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How the EU Value-Added Tax Affects Online Sellers

The new EU Value-Added Tax (VAT) changes, effective January 1, 2015, have a major influence on online merchants selling digital goods. It’s important for e-tailers to understand what these changes mean. Our team at Ecwid has put together the below to make it easy for merchants to accommodate the new policies.

The New EU VAT Rule — What is it about?

Before we dive into what’s new with EU VAT, let’s start with the basics.


The Value Added Tax, or VAT, in the European Union is a general, broadly based consumption tax assessed on the value added to goods and services. If your business is based in the EU or UK and you sell to other consumers within the EU, then you probably have a VAT ID and file your VAT return to the country where your business is registered. If your business is based anywhere outside of the EU or UK, then you may not have a VAT ID. If you fall into the latter category and sell digital goods (or plan to) to customers based in the EU, then the rule changes also apply to you (and we’ll get into mechanics of registering in the sections below).

The New EU VAT Rule

Now, a closer look at the new EU VAT rule on digital goods — according to the new rules, if consumers from EU countries purchase digital goods from your online store, they must pay the EU VAT rate based on the EU country where they are established regardless of from where you sell.

More Details

Please see this page for more information about the EU VAT changes: Key Facts About The New EU VAT Rules

How this Affects You


Basically, you are affected by the new rules if the following are true:

  1. You sell downloadable digital goods or services including eBooks, hosting services,e-courses, recorded training videos, music or audio downloads etc.
    See also: What counts as an digital good?
  2. You sell to customers in EU countries (regardless of whether or not you sell from within an EU member state)


Here are the requirements to comply with the new rules:

  • Identify the location of your customer
  • Calculate the correct VAT rates basing on the customer location
  • Save your customer’s location with two pieces of non-conflicting evidence such as a billing address and matching IP address — you’ll need to retain information for 10 years
  • Submit a quarterly VAT return to each EU state, or use a MOSS (Mini One-Stop Shop),which reports to each EU state on your behalf

As a small business owner, the new rules present you with some difficult challenges that we’re prepared to help you navigate and comply.

How to Comply With the New Rules

Change is always hard, but here’s what you’ll need to do in order to continue selling digitale-goods to your consumers in EU countries:

  • Register for MOSS and get VAT ID. As a merchant, to comply with the new rules, register for the Mini One-Stop Shop Scheme, or MOSS. If your business is based in an EU country, then you may already have a VAT ID and can easily register for MOSS. If you don’t have a VAT ID and operate your business from outside the EU, then you can choose any EU country to be your Member State of identification. Note, for UK merchants with a UK VAT ID, you can register for MOSS through the HMRC.
  • Report quarterly. Each quarter, a merchant is required to submit, by electronic means, a MOSS VAT return, whether or not you have actually supplied e-goods. Where no supplies in the EU have been carried out for that quarter, a “nil return” is submitted. The MOSS VAT return (and accompanying payment) is required to be submitted within 20 days of the end of the period covered by the return. This document describes the matter in more details: Guide to the VAT mini One Stop Shop

E-tailers need to have the right tools in place to operate their store successfully and comply with laws around the world, like the EU VAT.

You can find additional information on the new EU VAT rules here.


by Jesse Ness, February 13, 2015 

Article courtesy of:  www.business2community.com

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