. First piece I found by someone who’ll be affected starting a discussion, good intro.

Everyday Designer – Sole traders, digital products and EU VAT reform. Useful post about the changes, which also makes the point that online sole traders are so free and independent that it’s difficult for authorities to disseminate info even if they want to.

A Handcrafted Business – VAT rules for digital goods are changing. Short piece about the changes, with a couple of handy short videos.

Taxamo – Five digital EU VAT myths busted – people are running away with some wrong ideas, and this short post reins some of them in.

EU VAT Changes 2015 – What You Can Do by Rosie Slosek at One Man Band Accounting. Points out the nigh-impossibility of complying with the vaguely defined rules, and gives practical suggestions for small businesses.

How #VATMOSS is the end of small enterprise in Britain – and how we can change it – by Heather Burns at Idea15 Web Design. A bleak assessment from someone with a background in internet law and policy. Draws out the implications and impracticalities, including pointing out that the record-keeping would require registration for storage of personal data.

They didn’t know – the impact of #VATMOSS on really small businesses – by Ysolda Teague. Reporting on a face-to-face seminar with HMRC, the UK tax authority. She found that they simply didn’t know about the numbers of small businesses selling online, or the breadth of material distributed this way. I find that especially ironic as HMRC has the best database of self-employment in the country.

HMRC write-up of a Twitter Q&A on 27/11/14. May be useful clarification, but suffers from the character limit on tweets. Annex at end says more about ‘no or minimal intervention’, though some of this appeared to be contradicted in a later webinar.

Taxamo organised a webinar with Andrew Webb from HMRC and Esteban Van Goor from Baker & McKenzie on 2/12/14. Questions had been gathered through the Digital VAT 2015 Facebook group. Video replay here (long). Clare Josa has done a heroic write-up, which is probably a more effective place to start. It’s still maddeningly unclear, but inching in the right direction.

Some of the small business folks had a face-to-face meeting with senior HMRC people and a government minister on 4/12/14. Enterprise Nation post about that.

There was a follow-up meeting 10/12/14 – here’s another Enterprise Nation post. New guidance is about to be released by HMRC. If you read the comments you’ll see a lot of anger that nothing new is being promised, and that government reps still do not understand the effects it will have on microbiz. To me it reads like a promise to explain the basics of what is covered and how the system will work, which should have been done routinely months ago.

HMRC issued new guidance on 10/12/14. General consensus: it’s good to have more guidance, but it’s still piecemeal and confusing. It talks about what e-services are (and in my opinion makes the EU definition more convoluted). It also says more about the fudge, alluded to for a while by HMRC people, of recording UK and EU sales separately and submitting nil returns for UK activity if your turnover is below the normal registration threshold.

On Twitter it took a while for hashtags to get going (I found posts through a search for ‘eu digital vat’), but now discussion has now taken off under #VATMOSS and, Twitter users being a witty lot, #VATMESS. Lots of questions and knowledge being shared there. One good side of all this is witnessing a community of mutual support forming in a way that wouldn’t have been possible a few years ago. Yay internetz!


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42 Responses to “New EU VAT rules change the game for digital businesses”

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  1. Pam West says:

    I dont know what you are selling. I sell digital downloads for cardmakers and designer resorces.
    I was selling direct. I sell on as well they take care of the VAT so I will only be selling on there now

    • Tim Gray says:

      Hi Pam. I have an ebook and a couple of PDF courses/workbooks on my site, which I’ve been trying to market. Those will have to come down by the end of December, and maybe shift to a sales platform elsewhere.

      I’m glad you have a platform already. Do be sure they’re handling that VAT!

  2. Thanks Tim – and basically, I was winding down my direct course sales – I was ramping up direct ebook sales, but i will be taking that all down for January and aiming to sell on platforms that will deal with this for me. Basically Amazon, Kobo, Smashwords etc will need to deal with that headache and there’s no VAT on royalties.
    I presume if we sell video on Udemy, they deal with the VAT and we just get the income – my accountant is not entirely clued up, that’s for sure – I think this will bite a lot of people – hopefully it will resolve – but as of right now, I am not going to register for VAT. I may change my mind, but with the info right now – that’s the plan – let’s stay in touch about it!
    Thanks, Joanna

    • Tim Gray says:

      Hi Joanna. I’m going to follow a similar path – take products off my own site and look for other homes for it on larger platforms. I suspect most people will do that.

