If you’re a business based in the EU, read on - you’ll NEED to know about this.
If your business is not based in the EU but your customers are, then you must read on as well - you’ve also gotten pulled into this group by the recent amendments made in Jan’15.
If you don’t belong to either of those two categories, then read on - just to quench your curiosity.
The European Union Value Added Tax (EU VAT) is a general tax that’s levied on most goods and services that are traded for consumption within the EU.
It is applied, when a VAT registered business sells goods or services to another business or to a consumer based in EU.
Earlier VAT was being charged based on the country of the supplier, for digital products and services. But since the January 2015 amendments, VAT will now be charged depending on the customers' countries.
Here's a table to make things clearer:
(Note: VAT registration is required for any and all e-services sales, regardless of volume)
*TBE = Telecommunication, Broadcasting and Electronic Services
As mentioned earlier, businesses have to determine your customer's location, in order to charge the right VAT rate. And to do that, you will be required to collect two of the following pieces of information as proof of location of your customers, for each transaction -
Few crucial things to keep in mind:
In short, if you are serving customers from 28 different EU states, you'll have to charge them with 28 different VAT rates, without creating a mess. And for a subscription business with recurring revenue, the probability of creating a mess only increases.
Here are the different EU VAT rates for your reference:
|Czech Republic (CZ)||21%|
|United Kingdom (GB)||20%|
ChargeBee ensures that you comply with the latest EU VAT rules, with little efforts from your side, in the following ways:
We've been using ChargeBee for half a year and they've already surprised us positively multiple times. One example was VAT regulation changes in January 2015 that almost made billing for electronic products in EU a nightmare, but as ChargeBee had the support for new system available from day one, the trouble was minimized and correct VAT percentages used for each country automatically.Antti Virolainen, Co founder, Sharetribe