The horrible implications of the EU VAT "Place of Supply" change

I’ve been aware for some time of an upcoming change to the VAT rules when selling to other EU businesses, and that they will change how we charge and report for VAT as a VAT registered business.

As I looked more deeply into these rules and how they apply to my VAT Registered business and sales of Perch CMS, I started to realise that there is a much wider implication. These rules potentially catch micro-businesses that are not registered for VAT. Any unregistered freelancer who also sells an ebook or licensed software needs to take a look at this right now.

My “user stories”

To try and make some sense of the changes – and explain how VAT works to non-registered people – I’m basing this explanation on some typical cases.


Joe is a freelance web designer. He is below the UK VAT Registration threshold. He only provides hands-on design services to his clients in the UK, Europe and USA, who pay him for his time by invoice.


Ann is a freelance designer. Like Joe, she is also below the UK VAT threshold. In addition to doing design work on a freelance basis she has written an ebook which is sold to people all over the world. She doesn’t currently charge VAT as she isn’t registered.


Tom operates as a Limited Company in the UK. He is registered for VAT. He and his small team does PHP development for clients in the UK and Europe. He charges VAT to UK clients who then reclaim it though their VAT return if they are VAT registered.

His European clients can avoid paying UK VAT if they have a VAT number in their own country, so Tom can invoice them without VAT.

European clients without a VAT number Tom charges VAT at the UK rate.

Tom also sells some licensed software – a couple of small PHP applications and an ebook about PHP security. However because he is VAT registered he must charge VAT on the sales. As with his services he must charge VAT a the UK rate to UK customers plus customers in Europe with no VAT number. He can allow business customers to buy the software and book without VAT as long as his store can validate their VAT number.

He submits his EC VAT Sales list quarterly, listing any sales to EC countries where he didn’t charge VAT. He pays VAT due to HMRC, the UK tax authority.

What are the changes?

To decide what VAT you need to charge someone buying a product or service, you use the “place of supply” rules.

Of our three case studies above we only have one VAT registered business – Tom. The current place of supply rules effect Tom as follows:

  • Tom does web development for a client in Germany – the place of supply is the UK – charge UK VAT
  • Tom sells an ebook or downloadable to a person without a VAT number (deemed a consumer) in Germany – the place of supply is the UK – charge UK VAT
  • Tom sells an ebook or downloadable to a company with a VAT number in Germany – he doesn’t charge VAT but reports the sale via his EC Sales list

After January 2015 if Tom sells an ebook to a customer in Germany with no VAT number he has to charge VAT at the German rate. This is because the “place of supply” for a digitally delivered service is changing to be the customer’s country NOT the supplier’s.

He also has to pay the VAT due to the German authorities, meaning he needs to register for VAT in Germany. In the UK however, as a VAT registered business, he will be able to register for the “Mini One Stop Shop” (MOSS), submit a return and pay the VAT due to them, and then MOSS will distribute it to each country.

So Tom now needs to update his systems to be sure that:

  • he can identify with two non-conflicting pieces of information the state the customer resides in
  • he knows what the VAT rate is in each EU member state
  • he can add VAT at the correct rate to the purchase of any non-VAT registered purchase
  • his invoices comply with the VAT rules in each member state
  • he can export whatever information is needed to comply with either the MOSS return rules OR the rules in each member state if he decided to register in each state
  • Tom needs to do this before the end of 2014

Tom’s PHP development services aren’t covered by this change. When he sends an invoice for work he has done, he uses UK VAT rates as before.

What products and services are included?

This is a non-exhaustive list of the things that readers of this blog are likely to be selling and that I think are covered by the rules.

  • downloadable software licenses
  • ebooks
  • video tutorials (not webinar in-person training however)
  • music downloads
  • Software as a Service

My understanding it that these rules cover any hands-off digital delivery of a product or service.

If you are below the UK VAT threshold so currently don’t charge VAT

If you are not VAT registered then you might be thinking you can avoid all of this. I have bad news.

Some countries – in particular the UK – have a very high VAT registration threshold. So lots of freelancers and micro-enterprises do not need to register for VAT. However, other countries have a low or even 0 threshold. If you sell your products into those countries then they can demand you register for VAT in their country and submit a VAT return to them OR (in the UK) register for the MOSS, which will deal with paying the VAT due to other member countries for you.

You can only register for the MOSS if you are UK VAT Registered.

This means that Ann – our freelancer designer who also sells an ebook – is either going to have to register for VAT in every country she sells to, charge VAT to their residents and pay VAT due OR register in the UK and also register for MOSS.

Her small ebook venture is then going to have to comply with the same VAT rules that apply to Tom, running his larger enterprise.

Ann needs to do this before the end of 2014.

Joe only sells his time, as a freelance designer. Joe can disregard all of this. However the rules might mean that he puts plans for that ebook on the shelf as the potential hassle it could bring, makes the few thousand quid he might make not worth it.

I’m still hoping that there is some loophole for people meaning the above isn’t true. However I’ve now read this in several different places, for example see this PDF from Grant Thornton.

Assuming that the sales and delivery method you use for your book or software will have you covered isn’t a great plan. Check with them what your liability actually is.

Let’s crowdsource this

I’m not an accountant, I’m a web developer who just read a bunch of tax documentation. I can’t be sure I am completely correct in the above, but there is one thing I can be absolutely sure of. Micro-businesses are not going to get any help with this from the government. No-one is interested in bootstrapped small products and services. We’re on our own.

If you do have an accountant or tax advisor then naturally speak to them. However I think many people who will be caught by this do not have such professional advice.

So lets help each other.

I’ve set up a GitHub repo and GitHub Pages site. Help me build it out with what you know and learn over the next few months.

