Determining When to Collect Value-Added Tax for European Subscription Sales

As I’ve previously reported, while US and European publishers didn’t have to charge a Value-Added Tax rate to print subscriptions, they do have to

As I’ve previously reported, while US and European publishers didn’t have to charge a Value-Added Tax rate to print subscriptions, they do have to collect and remit VAT for digital sales of goods and services.And content is considered an Electronically-Supplied Service (ESS). ESS can also include:

Web-hosting, distance maintenance of programs and equipment
Software downloads or SaaS
Images, text and information and database access
Music, films and games, including video games
Sports, scientific and entertainment broadcasts and virtual events
E-learning

According to Benno Tamminga and Martin Ryan, guest speakers on this week’s Members Webinar on Subscription Site Insider, US or any non-EU companies selling any of these services to an EU audience are responsible for collecting VAT, if the subscriber is a private individual. Subscription sites do not have to collect VAT from business customers because businesses are expected to pay VAT to the government on their own. (See our Case Study on Vet Visuals International and Structured Credit Investor for in-depth discussion of the B2B exception.)However, consumer publications who sell individual subscriptions to private individuals *do* need to collect VAT from subscribers, and the VAT rate can vary according to the location of the customer. For example, a subscriber in the UK would be charged 20% while one in the Netherlands would be charged 21%.The EU is currently working on a simplification scheme that would reduce confusion in this area for non-EU companies. You can learn more about it, along with the VAT rules for EU-based companies, by watching our On-Demand Video of Collecting VAT for Online Subscription Sales in Europe.