- Most paper books are already subject to VAT (90%+).
- The margins on ebooks are already much higher than paper books (due to reduces production, distribution, storage, returns, and tax costs).
- The only reason ebooks cost as much as they do is due to lack of competition and the publishers wanting to continue to sell paper books.
So while publishers might try to exploit this opportunity to raise prices on something which already costs too much, let's not pretend that the VAT (which is effectively already built into the price, since they're 1:1 with paper books which DO pay VAT) has anything to do with it.
Part of the problem is that there is no uniform provision across the EU for VAT exemption for books. Some countries charge VAT on paper books, or on e-books, or on both.
> The margins on ebooks are already much higher than paper books (due to reduces production, distribution, storage, returns, and tax costs).
The costs associated with creating and distributing a physical book are probably a smaller % of the price than you assume. This piece http://www.theguardian.com/books/booksblog/2011/aug/04/price... gives a figure of $3.50 for a hardcover which, as I recall, is similar to other breakdowns that I've seen.
This is definitely a retrograde step, especially in countries such as the Republic of Ireland, where paper books are generally ascribed a 0% VAT rate. That doesn't protect us in regard to e-books however, as the specific legislative text refers to "printed matter", and defines some criteria that prevent e-books from taking advantage of this provision. There is also a clause in the relevant legislation that deals more specifically with "printed matter" that is purchased and downloaded via the internet, and states that it is "considered to be a service" and therefore liable to VAT at the standard rate.
I've written the usual letters to government ministers and to members of the European Parliament, but have been completely ignored in all cases, not unexpectedly. Unfortunately, I feel that this is going to be another measure pushed through the EP without any public consultation.
It's up to member states to pass laws that exempt e-books from VAT.
Frankly Amazon, Google and the like have taken the piss by using Luxembourg as a tax haven for too long. It's right that VAT is charged in the consumers country.
So legally minimizing a tax bill by selecting an optimum location and passing some of that advantage onto customers (one of the reasons Amazon is popular) is 'taking the piss'?
is the full VAT tax displayed on the bill for all items purchased? Not being a member of EU or related I do not know how the amount of taxation is conveyed to the buyer so I am a bit curious
For my purchases from Amazon UK to EU-not-UK (where books are charged VAT) the bill information clearly shows the total before VAT, VAT and the final total.
I'm rather sure that it's mandatory. The thing that sucks is that the VAT-included price is visible only at the end of checkout, which is different than everything else - local stores and web-stores are required to advertise only tax-included prices. Possibly it's because the "same customer" may get different tax rates depending on where I choose to ship the item.
Advertised prices include VAT for all goods and services aimed at people. The price without VAT isn't usually shown. Goods and services aimed at businesses show prices excluding VAT (since the business doesn't pay it), but they make this clear. International shoppers might see the no-VAT prices on websites, I'm not sure.
This applies to websites and shops. Europeans will often be surprised in American shops that the tax is added on afterwards — I've had the exact change ready and been caught by this.
The line before "Total" on a receipt shows the amount of VAT paid. Many shops will "*" any items had different rates (things like basic food).
Pretty sure they pay UK VAT on physical goods. This article is referring to the changes in VAT for digital goods.
By the way, physical books are vat-free in the UK (presumably because it is seen as a good thing to encourage people to read), whereas e-books have always been standard VAT in the UK, making e-books less competitive.
Shipping books from UK warehouses to UK customers means that they're paying the 0% VAT that UK is currently requiring for physical books.
The only question is about e-books, which are sent to UK customers by a USA company from datacenters most likely in Ireland or Germany. You could argue that UK VAT should be paid whenever an UK customer buys a digital item from abroad, but it's a bit different argument than your post is making now.
Yep, it's a mess that's going to backfire. I'm taking the step of blocking all non-UK EU countries from purchasing. It sucks, but it's the only way I can keep my tiny little bootstrapped company afloat without having a heck of a lot of extra paperwork and filings to do (with commensurate fines if I screw it up).
For my SaaS (https://www.wisecashhq.com) I plan to handle it as well as I can (I'm based in France). The plan is first to get to fully understand what needs to be done from my country, then try to sign for a "MOSS" (mini one stop shop).
I agree this looks like a major PITA, but luckily Recurly (which I picked for my billing code) seems to have this supported (did not test yet, though).
That said I do feel your pain. I feel a bit of fatigue with regards to the increasing challenges that bootstrappers (amongst others) face (eg: cookie law, vat).
Yeah, I don't know whether France has a similar exemption, but in the UK currently I do not have to track or even charge VAT until the company has £81k in revenue. I don't even have to register for it. This is really handy for turning a side-project into a small company, as I can just try out various revenue streams without too much bureaucracy.