If you know of useful resources and tools, add them to the list.

If you have implementation experience of how you have gone about preparing your systems for the change, write it up.

Raise an issue if you think this might effect you and need answers – people who understand this please comment on those issues. If you are commenting and have official capacity, e.g.: you are a tax specialist or accountant, please say so.

We can’t offer each other advice in an official capacity, but that shouldn’t stop us just sharing what we know and learn.

Help me raise awareness of this

I don’t want to frighten people about this like some kind of VAT legislation reading prophet of doom. However I don’t want people to get caught out in a set of rules that aren’t written for people like us, but will still apply to people like us.

If you can please upvote this post on Hackernews or anywhere else that people who make and sell digital products and services hang out, tweet about it, tell other people. From talking to people it is obvious that very few people really understand that the rules are changing and, like me, are pretty confused as to what to do.

Published on the


Andy Brice on the 13 Oct 2014 at 09:11:27:


Thanks for doing this.

“His European clients can avoid paying UK VAT if they have a VAT number in their own country, so Tom can invoice them without VAT.”

You could make this clearer by saying “His European (non-UK) clients”.

Yang on the 13 Oct 2014 at 11:08:42:

One common situation is individuals selling apps on Apple AppStore and Google Play Store. Those two stores have very different ways (from a tax perspective) of handling the payments. Would be very interested to hear the implication of each regarding this.

Vero on the 13 Oct 2014 at 11:24:59:

Your summary’s the clearest I’ve read so far, and your conclusions are the same I’ve come to (though I’m still due another long date with the documentation to make sure I haven’t missed anything)

It’s an ugly, horrible process and the information still seems vague at best. From next Monday, we’ll be able to register for MOSS, leaving everyone roughly two months to get the rest of their procedures in place.

I’ll be very keen to see how this pans out, but again, I’m disappointed to see the UK bring in yet more rules that make life as a small business harder.

Andy Brice on the 13 Oct 2014 at 11:30:34:

My accountant took a look and commented:

“That looks pretty much correct to me. One point it doesn’t make is that as a foreign business selling to another member state you have a zero registration threshold in that state whatever their domestic threshold is.”

Adam Cooke on the 13 Oct 2014 at 14:22:33:

After reading this earlier, it prompted me to knock up a quick site to help us tech people find out the VAT rate for a given country. So… I’ve made which will return a array of VAT rates for all EU countries :) It might be helpful to some people. The source is public on GitHub ( and anyone can submit rates if they know of any adjustments/changes.

Heather Burns on the 13 Oct 2014 at 16:51:34:

I wrote an ebook this year on the Consumer Rights Directive, which was the EU e-commerce law designed to increase cross-border sales. Within a year of that we now have this law which threatens to reverse all the benefits of the CRD by putting such a high legislative burden on small businesses that they will have to shut their doors to customers outside their own borders.

I simply cannot grasp what public benefit would be had to any public purse by forcing sole traders to register for VAT in countries where they have sold one copy of a £12 ebook. Surely there will be a minimum sales threshold or a common-sense exception?

Andrew on the 13 Oct 2014 at 19:24:44:

I heard about this from my German accountant a few months ago. It seems to be causing headaches in a lot of different places for a lot of different people. Thanks for raising awareness for this.

I will go look at the GitHub site as well, but I think it would be worth having User Stories for services/products to the US as EU residents. Does this change anything in that direction?
Also, since so many ebook sales go through Amazon as a “distributor”, i would be interested in the responsibility for VAT still falls to the (self-published) author or if Amazon just taks the VAT cut and deals with it.

Gordon Stewart on the 13 Oct 2014 at 21:06:10:

This is all really confusing. I sell software to customers across the EU, which is delivered over the Internet (i.e. customers download it over the Internet).

The software is installed locally at the customer’s location, and doesn’t access the Internet for any part of its operation. So it’s not really a ‘digital service’ at all.

I’m really hoping this means we don’t fall under these new changes, as we are currently not VAT registered. Having to deal with all of this will cripple us.

Can anyone offer any clarifications on whether this would apply to this sort of software?

Paul on the 14 Oct 2014 at 12:37:35:

I run an online store for a relative’s business which sells downloadable videos worldwide via PayPal and Fetchapp (with a static HTML front-end), and this change will pretty much make it prohibitively complicated to continue.

We’ll either have the expense of moving to an eCommerce package which has all this taken care of, or stop trading.

Sven Latham on the 14 Oct 2014 at 14:06:59:

Gordon – my understanding is that you will still need to charge VAT at the customer’s national rate as the supply was electronic. How it subsequently connects the Internet (or not) is irrelevant.

Marc Wilson on the 14 Oct 2014 at 16:42:03:

One way around this is, AIUI, is to give them the software free, and sell the licence. On a disk, via snail mail.

Marc Wilson on the 14 Oct 2014 at 16:43:31:

@Vero – suspect it’s not the UK that’s brought this in, but the EU. There’s nothing in it for the UK.

Bob Kingsley on the 15 Oct 2014 at 09:28:40:

Hi Rachel, I think it worth pointing out that this rule change does NOT affect businesses “selling to other EU businesses” (B2B), as your introduction says, but businesses selling to consumers (B2C) – see – “The current VAT place of supply rules for business to business (B2B) supplies are unaffected.”

Gordon Stewart on the 15 Oct 2014 at 15:27:40:

@Sven I finally got through to someone on the UK VAT helpline, and he has said we will not be affected because we only sell B2B, and that only those that sell B2C are affected.

