Saturday, 27 December 2014

New EU VAT Laws

Update: 31 Dec 2014

Thanks to Erica Spinks's comment, I came across a platform that takes care of the EU VAT and this will allow me to continue selling to all EU countries. I have moved all my digital data over and am ready to sell. For me, this means business as usual, regardless of the buyer's location.

For Australia, I don't know what this means or why there is so little information available to us regarding this matter. From what I understand, the law applies to ANYONE selling to any of the 28 EU countries. If you sell a digital product to any EU customer, you are liable for the tax due on that item. There are thousands of small businesses in Australia that sell digital items to the EU. Yet, there has been no official advice regarding this matter from either the Small Business Commissioner, Small Business Victoria or ASIC.

Why exactly do we have a Minister for Small Business when small business can't rely on or apparently expect advice concerning such matters? Who knows.

One thing's clear though: ignoring these laws won't work as it looks like these laws will apply to stretch to actual 'goods' from 2016 also and that will effect even more small businesses.
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There's a new law coming into effect on the 1st of January 2015. It basically concerns anyone selling digital download products (such as my quilt patterns) to a customer in any EU country. It requires the seller to collect tax on behalf of that EU country and follow through with paying those taxes through an expensive, time consuming tax policy process.

There's been some discussion concerning this law in the UK in regards to UK sellers providing digital downloads to EU members, but as of today, there has been no information concerning the requirements for people selling outside the EU to EU members.

From what I understand, anyone selling a digital download product to a customer in the EU will have to pay regardless of their (the sellers) location. However, I have heard nothing specific about this where I am located, in Australia. I know of several US based shops who have stated that they will not be selling to the EU because of this law, but I have found it very difficult to get timely, accurate advice concerning this matter for Australian citizens.

This is concerning given that the law comes into effect on January 1st 2015.

I didn't know about this law until it was brought to my attention by another quilter on her blog and since then I've been at a loss to explain how it is that, with millions of e-book sellers out there who will be effected by this law, there has been so little discussion concerning its application in real life.

I am moving what patterns I sell over to an Etsy based store as I can't control digital sales by country on my present sales platform. Etsy have made a vague statement regarding this law, but so far haven't been specific and haven't addressed the implications for sellers outside the UK. I am waiting to receive more info from Etsy regarding this matter.

It looks likely that I will not be selling instant digital downloads to quilters in the EU. How this will be implemented, I don't know. I am assuming and hoping that Etsy will allow sellers to select which countries an item is available to sell to.

To all my EU customers who are interested in purchasing a pattern from me after January the 1st, you will still be able to do so, however instead of an immediate digital download, I will send the pattern on to you via email. This changes the product classification from a digital download to simply a digital product. Its annoying that we have to take a step backwards regarding technological advances and conveniences but it is presently looking like this will be the easiest work around.

For all my blog readers and quilters who have ever considered buying a pattern from me, please read this: my patterns will always be available for free during the month of their release over in my Yahoo BOM Group. Make sure you're a member (its free) as its a great way to ensure that you never miss out.

2015 is going to be a big year for me pattern wise, especially after the LE pattern lull of 2013 / 2014. Please become a member if you aren't already one.

9 comments:

  1. Hi Esther, You may like to read this post by Flossie Teacakes: http://flossieteacakes.blogspot.com.au/2014/12/eu-vat-solutions.html She's not in Australia but has the same problem. Some of the comments are useful, too.

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    1. That's great Erica, thanks so much for commenting with this info, I think I found a new sales platform via that article you posted :)

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    2. Terrific! Glad it helped, Esther.

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  2. I had not even heard of this! So thank you, Esther. I'm so thankful to be a member of your Yahoo-group and still enjoying and stitching LE.
    I will follow your finds about this law...
    Love from the Netherlands, Ria.

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  3. Hi Esther,

    Thanks for your blog post. It is a worry that Australians have not heard anything about this from their government - considering it creates a significant and onerous burden on Australian small businesses. I've written to the Federal Minister for Small Business, Trade and Innovation, and also the Victorian Minister for Small Business and the Premier, asking them to clarify the position for Australians.

    Here is a useful outline of the requirements and ramifications from Forbes business magazine (though it relates mostly to the US): http://www.forbes.com/sites/janetnovack/2014/05/15/european-vat-10-things-online-sellers-need-to-know-about-taxes-on-digital-goods-and-services/

    Cheers,
    Lisa S.


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    1. What I don't understand is why there is such silence on this matter. It is a tax law and there will be penalties.Thousands of Australians sell digital products to the 28 EU countries and like me, some of them will have no idea that this law applies to them for all sales from tomorrow. And in 2016, it will apply for 'goods' posted as well, so ignoring this will not make it go away. We need to get with the program.

      This silence is very strange. It makes you wonder why we have an MP for Small Business when there's been zero advice about this from that bureau.

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    2. Totally agree, Esther. I'm glad you've found a way through the mess for your business. Yes, the rumour that this will apply to "physical" and "posted" products from 2016 is what concerns me. And the fact that Etsy is not helping, yet. I just noticed that your blogpost was mentioned in a Tweet by "MDQuilts", on the #EUVAT (which is a great way to keep up with info). Cheers, Lisa. 2Jan14

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Thanks for commenting!