Changes to VAT rules in Europe

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Changes to VAT rules in Europe

Postby daveg » Thu Jan 15, 2015 7:46 pm

Since the 1st of January, changes in EU law affects the way Value-Added Tax (VAT) is applied on “electronic services” purchased by residents of European Union states (residents of European states outside the EU will not be subject to VAT).

For business to business sales, nothing will change. VAT is not charged if you provide a valid VAT number from one of the 28 member states.

The new changes mean that VAT will be applied at the rate of the purchaser's country, no longer at the rate of the merchant's country (Ireland).

For example, France has a VAT rate of 20%, Spain has a VAT rate of 21%, and Ireland has a rate of 23%. Customers based in France who want to buy a €10 service from us will be charged €12 (€10 + 20% France VAT). Customers based in Spain would be charged €12.10 (€10 + 21% Spain VAT).

Note that this measure only affects "Telecommunications, broadcasting & other online services", as defined by the VAT Directive. Therefore, actual physical goods sold via "distance selling" (clothing, etc) over the Internet are not affected by this change.

For more information on the different VAT rates in Europe, see this PDF
Dave Geoghegan
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