      My business has barely got started, and it makes no sense to allow VAT admin into my headspace if I don’t need to. Much better to use my time and energy to create things and build a community.

      I suspect the situation will change, at least a little, if the wave of outrage continues to build as I’ve seen it doing the last few days.

      • The outrage is indeed growing – so I would say that my direct sales will be on hiatus until things are a little clearer. Thanks for reporting on this – I’m spreading your post amongst others on the interwebz

      • geoff says:

        Hey Tim, thanks for the time and effort you’ve put into this post. Like everyone else I am amazed at the assumption by the EU that everyone sells using big platforms like Amazon. Your post has been a really valuable source of info for me. I work for the ecommerce platform Selz, and we’re working on plans to help with the reporting and the inclusive / exclusive pricing and want to make it as painless as possible. Posts like this have been fantastic with helping us keep up to date with changes and people’s opinions. A lot of digital sellers have expressed their worry about registering for VAT MOSS and the implications for VAT registrations. Hopefully some clarification comes out of the recent meetings, and people get more details on this aspect. If common sense prevails, you could use VAT MOSS with the 81k exemption still being in place for your business. Let’s hope more details are provided by UK Gov and EU next week. Thanks again, Geoff

  3. Hi Tim – fantastic article!

    You sum up pretty much how most people felt when they found out – only in the last week or so. I ‘happened’ to find out from one of my sellers. This is one of the main annoyances (along with hte ‘no threshold’ thing)…that we find out like this, now?!

    When retweeting about why this wasn’t being more widely known, a VAT specialist replied that all the ‘firms’ have been talking about it and in the public domain for years so we should have therefore been aware “er because you are running a business”…and it does seem that quite a few people were alerted *if* they were already registered for VAT, and some tried to alert others months ago. Only now though do we see the true extent of who still doesn’t know – even KPMG found that most SMEs were unaware in November.

    So yeah, I felt silly for not knowing, not keeping up despite working online for many years, dealing with many, many digital suppliers who would/should have known, but like you say “I’m sure there would have been conversation among people I’m connected to.” For such a huge issue, I can’t believe I’ve missed all that info supposedly going on while being on LinkedIn, Google+, dealing with other business owners, doing tax returns and saying I sell ‘Digital Craft Supplies’…nothing far as I can tell. Some people ‘heard’ but presumed it wouldn’t affect them as they were under the threshold for VAT, and EU colleagues who heard didn’t realise the full implications. So when I hear things like ‘despite’ the attempts by HMRC to notify and educate…it grates, as it does when VAT professionals look down their noses with ‘it’s your own fault’ attitudes, because as you also say the only people on our side, feeling our sense of unfairness, are other small businesses.

    • RGerhart says:

      In general, I had been aware of the plans for the change for years. But those changes were promoted as going against great businesses avoiding tax in Europe and that the details about how that should be reached had not been decided yet.
      So I was totally astonished, when about two or three month ago, I read in a legal newsletter about the changes becoming effective on January 2015 and discovering that I could in no way comply with them, however hard I tried to adjust my own shopping software to the new regulations.
      So the result for me is, that one platform I completely have to close down and I will no longer offer direct e-book downloads of my publications on my publishing website.
      The error of the authorities made in publicising the news about these changes was, that they did not recognise who will be affected by those changes and that the changes don’t only affect large online distributors, but small authors, musicians, event providers, trainers, etc.
      Except for the now two legal newsletters which mentioned the changes here in my country, my own publishing branch has not even mentioned the changes yet or recognised that adjustments will be necessary. So the information certainly has not reached all who will be affected by it, yet.
      When I had looked to apply for the MOSS a bit over a month ago on the official websites, they did not even have the formalities and online forms ready, but were still working on them. So even for the tax authorities, the whole change is a last minute thing.

  4. Andy Brice says:

    There are a number of ‘platforms’ that can handle the VAT for you. For software vendors the two that spring to mind are and If you make your sales through them they will handle all the VAT for you. You then just have 1 B2B transaction per month. However they will charge a bigger percentage then, or similar.