Once I hit £81k of course, I can probably afford to throw money at accountants to take care of it for me! But that critical first bootstrapping stage has become just that little bit more difficult. It's either block the rest of the EU, or get ready to do some paperwork. Or I guess I could become a zero-revenue startup! ;)
You need to take a view regarding the type of expenses your company will have too. I run a small, one man, UK Limited company and was for a time VAT registered. This is because when I first started the company I spent a few thousand Pounds on equipment. All the VAT I paid on this equipment was able to be offset against any VAT I collected through invoicing. For a while I was ahead and it helped my cash flow, even factoring in the accountancy bills each quarter (which weren't really all that much). I made this move on advice from my accountant, and at the appropriate time, when I was no longer "ahead" on VAT, I was advised to de-register for VAT. My revenues still aren't £81k.
Don't block non-UK EU buyers who have a VAT number though! The new laws only apply to B2C sales, not B2B, and I suspect the majority of SAAS customers are businesses anyway.
True, but if I want to take VAT numbers I have to be registered for VAT anyway and then do UK quarterly filings. I'd voluntarily lose the £81k exemption in this case regardless. A VAT MOSS filing on top of that would not be too much hassle.
Seeing as I'm not quite localised for Europe anyway, I don't think it's a huge deal blocking them at the moment. I'd much rather provide a good french service to France and a german service to Germany. But obviously I want to open that market up as soon as I possibly can, whether it's perfectly localised or not. This law just adds some delays.
(Disclaimer: I am not a lawyer, and all that jazz ;-) But I do know more about VAT than I probably should for my health..)
True, but if I want to take VAT numbers I have to be registered for VAT anyway and then do UK quarterly filings.
I don't believe that's true. You have, I assume, been doing both B2B and B2C sales so far, and the law has solely changed in regard to B2C sales on digitally supplied services.
The only new requirement for you to avoid needing to charge VAT should be that you'd need evidence to prove a sale isn't B2C on non-UK EU sales only. For that, all you need is a VAT number in the valid format (HMRC notice 741A section 2.7).
Handily, you do not even need to do any further validation of the VAT number if the VAT that would be ordinarily charged to that customer is cumulatively less than £500 over 3 months (741A section 19.2). (So if you were providing a service of £100/mo, you shouldn't even need to check their VAT number out! :-))
There's definitely stuff & concepts to get your head around with this, but in theory, still accepting B2B sales within Europe could be as simple as collecting, validating the format of, and storing VAT numbers.
If your B2B intra-EU sales are too low to make this worthwhile, of course, then yeah, it makes sense to block them (and in my research, it appears this is legal), but if you're doing several grand's worth, say.. it might be worth considering the above. Good luck whichever way you go! :-)
Though the point is somewhat moot because US government spends more per capita on public healthcare than the British government does, bizarrely. So while it's not "free" in the UK, Americans get charged twice via taxes and insurance.
Nothing is free, at all, in the sense you apparently mean. The costs may be hidden, but they always exist.
So what people are using here is a colloquial sense of the word free. When you walk into the doctor's office to have something checked out, you don't run the risk of having a large bill just for the privilege of seeing a doctor. If you get hospitalized, you don't run the risk of being bankrupted just because your job is too shitty to provide you with health insurance. Free in the sense of not a huge amount out of pocket at time of service and not going to financially cripple you to make extensive use of.
This is really screwing with the independent publishing sector in the UK right now: go on twitter and look for #VATMOSS. The TL:DR version is that ebooks are VATable and if you sell direct to customers the VAT regs mean that just one ebook sale in one EU country puts you in a world of bookkeeping pain.
A lot of small publishers are basically getting ready to fold their UK-based ebook operations completely at the end of the month. When you sell 10-50 products a month for £2-5 a pop it just isn't worth the hassle. And these are people who refuse to go via Amazon because monopsony. It is to weep.
31 comments
[ 2.9 ms ] story [ 72.6 ms ] threadLet's look at the facts:
- Most paper books are already subject to VAT (90%+).
- The margins on ebooks are already much higher than paper books (due to reduces production, distribution, storage, returns, and tax costs).
- The only reason ebooks cost as much as they do is due to lack of competition and the publishers wanting to continue to sell paper books.
So while publishers might try to exploit this opportunity to raise prices on something which already costs too much, let's not pretend that the VAT (which is effectively already built into the price, since they're 1:1 with paper books which DO pay VAT) has anything to do with it.
The article mentions that paper books in the UK are VAT exempt?
