taxes

As of January 1st 2015, a change in European Union tax regulations will affect all businesses selling digital products to customers in the EU. The change may seem intimidating, so we’ve done our best to compile all the information you need in a simple and easy to understand post.

It’s important to note that if you’re using Binpress as your digital fulfillment platform, you’re in good hands since we’re handling VAT collection and provide you with the information needed to file your VAT tax reports.

In a nutshell, prior to the reform, VAT (Value Added Tax) in the European Union was charged based on the location of the business selling the goods. In 2015, however, VAT will be charged based on the location of the customer. This change is meant to address a loophole, in which companies would base their operations in low VAT rates countries such as Luxembourg.

Who is affected?

Business providing telecommunications, broadcasting and electronic services will be affected by the changes. Electronic services as defined by the EU refers to services which are delivered over the internet and are automated (or involve minimal human intervention). This includes web development services and maintenance, web hosting, supply of software (and updates), images, ebooks, music, films, games and e-learning — all manner of digital products.

The new rules at a glance

Merchants located in the EU:

  • If you sell to consumers and/or businesses outside the EU, you do not need to charge VAT.
  • If you sell to consumers in the EU, you must charge VAT based on the country of residence of the consumer.
  • If you sell to a business (with a valid VAT  tax number) located in your country of residence, you must charge VAT.
  • If you sell to a business (with a valid VAT tax number) located in another country in the EU, the business is exempted (0% VAT) in what’s called a reverse charge procedure.

Merchants located outside the EU:

  • If you sell to consumers and/or businesses outside the EU, you do not need to charge VAT.
  • If you sell to consumers in the EU, you must charge VAT based on the country of residence of the consumer.
  • If you sell to a business (with a valid VAT tax number) in the EU, the business is exempted (0% VAT).

Tax thresholds

Another change bears bad news for small businesses. Prior to the reform, some countries would offer exemptions to businesses who would not meet their defined tax thresholds. However, as of 2015 the EU has removed all tax thresholds and you are now required to report VAT even for a small turnover.

Tax reporting

While the 2015 tax changes add complexity in collecting VAT for most businesses, tax reporting will become more convenient with the introduction of MOSS (Mini One Stop Shop).

Businesses reporting VAT taxes will have the ability to sign up under MOSS and report quarterly for all VAT regardless of where it was collected. Registration for MOSS is voluntary, and businesses who wish to not register will have to register for VAT with all member states where VAT has been collected and file quarterly or monthly (subject to the member state rules).

If you are using Binpress as your digital fulfillment platform, we provide you with the information needed to file your quarterly reports.


Before revamping your entire tax workflow, read up on the European Union’s own explanation of the new rules here, and check out this PDF for an in-depth look at the changes, however if you’re selling using Binpress, you can keep your reading to a minimum since we’re handling VAT collection for you.

VAT collection is a small part of what Binpress has to offer businesses selling digital goods. Read more about the variety of digital fulfillment tools we offer to businesses.

Image credit: StockMonkeys.com

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