    • Tim Gray says:

      Thanks Andy. Yes, I mention platforms in the post. I think they will be the solution for many people, including me. Though at the moment many platforms are still working out whether and how they’re going to handle VAT. People in the craft field are saying theirs are refusing to get involved, leaving vendors responsible.

  5. Rosie Slosek says:

    Thank you for including my blog post, Tim.

    The main issue here isn’t VAT. It’s that any but the very biggest businesses cannot comply because it is not possible to do so. With unlimited penalties, a 10 year time limit, worldwide impact and no minimum of automated content and expected 100% uptime, it’s not possible to keep to the rules.

    That’s why the situation needs clarifying and fast.

    • Tim Gray says:

      Cheers Rosie. Re automated content and uptime, can you say a little more? It sounds like you might have read rules/guidance that I haven’t on what activities are included. (Something that’s been very thin on the ground.)

  6. Melissa says:

    I’m from Australia and whilst knowing nothing about international taxation, it looks to me like every small and micro business located in every country of the world outside of the EU will also be impacted.

    Here in Australia we already have GST to manage and submit to the Australian Government. If you are selling a digital product online (and not via a third party website, which a lot of microbusinesses don’t choose to do), then suddenly we (globally) cop an additional burden of administering VAT for the EU as well? You’ve got to be kidding me!

    Most micro businesses run on the smell of an oily rag. We barely have the resources to manage the taxation requirements of our country, let alone EU requirements as well. Some small businesses here will have to consider closing their online stores, or being forced to use third parties to sell their products (what happened to the notion of a free marketplace?) or selling to the rest of the world but somehow figuring out how to not sell to any customers in the EU.

    This is crazy. I understand clamping down on the big B2C companies like Amazon as they’ve had loopholes to minimise their tax until now, but the impacts go way further than that and stand to cripple small and micro business worldwide.

    • Tim Gray says:

      Hi Melissa. I don’t disagree… It’s becoming ever clearer that the people who drafted these rules simply weren’t aware of the numbers of businesses and breadth of activity covered. Would have been nice if they had caught up before enforcing new laws.

  7. Deborah Moebes says:

    I don’t see anything in your article that points out that VAT is only collected from sellers to the EU whose sales exceed 35,000 Euros minimum per year. For the majority of boutique online sellers, then, VAT is a non-issue, and even changing platforms is cost-prohibitive unless they anticipate a marked increase in sales.

    • Tim Gray says:

      Hi Deborah. It’s very clear in the discussions that for ‘digital services’ there are no minimum thresholds. On the page you linked, I think the new rules supersede the bit on other EU countries – services – selling to consumers.

  8. Thanks for the article Tim,

    I’m an Italian self-published author based in Vancouver, Canada. Today I got the “VAT related email” from KDP in my inbox but I’ve barely understood what was all about. Your article at least cleared some stuff but I’ll definitely need to look into it. These new set of rules seems to me a kind of scary tendency not aligned with our times. I wonder what a person like Seth Godin would think of all this.

    Thanks again!


  9. My non-UK book sales across the EU this year totaled £84 spread across 7 countries. Assuming that repeated itself next year – which, given my book’s content, would be optimistic – we would still be talking about perhaps €20 or €25 due in VAT across 7 countries.

    That’s it.

    All of that mess and hassle for €25? All that micromanagement of a microtrader’s microsales, for €25?

    Qui bene?

    • Tim Gray says:

      It wasn’t my idea! ;)

      And if it had been my idea, I’m a game designer and communication guy, so the rules would work and people would understand them. Bah!

  10. Great that you have dug out so much info Tim.
    Agree the nub of it is: “I would want clarification of whether sole traders (the UK terminology) are counted as businesses here, and whether I’d need to collect some info to prove it. (We don’t have business registration numbers for sole traders…)”
    I wonder if the info is not available because they don’t envisage chasing non registered businesses i.e. non registered for VAT or paying PAYE as a limited company? The costs involved for minimal potential returns would not make economic sense?
    For the registered rest of us, bundling an info product with a service element like a series of updates or tips would seem prudent, but keep an eye out for further tightening of the service definition.