The costs associated with creating and distributing a physical book are probably a smaller % of the price than you assume. This piece http://www.theguardian.com/books/booksblog/2011/aug/04/price... gives a figure of $3.50 for a hardcover which, as I recall, is similar to other breakdowns that I've seen.
Ref: http://www.revenue.ie/en/tax/vat/leaflets/printing-and-print...
I've written the usual letters to government ministers and to members of the European Parliament, but have been completely ignored in all cases, not unexpectedly. Unfortunately, I feel that this is going to be another measure pushed through the EP without any public consultation.
Frankly Amazon, Google and the like have taken the piss by using Luxembourg as a tax haven for too long. It's right that VAT is charged in the consumers country.
I'm rather sure that it's mandatory. The thing that sucks is that the VAT-included price is visible only at the end of checkout, which is different than everything else - local stores and web-stores are required to advertise only tax-included prices. Possibly it's because the "same customer" may get different tax rates depending on where I choose to ship the item.
This applies to websites and shops. Europeans will often be surprised in American shops that the tax is added on afterwards — I've had the exact change ready and been caught by this.
The line before "Total" on a receipt shows the amount of VAT paid. Many shops will "*" any items had different rates (things like basic food).
By the way, physical books are vat-free in the UK (presumably because it is seen as a good thing to encourage people to read), whereas e-books have always been standard VAT in the UK, making e-books less competitive.
The only question is about e-books, which are sent to UK customers by a USA company from datacenters most likely in Ireland or Germany. You could argue that UK VAT should be paid whenever an UK customer buys a digital item from abroad, but it's a bit different argument than your post is making now.
Hand-picked links:
- http://ec.europa.eu/taxation_customs/resources/documents/tax...
- https://docs.recurly.com/eu-vat-2015
- http://theaccountancycloud.co.uk/vat-rules-on-digital-servic...
I agree this looks like a major PITA, but luckily Recurly (which I picked for my billing code) seems to have this supported (did not test yet, though).
That said I do feel your pain. I feel a bit of fatigue with regards to the increasing challenges that bootstrappers (amongst others) face (eg: cookie law, vat).
Once I hit £81k of course, I can probably afford to throw money at accountants to take care of it for me! But that critical first bootstrapping stage has become just that little bit more difficult. It's either block the rest of the EU, or get ready to do some paperwork. Or I guess I could become a zero-revenue startup! ;)
The bad thing is that I will already roughly reach the threshold because of my main income which is coming from consulting.
So bootstrapping based on consulting is becoming a bit harder, paperwork-wise :P
Seeing as I'm not quite localised for Europe anyway, I don't think it's a huge deal blocking them at the moment. I'd much rather provide a good french service to France and a german service to Germany. But obviously I want to open that market up as soon as I possibly can, whether it's perfectly localised or not. This law just adds some delays.
True, but if I want to take VAT numbers I have to be registered for VAT anyway and then do UK quarterly filings.
I don't believe that's true. You have, I assume, been doing both B2B and B2C sales so far, and the law has solely changed in regard to B2C sales on digitally supplied services.
The only new requirement for you to avoid needing to charge VAT should be that you'd need evidence to prove a sale isn't B2C on non-UK EU sales only. For that, all you need is a VAT number in the valid format (HMRC notice 741A section 2.7).
Handily, you do not even need to do any further validation of the VAT number if the VAT that would be ordinarily charged to that customer is cumulatively less than £500 over 3 months (741A section 19.2). (So if you were providing a service of £100/mo, you shouldn't even need to check their VAT number out! :-))
There's definitely stuff & concepts to get your head around with this, but in theory, still accepting B2B sales within Europe could be as simple as collecting, validating the format of, and storing VAT numbers.
If your B2B intra-EU sales are too low to make this worthwhile, of course, then yeah, it makes sense to block them (and in my research, it appears this is legal), but if you're doing several grand's worth, say.. it might be worth considering the above. Good luck whichever way you go! :-)
So what people are using here is a colloquial sense of the word free. When you walk into the doctor's office to have something checked out, you don't run the risk of having a large bill just for the privilege of seeing a doctor. If you get hospitalized, you don't run the risk of being bankrupted just because your job is too shitty to provide you with health insurance. Free in the sense of not a huge amount out of pocket at time of service and not going to financially cripple you to make extensive use of.
A lot of small publishers are basically getting ready to fold their UK-based ebook operations completely at the end of the month. When you sell 10-50 products a month for £2-5 a pop it just isn't worth the hassle. And these are people who refuse to go via Amazon because monopsony. It is to weep.