Digital EU VAT & UK VAT

On the 1st Jan 2015, the European Union introduced the digital EU VAT law. This law requires all sales of digital items (such as ebooks) in the EU to pay VAT based on the location of the customer. Learn more here.

This is intended to close tax-loopholes for large multinational corporations such as Amazon, Google, Apple etc but has major implications for small-to-medium companies and individuals. In order to remove all of the administrative burden from our sellers we will take care of all EU VAT issues for your customers based in the European Union.

The UK has left the EU but they have a similar law that also requires VAT be charged on digital products if your customer is based in the UK - regardless of where the seller is from.

Settings

Visit your settings page and then click on the “Taxes” tab. If you scroll down you'll see a number of options.

• By default, we automatically handle digital UK & EU VAT for you. If you'd rather handle the process yourself you can uncheck the first two checkboxes.
• Choosing to include taxes within the product price means your customers won't see a difference in the price they need to pay. However it means your profits will be impacted to account for sales tax - instead of being passed on to customers.

Adding digital UK & EU VAT on top of price

If your product is priced at $10 and your customer is based in France (standard VAT rate of 20%), then the following will happen:

Your customer will be charged: $10 + (0.20 × $10) = $12

We will charge 5% and will collect the EU VAT amount: (0.05 × $10) + (0.20 × $10) = $2.50

You will receive the remaining amount: $12 – $2.50 = $9.50 (Note: PayPal will deduct it’s fees as well)

Including digital UK & EU VAT in price

If your product is priced at $10 and your customer is based in France (standard VAT rate of 20%), then the following will happen:

Your customer will be charged: $10

Price before VAT applied: $10 ÷ 1.20 = $8.33

We will charge 5% and will collect the EU VAT amount: (0.05 × $8.33) + ($10 – $8.33) = $2.09

You will receive the remaining amount: $10 – $2.09 = $7.91 (Note: PayPal will deduct its fees as well)

Buying Process

If we detect that a customer is based in the EU or UK, once the customer clicks the “Buy Now” button they will see the following:

Key note