Rachel Andrew on the 15 Oct 2014 at 17:02:46:

It’s absolutely correct that it is B2C sales that are covered by this however, how do you prove a sale is B2B? Usually by them having a VAT number. In which case you wouldn’t charge them VAT anyway if you are VAT registered. We essentially treat all EC Sales that don’t have a VAT number as B2C – even though my product is aimed at design agencies so should be B2B, someone might buy it for a personal website, for example.

If anyone who is actually a tax advisor or accountant and can clarify the rules around this that would be helpful. For example:

1. If I only sell B2B is there a practical way to ID not VAT registered B2B customers that would be accepted in an audit?
2. As a VAT registered business I have to submit the VAT numbers of EU businesses that I don’t charge VAT to in my EC Sales list. If a non-UK VAT registered business collected VAT numbers as proof would that be enough?

Chris O'Shea on the 15 Oct 2014 at 17:08:51:

To those above talking about app sales via Apple, Google, Amazon….

If you are a UK business, it is a B2B transaction between you and the platform holder. It is outside the scope of VAT, but you still report it on your return or EC Sales List. Please check this with your tax advisor.

Those platform holders charge the customers VAT and pay it their end, but between you and Apple/Amazon/Google is B2B.

Note, Google right now isn’t this way, but it is changing in January 2015 to follow the others on VAT

(please consult your accountant though)

Bob Kingsley on the 16 Oct 2014 at 09:58:51:

Hi again Rachel,

I can appreciate the confusion, and you make a good point about “how do you prove a sale is B2B?” As a (non-VAT-registered) voice-over artist, I provide audio files of scripts, etc., and as a general rule they are ordered by media production businesses for their clients for whom they’re creating web videos, corporate presentations, radio/TV commercials etc. – but I suppose it’s always possible that I might be approached directly by a private individual who would like to book my voice-over services for (say) something on their own web site. It’s never happened – in fact, I must admit to never having actually done business with any EU countries up to this point (and I’ve been at it for over 30 years now), and this new ruling only makes me more determined to stay well away from it, as it’s too stressful to deal with!

One area I’ve just recently been considering is putting myself up for reading audio books – and this IS a field where the sale of the end product could well be considered a B2C activity, if the audio material is uploaded to a web portal where the global public can purchase the product – so it looks like THAT embryonic idea has been knocked on the head, too, by this arcane ruling!

Andy Brice on the 16 Oct 2014 at 11:57:07:

>Bob Kingsley

If you are doing something 1:1 (e.g. bespoke voiceover for client or in-person training) rather than doing it once and selling it lots of times (e.g. software product or instructional video) then I don’t think it is affected by these changes.

Sven Latham on the 16 Oct 2014 at 16:24:30:

Whether a sale is B2B or B2C is a moot point. The only thing that surely matters is whether the customer has a VAT number or not?

While the UK has a threshold for registration there will always be companies (like Bob’s) which are unregistered, so VAT must be applied even if this is a B2B transaction.

Ian Sharp on the 27 Oct 2014 at 13:08:02:

Thanks for getting this important conversation going.. I’m a micro startup getting ready to sell online training and so this nasty little complication causes me quite a headache. I think the only practical way forward for me in the short term will be to prohibit B2C sales into the EU. Another barrier for small businesses when we should be getting all the help we can get.

Vlad on the 02 Nov 2014 at 03:04:38:

Rachel, thank you for your time for writing this article.

Before I write the answer that I will receive from my accountant, please do tell me what’s your take on this situation: Joe (UK business, unregistered for VAT) wants to send an invoice to a german company (registered for VAT) for £100. What’s the total amount that Joe needs to bill the german company?

Jane on the 06 Nov 2014 at 10:26:00:

Why do you call it “EC”? It is “EU”!

EC referring to the countries is so 1958…

Since 2009: EC = European Commission, EU = European Union

Rachel on the 07 Nov 2014 at 08:23:18:

@Jane I have no idea why it is referred to as “EC Sales”, but it is. So maybe you should ask HMRC that question

Francis Davey on the 07 Nov 2014 at 10:04:03:

“EC” presumably because there was a “European Community” (or 3) when VAT was first legislated and no-one has thought of updating the name.

Rachel, well done on getting people talking about this. The change is well-meaning (to stop big businesses basing themselves in Luxembourg and using the lower VAT rates to undercut smaller suppliers) but no-one has really thought through the effect on the small software business that sells to multiple member states).

Tim Thornton on the 10 Nov 2014 at 14:56:19:

Rachel, well done for highlighting this, I’ve been trying to get my head round it for the last couple of months.
I think our approach will be to revert to sending things out on physical media for customers in the EU but outside of the UK, increasing the cost to the customer but keeping the paperwork manageable at our end.
Does anyone know if any of the e-commerce platforms are doing anything to automate the paperwork?

VATlib on the 10 Nov 2014 at 16:40:46:

Hi, VATlib may be able to help for the VAT rates. It is a free App. I started with a freemium system and now it is a free App to just not deal with the VAT on such small income.

Peter Reynolds on the 12 Nov 2014 at 09:29:57:

“Selling to consumers
If you sell goods and send them to consumers in another EU country, you need to register there and charge VAT at the rate applicable in that country – unless the total value of your sales to that country in the year falls below the limit set by the country (EUR 35 000 or EUR 100 000).”

No mention of low or zero VAT thresholds.

Rachel Andrew on the 13 Nov 2014 at 07:34:47:

@Peter Reynolds – those are the rules for physical items. It mentions “goods” and “send them”. The legislation we’re discussing here is purely in regard to software, ebooks and so on.

