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How to apply the EU VAT to your digital goods

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Under EU law, consumers residing in countries of the European Union must pay VAT (Value-added tax) in every digital purchase, no matter where the seller is located. For this case, Digitalsellz has established a series of settings to include this and allow sales to EU-residents without any problems.

Using our “Location & Tax” menu, Digitalsellz users can easily confirm any of the settings related to the EU VAT Charges.



 

Under the “Enable tax reporting” button, you can select the option to make reports on every sale you have made to EU users to directly report any applied tax information.

You can also set your own country to automatically consider this information under a drop-down menu.

With the Tax Percent option you can manually choose the amount of tax applied, in case you need it.

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Also, and in case you don’t want to sell your digital files to users located in the EU, our site can automatically detect their location and disable the sale. You can set that option under the button “Disallow purchases from EU due to new EU VAT rules”.

How does Digitalsellz help me keep track of my EU VAT Sales?

If you have the option to allow EU sales activated, the system will automatically detect the country of purchase and apply the corresponding tax. The system will identify every buyer and keep the pieces of non-conflicting data (such as IP and billing addresses) in your monthly reports for you to review. In a nutshell, the reports allow you to view information such as:

– Location of buyer
– Tax
– Tax Amount
– Tax included in earning
– Date of purchase

How does the EU VAT work?

– The new EU VAT rules apply to “automated digital services” – any thing you can buy or use online.

– From 1 Jan 2015, as a seller, you have to pay VAT in any EU buyer’s country, at that country’s VAT rate, even if you aren’t in the EU.

– There is no minimum charge: even if you sell one item for 99 cents, the law still applies.

– To prove where the buyer is, you need two non-contradictory pieces of information, which you need to store for 10 years.

MOSS (Mini-One-Stop-Shop) is a system set up in each EU country, to collect the VAT and distribute it for you, so you don’t have to VAT-register in each country. Overseas users can sign up with VOES, the equivalent for non-EU-residents.

Why is this being introduced?

The law was originally designed in 2008 to stop to billions of euros of consumer tax being lost due to multi-nationals setting up in low-tax jurisdictions – an aim which few would argue with.

The European Commission argues that this will create a level playing field, because it means that sellers can’t undercut their competitors unfairly by using a lower VAT rate.

However, because there’s no threshold, it actually disadvantages the smallest companies and individual traders. It creates a divide between the multinational companies who have the systems to comply and those sole traders and microbusinesses that simply can’t.

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