Saturday, 31 May 2014

I don’t think the EU knows how the internet works

From January 2015, small software developers have a new administrative hassle to worry about: EU VAT

HMRC has issued guidance on the new VAT place of supply rules for digital services, coming into effect on 1 January (2015):

If you’re VAT registered, and selling software B2C in the EU, you now have to account for VAT to the country where each individual belongs.  Have a read of section 1.5 of the above link, and see just how much fun this is going to be.

If you only get paid through an app store, you’re probably OK, as the app store will take the hit, but if like us you collect payments directly via PayPal, it’s going to become very difficult, unless we’re allowed to assume that the PayPal registered address is in fact the one that applies to the customer.  In that case, we can set a different rate of VAT for each country.

However, we still have to pay the VAT to each and every country it’s due to, instead of to a central EU body.  As a result, this will increase costs enormously selling outside of our home countries.  My prediction is that this will lead to a reduction in the amount of independent software available, as the overhead of filing in each country is not generally worth the returns from the sales to those countries.

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