Julie on the 13 Nov 2014 at 18:48:48:

Please consider signing this petition to request that micro businesses are given more consideration:

Lorraine on the 13 Nov 2014 at 21:33:13:

There’s now a petition on which is worth signing and highlighting to others who will be affected –

Martin on the 14 Nov 2014 at 13:13:08:

Is it allowable to charge VAT on an EU export even if it is B2B? Like if one sells B2B entirely within the UK.

If so then could these new rules provide an alternative to maintaining the EC sales list?

(If selling something online for 99p, I would rather not require the customer to go find their VAT number.)

Henneke on the 15 Nov 2014 at 15:32:48:

There’s an important difference between automated products and training products with live teacher involvement.

As a freelance copywriter, who’s developing an online training business, I’m in a similar situation as Ann (I’m also UK-based). I’ve not had final confirmation from my accountant, but my approach is going to be as follows:

For “automated” training products (such as ebooks or video tutorials without live teaching), I’m planning to use a reseller. My ebooks are already sold via Amazon and for other training products I’ll use FastSpring. Amazon and FastSpring act as my reseller, so I’m dealing B2B and don’t have to worry about registering for MOSS. I’m not using FastSpring yet, but have heard good reviews – this is an excellent option if you want to sell software or ebooks on your own site. You have to pay them a percentage of your sales of course, but it’s worth it in my opinion because you avoid the trouble with registering for MOSS (and VAT).

Any training products that involve live teacher involvement such as Webinars or Distance Learning programs, I sell direct because for these products VAT would be charged in the country of the supplier.

Brian Worley on the 17 Nov 2014 at 12:20:07:

Thanks for the article, the scenarios you describe for three different business cases helped me clarify this in my head to the point that I clearly need to do something with my idea about selling e-books in the near future.

I have been considering e-books as the next step of business for me; i’m not currently UK VAT registered. As I understand it I can only sell ebooks to UK customers from January 2015 under this ruling. What about customers outside of the EC/EU like Australia / New Zealand / Canada / US – are sales of e-books in these countries allowed as being outside the scope of the new rules?

I sell training courses, that I deliver in the UK , on my website via an e-commerce plugin currently and from what I understand these are not within the scope of the new conditions.

I better go and have a word with my accountant…

Tim Gray on the 18 Nov 2014 at 13:48:43:

I just found out about this a few days ago. I spent some time digging around, and have just published a fairly chunky blog about it at I hope Rachel doesn’t mind the plug – hopefully it answers some basic questions people are grappling with.

Nick McChesney on the 18 Nov 2014 at 14:36:49:

Readers of this blog may be interested in following developments on this topic on the ICAEW’s website. I have given a number of webinars on this topic for the ICAEW with Andrew Webb a senior policy adviser at HMRC, which are available for download at

PG on the 18 Nov 2014 at 18:00:20:

Impact of new EU VAT rules on app stores

Developers that create paid-for apps for the Google Play store will be among those severely affected by new 2015 EU VAT rules.

Notice that Apple’s App Store is not included in this intro….

In the latter case, this is because developers sell their apps to Apple who act as their agent and, in turn, sell it to customers via their App Store. As a result Apple handles the sale and the subsequent VAT compliance. Companies that develop apps deal with Apple SARL in Luxembourg and never have to worry about applying and charging VAT directly.

Google Play, however, is incorporated differently.

Steve Cole on the 19 Nov 2014 at 14:32:47:

Someone has created a commercial SAAS solution to this problem:

I haven’t used it, so I can attest to how good it is.
vivienne wells on the 19 Nov 2014 at 16:29:28:

We sell ebooks with embedded video as downloads or on CD. We are not VAT registered. After discussion with our accountant we have decided that all orders to the EU outside the UK will have to receive their ebooks on CD – and if they buy a download by mistake that will be considered a free back-up for their CD purchase. The whole thing is antediluvian. Our accountant told us that most other EU countries require all businesses to be VAT registered, however small, so this is only a problem for the UK small business.

Laura on the 20 Nov 2014 at 03:20:32:

My husband told me about this tonight, I knew nothing about this and I sell digital knitting patterns so will be affected. I don’t even reach the tax threshold let alone the VAT one! I’m astonished at how damaging and far reaching this will be as a buyer and seller of digital downloads as many digital entrepreneurs will no doubt shut up shop or cease trading with the EU, us Brits included. I’m at a loss as to how to move forward with selling my patterns!

VATlib on the 20 Nov 2014 at 07:30:55:

@PG – if you are selling via Google Play the new rules are good news for you as Google have to deal with the taxes in EU and will. They have changed their T&C. It will be the same as with Apple. But you will still have to manage VAT outside EU.

Barry on the 20 Nov 2014 at 08:20:21:

The only way to sell an ebook or a video training product would be to use Clickbank as the supplier. In effect, when you sell through Clickbank, it is effectively buying the product from you and selling it to the end consumer. Clickbank already has VAT protocols in place and charges VAT fr EU customers. As Clickbank is an American company there is no exposure.

Juz on the 20 Nov 2014 at 10:46:58:

Rachel Andrew on the 20 Nov 2014 at 15:15:36:

@Barry: I don’t think Clickbank are “the only way” there are lots of potential methods of selling via a third party – where you are essentially paid a royalty on sales.

David on the 20 Nov 2014 at 17:04:27:

Would theme templates sold via marketplaces & an e-com store come under these laws?

Matt on the 21 Nov 2014 at 00:01:01:

We’re a bit like Tom in your example, and we’re currently working out how to become compliant. One aspect of this which I haven’t seen discussed yet is (quoting from your excellent article):

“his invoices comply with the VAT rules in each member state”

How on earth are we meant to know what each of the member states’ rules are for VAT invoices? The HMRC MOSS documentation seems to give no guidance on that, and as far as I can tell many states only publish their rules in that state’s language….

