EU VAT Changes and Digital Distribution

[gmaverick019_v1legacy]

Do you think we'll see price hikes across the board?

Bingo, if this affects all distributors and publishers the same, they will all simply adjust prices to compensate, if the adjustment means prices going up so be it, if it means they get more from the same price, they'll keep as is.

I predict a big rise in people using VPNs to gain access to regional variant stores with lower pricing, as happens already with Origin.

I'm surprised it's taken this long for this to happen, any physical goods get VAT applied when they enter the country, You'd have though this would automatically apply to digital ones too, guess not.

You can use a VPN as much as you like it won't change the country of origin of your payment. It doesnt matter if you use paypal, bank account or credit card the money is instantly known from it point of origin. No bank can accept electronic payment without knowing its origin, failing to do can result in criminal prosecution.

couldn't EU consumers simply keep a bank account in *insert lowest VAT country here* and purchase using that account then, since the country of origin for payment is being checked, at least based off of what you are saying?

I can't assume for the EU, but in the states people travel for work all the time, some every day/week, so why is it fair that someone is getting fucked on VAT for buying something in a different country, just because their money is being kept in another country?

 

[Prince of Ales]

It looks like the VAT MOSS system is there to ease the process. See here: https://www.gov.uk/register-and-use-the-vat-mini-one-stop-shop

If you're using the VAT MOSS system (can't see any reason you wouldn't), you only need to submit one return to your own tax authority, and then the authorities from around the EU will deal with the rest among themselves. So if you're a business in the UK, you can deal with HMRC exclusively. I presume that means they'll be the only ones carrying out spot checks, giving out penalties etc.

It's still going to be a bigger administrative cost than before. In particular, as was mentioned, smaller businesses may not have previously have had to register for VAT, and they will have to do so now.

This bit is interesting:

If you make taxable supplies of digital services to consumers in other EU member states, and your UK taxable turnover is below the UK VAT registration threshold, you can use the VAT MOSS to account for the VAT due in other EU member states, but you don't need to account for and pay VAT on sales to your UK consumers.

So the threshold (£81,000 a year in the UK) still applies to sales made to your own country. There's an interesting consequence of this. Say you're a small business based in France selling digital goods, and say your sales are exclusively made to UK customers. Lets say you make £60,000 a year from UK sales. You'd have to pay £10,000 a year to HMRC (that's £50k net + £10k VAT = £60k gross). Now lets say you were based in the UK and made the same sales. Since you're under the threshold, you're exempt from paying VAT and you've just made yourself an extra £10,000 (or you could reduce the price of your products to gain the same profit margin with a higher sales volume, whichever you think would make you more money). In other words, it can now be quite beneficial for a smaller business to be based wherever the majority of their sales are coming from. Won't make a difference to larger companies of course.