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There's been a lot of discussion and concern recently about the VAT changes coming into effect in the EU in January 2015. Here are my thoughts on it - personal and subjective as they may be!

[I have a more objective professional approach at my Quids & Quills accountancy-for-authors website.]

Brace yourselves :).


Basically, anyone selling ebooks DIRECTLY* into the European Union will now have to register and account for VAT.

Previously, it depended on where you were based. US-based authors and publishers weren't subject to VAT.

UK and EU-based authors and publishers had to sell over £81k a year before they had to worry about VAT (I wish *g*).

But now it's all to do with the CUSTOMER's country, not the seller's. So worldwide sales start to hit the VAT radar.
What's more, every EU country has a different rate of VAT, so the net price will be different in every case.
(see notes on how Amazon's going to deal with that below).

*DIRECTLY means NOT through Amazon / Barnes & Noble / All Romance Ebooks / other online distributors. In those cases, the distributor will have to do all the VAT reporting. But it will affect your royalties from these places.

I've put out a brief summary of what the new legislation means HERE on Quids & Quills.

There is a LOT of lobbying going on, asking for help and relaxation of the strict system for small businesses, so things may change.

But at the moment, it all kicks in on January 01 2015.


It's a two-edged thing for me - as an author, and also as a self-publisher.

As a self-publisher, I only use the online distributors like Amazon, so they'll handle the legal requirements (one hopes).
If you use Kindle Direct Publishing they'll have written to you to explain how they're going to fiddle with the book prices to allow for all the different rates.
Essentially, from 01 Jan, if you specify a price of $2.99 (for example), you'll probably get less royalties from it in future.
How? They use the $2.99 as if it included VAT. So they'll take off the VAT - at whatever rate according to the customer's country - and then calculate their 35/70% royalty to you. It'll be a different amount for every country's sales, and inevitably more than the 3% on ebooks we currently suffer from Luxembourg's tax rates, where Amazon are based.
It's a bummer. but I don't actually see any other way of handling it, except to keep the $2.99 before VAT. And then of course, Amazon will charge VAT on top of it, and the customer will have to pay more - or maybe not buy at all.

As an author, I'm asking all my publishers whether they're geared up for it, though it's their responsibility.
But if they don't want to handle it, they may pull out of direct website sales completely and just rely on the distributors. Hopefully it wouldn't mean too many lost sales.
If they *do* stay with website sales, the prices may have to go up, or an inclusive price may have to cope with higher VAT rates like Amazon's strategy. And therefore lower royalties to me.


This is not any publisher's fault, or even the distributors - although the legislation has been brought in mainly to ensure the big distributors (and we know who that is) pay a fairer dollop of tax overall.

But it could be a real burden for small businesses who only make a small number of overseas sales, yet have to keep extra records and pay over part of their profits in sales tax. The concern at the moment is its impact on digital sales overall.

Will keep you posted!!



( 7 comments — Leave a comment )
Dec. 22nd, 2014 10:11 pm (UTC)
I hope my brain only hurts because I've put in a 14.5 hour day at work. Does the VAT threshold not apply in this? Or is it different from country to country and they go with the lowest?
Dec. 22nd, 2014 10:33 pm (UTC)
This is separate from the VAT threshold that UK businesses are used to. It hits as soon as a digital sale is made. Yes, totally unfair! and that's one of the things lobbyists are trying to get sorted. But a large part of the issue is getting a level that all the EU countries will agree to. Madness.
Dec. 22nd, 2014 11:18 pm (UTC)
And 14.5 hours?!! They're working you too hard!! *hugs*
Dec. 22nd, 2014 10:21 pm (UTC)
It looks like there is no threshold for US sales to the EU, is that how you read it? Like if I sell a single ebook I have to register and pay VAT on it?
Dec. 22nd, 2014 10:31 pm (UTC)
Hell yes, no threshold at the moment. I stupidly hadn't thought of JCP Books. Talk to me later offline as your trusty accounts consultant :( :)
Rj Scott
Dec. 23rd, 2014 12:00 pm (UTC)
Thank you for this... will share... :)

(Deleted comment)
Dec. 24th, 2014 02:30 pm (UTC)
Thanks Liam. I'll be posting any updates both here and on my Quids & Quills Facebook page https://www.facebook.com/quidsandquills.
( 7 comments — Leave a comment )

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