Myriam Melot on the 21 Nov 2014 at 11:09:42:

There is a petition going to sign against the changes for micro business –

Lorna Mitchell on the 21 Nov 2014 at 14:39:35:

I work part time in my business (I also have a part-time job), mostly doing training and consulting but I have a couple of other side projects, and I am not VAT-registered. I have 2 books on leanpub; since consumers buy from leanpub and then leanpub pays royalties to me, I believe that the VAT changes don’t affect this.

However I also sell a PDF download via e-junkie, where consumers transfer directly into my paypal account. The document is a pack to help other developers prepare for Zend Certified Engineer exams, and it’s been quite popular – last financial year I made >£1k from it and I was really pleased! To prepare for the VAT changes, I will be taking this off sale in December. I’m gutted, and it hurts the bottom line of this very small business, but I can’t see an alternative. I’ll be looking for an alternative sales channel for it!

Also the accountants are really struggling to get up to speed as well, mine misinformed me initially and then said that the HMRC guidelines were really clear for what a VAT-registered company should do, but not so much for a microbusiness. Thanks Rachel for making sure we get decent advice!!!

Damien on the 21 Nov 2014 at 15:40:07:

An incredibly interesting article. Presemably this VAT change will go hand in hand with the European arrest warrant. I can imagine someone self publishing a steamy £3.50 e-novel finding themselves rushed off to a detention centre in readiness for extradition to face tax evasion charges in some far flung EU country. The 5 million self employed or micro companies in the UK, many (like mine) taking advantage of e-technology, will find another nail firmly placed in their coffin. Really the UK government (as well as the EU of course) is hopeless dollop.

Dale Burrell on the 22 Nov 2014 at 19:25:47:

Well said – thanks for that clarity.

What do you think would be the case if I use a third party, US company to sell my products on my behalf?

For example I am thinking to use PivotShare (a Californian company) to sell my videos for me – if an EU customer purchased one would I still need to deal with the VAT as you describe? Or does having the US middle-man remove that need?


Lisa Robinson on the 23 Nov 2014 at 03:23:13:

Dale – no that will not remove the need for the VAT as the US is affected by this as well. I have clients in the US and in the UK and based off of the new rules – my clients in the US if they sell their digital products in an EU country – and it is not a business or they can’t prove it is a business – they will have to pay the VAT tax as well. I have been researching this and I am creating a VAT Tax Fact Sheet and so far – the only way I can even remotely see around it is if you only sell to businesses – but then the burden of proving that it was a business you sold to falls on you.

Stefan on the 24 Nov 2014 at 08:52:41:

Google will solve the problem for us app developers:

David Gladman on the 26 Nov 2014 at 13:41:45:

Just so you all know an EU VAT NUMBER validation checker is at:

This is to check your clients VAT number works and is correct with the address you are given, so you can accept the VAT registered number (VRN) and use it in your EC sales lists. We are vat registered, as are all of our Eu (outside uk) clients…. We are B2B, so i believe zero vat charged as usual.

Adrian Jones on the 26 Nov 2014 at 15:12:16:

The rules for determining where a consumer is when they purchase a download from a website seem to be confusing. I rang HMRC who first told me that the physical place where the buyer is should be used. So if the users IP address is in Spain then charge VAT for Spain. I asked them what do I do then if their credit card billing address is in the UK. Initially she kept saying that it is the physical location of the buyer that matters. I then asked how then can I keep 2 pieces of non contradictory proof that he was in Spain? I have 2 pieces of proof but they contradict each other in that example. She then said that it depends if the person is on holiday in Spain or resides there. How the hell am I supposed to determine that information I asked!!! She didn’t even seem to think it was odd! Eventually I convinced her that what she was saying was nonsense even if that is the rule. She went away to check and came back stating that in all cases I can simply use the credit card billing address as proof and that is the only info I need to keep. That isn’t what the rules say as far as I can see but I confirmed with her that the call was recorded and I have the call reference ID in case they try to deny it. I thought the idea of the EU was to make doing business easier? I can sell anywhere else in the world with no hassle but not within the EU. The people that make these rules appear have no idea what they are talking about and don’t seem to care what its going to do to small businesses. Did they ever consult with small businesses about this?

Mo on the 26 Nov 2014 at 18:24:26:

You say “However, other countries have a low or even 0 threshold.” But is that right? Some have zero thresholds for domestic business, but according to this site: , for distance selling — which we’re necessarily talking about here — the thresholds are all quite sizable.

Rachel Andrew on the 26 Nov 2014 at 19:12:08:

@Mo there is NO threshold for cross border sales of e-services. It doesn’t matter what the individual country threshold is.

Distance selling is a different thing, on the page you linked to you can see it mention “goods”. What we are discussing here is the issue of e-services and the need to use the MOSS.

Adrian Jones on the 27 Nov 2014 at 08:55:56:

It seems to me the easiest way to make this a fair system would be to keep the existing country thresholds in place. This way a UK company selling to Italy would only need to be registered if they reach the Italian threshold. Can anyone see anything wrong with that simple isolation? This avoids the ridiculous situation now where if I make a sale of €1 I need to register. That means an unregistered Italian business can sell their ebook for €10.00 in Italy and the UK business is forced to sell for €12.20 in Italy which can’t compete fairly. Bare in mind also that if you make a €1 sale to Hungary you have to travel there to register for VAT in person as far as I can see from their rules.

Mo on the 27 Nov 2014 at 11:01:59:

Ah, OK, I’m with you, sorry. Is there such a thing as ‘digital goods’, or is any digital sale considered as an e-service?