  11. Ian Chester says:

    A week on from discovering this problem I have to deal with, and the big contradiction remains. Which country is the tax due in? (1) EC document states that it is the country where the service is “effectively used and enjoyed” – the only way to know that is ask the customer and believe them. (2) HMRC guidelines say it is where they “are established, have their permanent address or usually resides” – again, ask for an address, but it is pretty difficult to verify. (3) The guidelines then go into detail about identifying the current location of the customer – how is that relevant to either (1) or (2)?
    These options could conceivably be 3 different countries.
    It is incredible how something so fundamental to the principle of this tax can be so botched. In phone calls to HMRC I have been told, ask for an address, record the IP address, if they match – job done. Well that is what I will do, but it certainly isn’t what the words say!

    • Tim Gray says:

      Yes, this is one of the main sticking points on which people have been pushing HMRC. Data gathering doesn’t happen by the magic they think it does. And nobody has thought to make a practical guide of steps people can actually follow. The mud may settle over the next few weeks, but of course the deadline is looming.

  12. Tim Gray says:

    I’ve been updating the links section. If you haven’t been following this on social media, you may want to look at the recent stuff.

  13. @BobK99 says:

    Thanks for all this Tim. I’m just getting up to speed on all this, so any comment I made would be either totally naive or misguided. So that’s all for now :-)


  14. tanya marlow says:

    hi there – thanks so much for this – very useful. I came to your site via Joanna Penn. It is infuriating that, as you say, laws that are intended to curb big businesses are making it such a nightmare for the little guy. This was really helpful information as I consider releasing some e-books.

  15. Roy says:

    New EU VAT Rules, its not as bad as suggested.

    I have been speaking with HMRC about this and been told the following:

    If you are trading ‘electronic services’ (Includes e.books) to non business customers in EU countries you have to register for VAT in the UK, but if your sales are less than £81K you do not charge any VAT on your UK or EU sales.

    You do have to submit quarterly returns to HMRC and as you are not at the thresh hold they are ‘Nil’ returns on the on-line submission.

    Once you are over the thresh-hold you charge VAT on all your sales and submit you EU returns via MOSS, the HMRC them deal with the money transfer to the country you have sold into. You can alternatively use service providers like this one to do that for you information from HMRC Brief 46 on this is at:…/revenue-and-customs-brief-46-2014-vat-…

    So for most UK based businesses selling into other EU countries will not affect them apart from a quarterly VAT submission to HMRC. In one respect it will be good for most businesses as they will have to keep on top of their financial book keeping as you would be expected to give your quarterly sales.

    If you sell electronic services and want to grow your business then just go and do it!

    • Tim Gray says:

      Roy, it is true that HMRC has come up with this peculiar fudge ‘solution’. It’s good that they are making some efforts to help, at the eleventh hour. BUT don’t be fooled into thinking this makes the problems go away.

      You still have to manage to gather the appropriate location data, which is non-trivial (and store it for 10 years). You still have to identify and charge the appropriate VAT rate for the buyer’s country, from (I think) 75 rates in use across the EU. You still have to hope that no other member state finds fault with what you’re doing. (And that the UK rules don’t get changed on you in future.) And of course you still have to do the accounting admin.

      I think the best approach is to minimise risk based on what your situation is (eg if you already do VAT the whole thing will look different), and wait a while to see how it all shakes out. Awareness has only recently started growing in other EU countries, the US, etc – even among national tax authorities.

      (PS – rereading your post, you may have misunderstood something. You would make nil UK VAT returns if below the threshold, but you would be liable for EU VAT on -all- your EU digital sales.)

  16. noor says:

    It is infuriating that, as you say, laws that are intended to curb big businesses are making it such a nightmare for the little guy.


  1. […] the info, I’m going to direct you to this thorough and extremely important post by Tim Gray: “New EU VAT Rules Change the Game for Digital Businesses.” He’s assembled a bunch of links — you should read and bookmark all of […]

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  5. […] And so is this, by Tim Gray of Words That Change the World […]

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  9. […] off, I agree with Tim Gray that it’s clear they have been drafted by people who do not understand the internet in general, […]

  10. […] as well as using Smashwords for smaller markets. I was selling direct through until the EU VAT tax laws came in January 1, […]

  11. […] as well as using Smashwords for smaller markets. I was selling direct through selz.comuntil the EU VAT tax laws came in January 1, […]

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