Are you selling digital products or offer a SaaS service within the EU? Starting January 1, 2015, there will be major changes to the VAT (value added tax). Here’s what FastSpring clients need to know.
What are the new VAT tax changes?
Prior to 2015, the VAT was based on the location of the business—not where the customer was located. The new VAT rules, effective January 1, 2015, state that businesses must charge the VAT based on the customer’s location.
The challenges for these changes can be determining the country in which the consumer is located. FastSpring detects the customer location via IP address (which is the suggested way).
Does the VAT change affect my company?
It may, if you sell e-books, games (download or online) or offer cloud computing or SaaS services in the EU. This new rule affects business-to-consumer companies more than those selling to registered businesses. Registered businesses are typically exempt from VAT and file their own. Using a digital commerce provide like FastSpring will make the VAT transition seamless.
What do these changes mean to my EU-based customers?
In general, if your company is based in a low VAT country, your customers living in higher VAT countries will pay more tax. You can get an idea of tax rates from wikipedia.
If your company is based in the U.S., nothing changes other than how the tax is calculated.
Your customers do not need to file the VAT tax due. However, it is mandatory that businesses file and report the VAT tax collected.
Is there anything I need to do?
No. FastSpring has you covered in three ways:
- FastSpring already charges VAT based on your customers’ location. This means you won’t have to file any special paperwork or change an existing process.
- FastSpring will continue to file the VAT tax collected for your company.
- FastSpring will keep your VAT documentation for 10 years (required by the new law).
Who can I contact if I have any questions?
We’re happy to answer questions you have about the 2015 VAT changes. Please email us at firstname.lastname@example.org.