Paul F on the 27 Nov 2014 at 17:30:18:

What is the situation with the VAT flat rate scheme? Is this a way around the red tape for a micro business case like that of ‘Ann’. I suspect that it isn’t and that she’d still need to sign up for MOSS, however being registered for the flat rate scheme would mean that it would be easier for her to handle her business as a whole than having to file normal VAT returns.

Jim on the 28 Nov 2014 at 16:20:19:

Regarding the country of Hungary:

VAT registration and communication with the Hungarian tax authority must be in Hungarian language. “

According to:

peter hughes on the 30 Nov 2014 at 08:57:19:

Adrian jones (above) has nailed the big problem with this legislation from a vat collection point of view… As a customer it now makes sense to be residing in the lowest vat rated country. The products you are buying are digital anyway so the vast majority of purchases will need nothing delivered to your home address
The ip address’ test’ won’t work because of vpn s so the only information a seller can obtain will be delivery address and billing address. Very poorly thought through legislation

Simon G on the 02 Dec 2014 at 11:22:40:

How about this hack?

If you sell electronically directly online from your website, you include a line in the terms and conditions for your site to say that your EU customers are presumed to live in your country unless they directly tell you otherwise? If when you sell you only collect the name and email address anyway and they agree to these terms and conditions, don’t you have evidence by default that they are in your country?

Nigel on the 04 Dec 2014 at 12:35:11:

It will mean a small loss in sales but you could (and I will) block sales to EU countries other than the UK.

Even thou the UK gov. are now saying you can register for MOSS and not have to pay UK VAT if you’re under the limit. Its just too much hassle.

I’ll be telling ‘would be’ EU purchasers that they can’t buy due to these rules. If everyone did that it might cause more stink than a petition. To say I’m annoyed is an understatement.

Cyberworld on the 08 Dec 2014 at 06:14:06:

UNfortunately this has been laregly caused by companies like Amazon who are registered in luxembourg with a 3% VAT rate and selling to consumers all through the EU. This is the way they are being caught, so the money French or German people spend online at say Kindle is not lost to the local tax system. UNfortunately as you say it is hell for small online businesses.

Envoid on the 08 Dec 2014 at 16:26:14:

Some good comments on Vince Cables response to the recent petition:

Envoid on the 08 Dec 2014 at 17:08:59:

Some larger companies are struggling with the VAT change too, if one record of a support chat with Microsoft/Skype is correct: appears they removed the ability to obtain a VAT invoice because of required changes.

Karen on the 09 Dec 2014 at 15:54:00:

I live in Spain(VAT registered) and design websites for a number of clients throughout Europe inclunding the UK. I am confused as to my position, I have read your senarios on web designers plus I have read other blogs and sites who say web design does not come under the heading of digital services therefore VAT will remain charged at the rate where the designer works from. Can anyone please clarify this as even my accountant is having a hard job in understanding it.

Philip Gordon on the 13 Dec 2014 at 14:33:40:

I am a translator. I receive the documents to be translated by e-mail and I send the translation back by e-mail. I also send the invoice by e-mail. I am not registered for VAT in the UK as I am (way) below the threshold. Will I be affected by this?

Naomi Janzen on the 15 Dec 2014 at 01:25:50:

I read in the rules that religious and live training webinars are exempt. So I am wondering if somehow my business escapes the VAT vortex. We are a membership site that broadcasts, via embedded player on our web site, a weekly live guided meditation. We offer replays of this live event throughout the week, for members who missed the live broadcast. While our broadcast is not “religious” and is non-denomenational, it is a product based on spirituality. OR…it could be seen as a live training. Because meditation is about stress relief, etc., and what we offer is a sort of “training wheels” meditation experience which is designed to get people used to meditating (the training aspect). Where do you think we land, in terms of VAT liability? Any insight would be very much appreciated. Our goal is to get the world meditating together ( so it would be a real oversight to exclude EU members!

Erik van der Eijk on the 15 Dec 2014 at 07:47:38:

I’ve read so many resources but can’t seem to work out how we have to improve our woocommerce shop.

We run a woocommerce marketplace with front end submissions, where members from any country can sell their products and services to website visitors from any country. and could be very helpful if we were the seller. We are not, we merely provide a service to sellers.

Anyone an idea how we can make sure the correct shop-base VAT tariff of every seller will be calculated automatically?

Neil Perryman on the 17 Dec 2014 at 14:21:09:

I’m really confused about how this will effect people who use crowd-sourcing platforms, like Kickstarter and Indigo. I self-publish books (paperbacks and ebooks) and I use Kickstarter to pre-sell these books, which then allows me to fund the whole enterprise (much like how an advance would work). I don’t sell anything directly from my own website (when the books are finished I use Smashwords and Amazon for those people who didn’t back the Kickstarter and I know they will deal with the VAT issue at their end) and Kickstarter also takes 20% VAT from their fees, too.

I’m way below the threshold for being VAT registered. I barely make enough to pay income tax.

So, I’m not technically selling anything directly from my website – I’m using other platforms to facilitate this – and if I follow the HRMC flowchart, the rule doesn’t seem to effect me. Or does it effect me if one of my eBook backers is from, say Germany? Am I in trouble or not? Or should I ban EU (not including UK) residents from backing the eBook reward tiers? I honestly don’t know what to do for the best.

ChrisD on the 20 Dec 2014 at 17:30:23:

No one so far has mentioned registered charities ( I mean registered with the Charity Commission, not VAT). There are a lot who have websites, selling all kinds of things to raise money. I don’t know whether many of them sell digital products, but they might. If this VAT issue spreads on to physical goods online in the future, it will drag an awful lot of charities into the VAT mess. They don’t all make millions; if you analyse info from the Charity Commission website, you’ll find that many account for incomes less than £10,000 a year; and also many more are well under £50k. A vast percentage, heritage especially, are run by volunteers; I am one; and I’m hanged if I want to see my organisation dragged into doing VAT paperwork….we all have enough to do as it is, without even MORE admin.

