VATMOSS – Price rises expected

You are probably aware of the recent VAT changes on sales of digital goods, due to take effect on the 1st January 2015. It is with great regret that in light of these changes, EU customers will effectively be subject to a price increase as of January 2015.

What are the new EU VAT changes?

Currently, when calculating VAT on sale, it is the country of the trader not the consumer that is used. For my customers, this is very good news. Under the existing regulations I am not compelled to pay VAT on any sales – a saving which is passed onto you.

Under the new regulations – which only apply to those providing digital services and goods – VAT shall be calculated according to the country of consumption.

To avoid businesses having to submit up to 28 VAT returns four times a year, the EU has set up the VAT Mini One Stop Shop (VATMOSS) service by which the trader would only deal with one EU state. This however, requires the trader to be registered for VAT and so apply VAT to domestic sales as well.

How are you, the customer, affected?

The options for myself are:

  1. Cease trading to the EU (though continue in UK)
  2. Apply VAT on all EU (including UK) sales

Over the last 18 months, “EU but not UK” sales have comprised nearly 30% of all sales. I’ve also noticed from support and other communication that there are a few countries in particular where Event Organiser enjoys a substantial fan-base (notably Germany and the Netherlands). The non-UK EU market is not one I can afford – nor would ever want to – turn my back on.

So, unfortunately as a result of these new EU regulations, VAT shall be added on to all sales to EU customers.

Prices are – in one sense – staying the same, but all advertised prices shall be subject to VAT. As of 1st January 2015 the checkout price you shall pay for any of my products will depend on the VAT rate of your country of residence.

Perversely, the EU whose very raison d’etre is the freedom of capital is introducing changes that mean EU customers shall be worse off than their non-EU counterparts. For instance Event Organiser Pro (Developer license) is currently £120. For a US customer, this shall remain the same, but with the current VAT rates a German customer shall have to pay £143, and a Swedish customer £150.

Furthermore you can expect checkouts in general to become slightly more convoluted as I shall be required by law to obtain (and retain for 10 years) two pieces of non-contradictory evidence ascertaining the country of the consumer. This shall be:

  • An address – supplied by the customer.
  • An IP address – which is automatically taken, and requires no action on the part of the customer.

Which customers are not affected?

Non-EU customers, and VAT registered customers.

How can you avoid the price rise?

If you are not VAT registered, and will be subject to VAT the only thing you can do is purchase before the 31st December 2014. Unfortunately any renewals after that will subject to the new VAT regulations.

Incidentally if your license key is due for renewal within the next 2 months you should renew now before the VAT changes take effect. Your key shall be renewed for one calendar year from the date it was originally set to expire.