You may have heard about the new rules with VAT on digital sales from the 1st January 2015. Whilst we understand many of you are aware of this, and the update is a little late. Many of you have still to take action in making sure you are compliant. We have written this to help those who have yet to implement change and we’ve offered up some solutions based on the services we provide here at Nuttifox.
So… on 1st January 2015 the VAT rules for over the board sales of digital goods will change. Any VAT must be accounted for in the place where the customer lives, rather than where the supplier is based. – HMRC Brief 46
As John McCarthy, CEO of Taxamo puts it, “These new rules flip EU VAT on its head”.
These new EU VAT rules effect all companies selling digital goods to consumers in the EU. To be compliant you will need to do the following:
Charge the correct VAT rates the the consumers location
Validate the consumers location by IP Address and Billing Address
Report your VAT to the EU state or use a MOSS (Mini-one-stop-shop) which will report this on your behalf. More here for the UK Gov MOSS
Now most of our e-Commerce stores use WooCommerce and they have been quick to create a user friendly solution to keep you compliant.
EU VAT Numbers extension
Both of these extensions will add the functionality to your store, that will allow you to manage this change. They update taxes automatically on checkout and of the customers IP does not match their address, it will allow them to self declare the location to continue the transaction.
Other features of the extensions include:
Forcing digital goods to be taxed by the user’s billing address
Appending the VAT ID to formatted addresses
Some extra tax reports for EU states
You will still need to input the VAT rates into WooCommerce and report VAT to the relevant authorities using a MOSS system preferably.
These extensions do cost to implement, however they make managing the change very easy. For more information on setting up these solutions for your store. Contact Nuttifox on 01276 409 724 today and be ready for the new year.
Please note that we are not legal experts, this article was provided based on other resources and cannot guarantee 100% accuracy. If in doubt, contact your accountant/tax specialist.