Secondly; there are countless craftspeople and artists online, using blogs, websites, specialist online galleries etc; again a huge majority selling really small volumes, insufficient to bother the taxman, let alone the VAT man. Some may also be selling digitally, like art courses, e books, etc etc. again small-scale. Legislation like this will destroy many.

As for the “you can’t refuse to sell to someone in the EU because it’s discrimination” statements I’ve seen elsewhere, well guess what, it’s going to happen, discrimination laws or not. I can see a lot of online shopping dying a death…not everyone buys from the Big Boys…shoppers enjoy niche markets and small traders.
So much for the EU and its “equal opportunities” bull. No wonder the whole pack of cards is going down; the faster the better.

Zarek Rahman on the 23 Dec 2014 at 11:27:17:

I’m a UK lawyer and I’ve just advised Payhip (a digital distribution platform) on how to deal with this.

The basic idea is that they will change their business model to make the relationship between you (author) and them (platform) into a B2B relationship by buying a licence to reproduce your content, then sell that licence onto customers on a B2C basis (meaning the VAT & MOSS stuff is their headache, not yours).

They’ve just put out a blog post which explains the change – Hopefully this is the solution many of you have been looking for!

Fabio Gangarossa on the 25 Dec 2014 at 14:38:12:

Hello everyone, and thanks for this lovely guide and for your comments.

To my horror, I only just realised TWO DAYS AGO that my UK Ltd Company (currently below threshold), currently selling to nearly all Italian businesses and/or individuals, will be forced to register for VAT and use MOSS.

We have, therefore, applied for our VAT number to be used with MOSS.

However, a few things are yet unclear to me, please kindly help me to understand.

a) if I sell to a UK client (therefore my own EU member state) will I need to apply VAT in EVERY case, regardless of the sale being B2B or B2C ?

b) We will definitely NOT get our VAT number in time for 1 January. How do I need to invoice my customers in the interim period?

Thanks to all those who will help us to clear the fog in our mind.

Jonathan on the 01 Jan 2015 at 09:30:25:

Is there any way to get PayPal to ask for a vat number and if it is supplied then not charge vat?

Andy on the 03 Jan 2015 at 10:02:22:

Simple solution. Only three of my clients are outside of the UK (in Ireland) so I’ve informed them that I can no longer provide services to them – it’s simply not worth the hassle.

Darren on the 05 Jan 2015 at 08:44:52:

This is really confusing – I have currently removed all my digital downloads available on Etsy this morning as Etsy have sent an e-mail out about it a day before it came into effect (it’s great that they’ve just dropped that on us just like that!) and their attitude is that it’s our responsibility to

figure out which EU country the customer come from (even though at present they don’t supply that information – apparently they’re going to fix that within a few months!)

and charge the appropriate VAT rate on the digital download.

There are a number of people that have pointed out to them that in actual fact they are responsible for sorting the VAT out as it’s being sold via their platform and they’re taking payment for it through their system, and how on earth can they expect their sellers to comply when they can’t even get the information they require, and also there is no option to just restrict the digital download to a specific country (my initial idea was just to put a restriction on the download and make it available only to the UK or non-EU countries as I don’t have time to screw around with all this VAT – I barely make £2,000 a year running both my PC repair business and digital downloads, I don’t have the time or effort to mess around sorting VAT out as well on a couple of sales that last year totalled £10 – I might as well not sell the digital content for all the hassle it’s going to cause but at present Etsy haven’t implemented a restriction option – apparently though that is in the pipeline too – bit late really they should have planned this months ago and told their sellers about it months ago!).

Lee Mason on the 05 Jan 2015 at 17:17:09:

This has been a great resource, im know im a little late to the party, but have a little information regarding the “software licensing” part of whats covered.

Im UK based and after many calls with HMRC we belive we have the right answer regarding my specific business.

I sell php software which is specifically aimed at the web hosting industry (among other things).

As many others im below the threshold so would have to register.

However as my products are speicifically business to business these new VAT rules don’t apply anyway.

The key to the regulations are Business to Client purchases, business to business is unchanged (as you alluded to).

I was really worried about this at first thinking of all the extra admin it would add, but lukily for me (and hopefully this info helps someone else) these rules dont apply.

Sian on the 13 Jan 2015 at 14:45:57:

I’m based in UK and when I rang HMRC VAT helpline they said I needed to fill in an EC sales list like I already do for Apple stating how much VAT has been paid by the companies so HMRC can still reclaim it. Here are the VAT numbers so you don’t have to hunt around.

Facebook Ireland IE9692928F
Google Ireland IE6388047V
Apple Luxembourg LU 20165772

Of course if they start paying us through the US offices again, we won’t need to fill in any EC sales lists as it will be out of scope.

Mickey on the 15 Jan 2015 at 22:48:41:

I have been reading through the comments especially Adrian Jones. What no one seems to have spotted is that if you accidentally sell a download to say a Spanish resident who is a visitor to the UK you are breaking the rules by charging that person UK VAT. How on earth are you expected to find that out ?

Chris on the 19 Jan 2015 at 11:54:04:

I was under the impression that these thresholds applied:

Can anyone confirm that these thresholds have now gone away? If so, I think my only option is to block all sales to Europe other than the UK.

Raff on the 20 Jan 2015 at 11:14:14:

@Hennek, I had been planning to use FastSpring for a while, but brought forward the date when I found out about all the VAT changes. I’ve been using them since early December and have been happy with the service.

