Wednesday, October 22, 2014

New EU VAT regulations

Yes, the EU is at is again. Apparently they have been at it since 2008. So why are we only finding out about it now?

EU VAT rules are changing. From January 1st 2015, VAT payable on digital items will no longer be dependant on the sellers location, it will be dependant on the buyers location and payable to the buyers government. To add insult to injury, cross border thresholds are a big fat ZERO.

By now, many of you will have your eyes glazed over and you have no idea what I am talking about. Let me explain the situation from my point of view.

I sell digital crochet patterns via a number of internet platforms such as Etsy, Craftsy and DaWanda. Most of my digital sales go through my website. As I am based in the UK and I am well below the VAT registration threshold, all of my patterns are VAT free. I can continue to sell like this to the UK and non-EU countries.

However, from January 1st 2015, if I sell just one digital pattern to any one of the other 27 EU countries, I will have to register for VAT with that country and and pay VAT on that single pattern to that countries government.

My alternative would be to register for VAT in the UK and fill in a single form that would cover the whole of the EU. The downside to that is that less than 7% of my sales are cross border EU digital sales and I would have to charge VAT on the other 93% of my sales as well.

The silliest thing about all of this is that Distance Selling EU VAT thresholds, which are set by each country, are totally different. The lowest one, when converted to GBP, is just over £22,000.

This means that I can print off a pattern or put it on a cd and post it, then I would come under the Distance selling regs. Sending by email or using an instant download system, means I come under the ESS regs.

Makes you wonder whether the people who set up these regs have anything between their ears!