VAT rise on ebooks

FROM 1 JANUARY, anyone who sells an ebook to a customer in another EU country will have to charge the Value Added Tax rate applied in the country of the consumer who bought the ebook. This is the result of a 2008 European Commission ruling covering a range of "digital services".

This means that Amazon, based for tax purposes in EU member state and tax haven the Grand Duchy of Luxembourg, will no longer be able to benefit from that principality's 3 per cent VAT rate. The consumer will now have to pay the rate tax of their own member state when buying an ebook. A reader in the UK buying an ebook from any EU country will have to pay VAT at 20 per cent (unless the regulations are more messy than we suspect).

Prices for ebooks will as a result probably rise, although how swiftly and who will end up taking the hit for the VAT rise - the consumer? Amazon? The publisher? - remains uncertain. The Freelance understands that some individual NUJ members who have ebooks for sale via Amazon have been able to put their prices up to reflect this VAT increase. It remains unclear what will happen next.

The Bookseller reported that so far, there's no sign of Amazon going to the publishers to "ask" them to take a hit and offer their books at an even bigger discount to cover the costs to Amazon of the VAT increase. The Freelance is monitoring developments.

Other ebook selling platforms such as Kobo and Nook are also affected by the sales tax rise from 3 to 20 per cent, as they are also headquartered in Luxembourg. While ebooks are taxable "digital services", printed books sold to consumers in the UK continue to attract VAT at zero per cent.

For guidance from Her Majesty's Revenue and Customs on how to register to fill in one return every three months, covering sales to all EU countries, see - which is a fairly clear exposition of a bizarre set of rules.

You do not have to register for, and charge VAT on, sales to the UK unless you turn over more than a threshold amount - currently £81,000 a year. (If you do register, you can claim back VAT you pay on supplies used in your business.)

There is no threshold for the new rules. If you sell one ebook to another EU country, you must register. HMRC says that when you register under the new rules, you can declare that you are not registering for UK VAT - and you can still claim back VAT on the part of your UK purchases that relate to sales elsewhere in the EU even though you're registered as unregistered!

Last modified: 03 Jan 2015 - © 2014 contributors
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