FastSpring acts as a reseller of my downloadable software, and therefore they deal with all the VAT issues and different territories. All the invoices to ‘my’ EU customers show FastSpring as the seller with FastSpring’s own EU VAT number. Likewise, customers in other countries like the U.S.A get appropriately compliant tax invoices. My details just appear as ‘Product Support’ on the invoices.

It’s interesting to see that FastSpring do indeed collect all the information like IP addresses cross-referenced to countries, full customer billing address etc for their own compliance.

Even if customers use the PayPal option on the FastSpring page, that is FastSpring’s PayPal, not mine. All I do is receive a simple payment from them twice a month. They payments arrive via FastSpring’s UK bank, so no bank charges, and takes 2-3 days.

Admittedly, they aren’t cheap at 5.9% plus $0.95, but it does save me a load of accounting hassle, plus I seem to get less declined transactions with them.

Of course, all sales to non-VAT registered EU customers now have VAT added, but I can’t say I’ve noticed lost sales because of that.

I did a fairly sophisticated integration with my own website backend to generate license keys and save information to a database, but you can just use a simple web-link to a FastSrping checkout page for your product if that’s all you need.

Hope someone finds this useful.

JB on the 05 Feb 2015 at 18:33:54:

Can any one help.
I am a small business in the UK and I design and build exhibition stands for companies that exhibit at trade shows across Europe and UK. When I supply the services to my customers the stands are always on hire. And I charge them 20% VAT
If the exhibition is Germany, I transport the stand from the UK and build the stand in the venue in Germany. Once the show is over I transport the stand back to the UK.

Does this “place of supply” rule mean that I need to register and pay VAT in every country within the EU where I’m building the exhibition stands?

This is a very confusing rule and hope to get a better understanding of what I should do.


george on the 05 Feb 2015 at 22:41:25:

Why not ensure that data, music, or digital content sold is executed from a UK server. Go one step further and ensure data sales are executed from a tax haven.

Bitcoiner on the 20 Feb 2015 at 09:27:00:

Can customers not just order someone or a company from outside of the EU to purchase the item for them ? Doesn’t that remove the tax issue ?

Dan Ransome on the 21 Feb 2015 at 15:48:57:

What a load of rubbish – as if being a freelancer isn’t more than enough work already…!

Simon Sparkes on the 02 Mar 2015 at 21:02:12:

I write and sell software so at the moment I have had to block all sales to the EU (thankfully most of my sales are outside the EU) however my latest concept would be to supply a different version of the software and licence that will only work with physically supplied media like a memory stick or CDROM and not with the online version of the software.

That way the software would be no longer be deemed as elctronically delivered and therefore not fall under the EU VAT rules.

Sara on the 05 Mar 2015 at 19:30:39:

Hi Rachel, thank you so much for this post, it has incredibly helped me a lot with real examples. I just have a quick question you might be able to answer. What about the other way around? I mean: I used to live in the UK and now I’ve moved to Spain (and now I’m VAT registered here in Spain) Do you know if it’s necessary for my UK clients to be VAT registered in order to received invoices from me?

Thank you so much in advance :)

JFR on the 03 Apr 2015 at 15:11:34:

suggest those interested on Vat changes go to

Mariano Tufro on the 10 Apr 2015 at 14:24:11:

This is a good summary by Deloitte:

DFC on the 21 Apr 2015 at 04:27:34:

Nice article, there is nothing like keeping it simple is it when it comes EU etc!!! Pain in the arse!

Megan on the 28 Apr 2015 at 10:52:23:

Great article on EU VAT. Thanks for sharing with us.

John KElly on the 06 May 2015 at 15:07:23:

My brother has an issue:

He has set up a UK company. It holds stock in the UK for dispatch to Eire customers.
However, invoicing to the Eire customers is done by his parent company in Cyprus (ie there is no invoice direct UK-Eire).
What’s the VAT situation here? As I see it, there should be no VAT on the invoices between Cyprus and Eire. But does the fact that goods are dispatched from the UK have any implication at all?

RAB on the 12 Jun 2015 at 15:22:00:

Rachel, do you have an answer to vlad’s Question “Joe (UK business, unregistered for VAT) wants to send an invoice to a german company (registered for VAT) for £100. What’s the total amount that Joe needs to bill the german company?” when all Joe does is to charge for his time – intellectual work.

Would appreciate your views.

TelB on the 23 Aug 2015 at 06:14:09:

Interestingly, for all those people thinking that physical products gets around this problem ie dvds, cd-rom, usb sticks etc.
It has been stated that this requirement to register for VAT in all EU countries (and US) will be extended to physical product. And, sooner rather than later. The expectation is as soon as 2016.
This has badly affected my business plans but it is clear that I need to understand the situation and plan compliance somehow.
In the meantime, I have blocked all sales to non-UK EU countries and hope that will give me a bit of time to work out what to do about the US.
Exactly, how does one selling through PayPal, automatically calculate sales-tax for the individual US states?

Peter on the 24 Sep 2015 at 05:37:23:

What a mess / nightmare!! The EU politicians who get paid no matter what; have made it a huge red tape nightmare. #idiots

Riccardo on the 19 Jan 2016 at 12:11:39:

Hope the UK will exit the EU as soon as possible.
About this subject, is very clear here
and even more here
The flowchart is the most clear stuff I’ve found out there.

For B2B there isn’t any problem.
For B2P you have to register for VAT in the target nation or a very much simpler VAT/Moss here in UK.

Unfortunately I live in UK but I won’t be allowed to vote for the EU referendum, otherwise would be an absolute NO! ESCAPE FROM EU before it’s too late! :-)

See ya!

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