This is a guest contribution from freelance writer Jawat Khan.
Ask any professional blogger and he’ll tell you that selling eBooks, eCourses, trainings, tutorials and other forms of digital products is one of the most profitable ways of making a sustainable income from your blog.
It’s not easy, of course.
You need to spend countless hours creating high quality content, responding to reader comments, building relationships, spending money on advertising and creating products that people would gladly pay for.
It’s real hard work. And anyone who’s been on this path knows its challenges, and the personal and professional sacrifices that it demands.
Unfortunately, it just got a whole lot harder.
The EU VAT-MOSS Legislation
The European Union has recently introduced a new value added tax (VAT) that’ll come in to effect from 01 January 2015. This new VAT will be applicable on any digital products that are sold to buyers anywhere in the EU.
And this is where it gets really tough for us.
The tax will be calculated on the basis of the buyer’s location, NOT the seller. So even if you reside outside the EU you’d be required to pay this VAT on each sale that you make to a customer based in any of the 28 EU member states.
So, for example, if you’re a blogger based in Australia and a buyer from Germany or any other EU state purchases an eBook from your blog, YOU will have to pay the VAT on top of your product price.
What’s more, you’d need to collect evidence of your sales that indicate the buyer’s location based on his IP address and credit card information. You’d then need to submit this evidence along with your returns every quarter.
Honestly, one of the best things about making an online income, for me, is the lack of administrative costs and unnecessary legal documentation. But with this VAT, all of us, the bloggers and digital sellers, would need to collect evidence and submit returns on our sales.
To make this process slightly simpler, you can register with any “Mini One Stop Shop” (MOSS) in any EU member state (UK or Ireland being the most convenient). Your VAT will then be distributed to the relevant countries according to their tax rates.
You are also required to keep the record of your sales, as evidence, for at least 10 years to avoid any legal problems in selling to EU customers.
All this is very complex legal stuff.
The objective of this post is not to give you any legal advice. I’m no expert myself. But I just want you to know about the potential repercussions of this law on your blogging income. You should definitely seek professional advice on this matter and study this law in more detail here.
So What Can Be Done About EU VAT-MOSS?
Being a blogger myself, I know you might be confused and upset by this law. Some of the most prominent freelance writers, bloggers and digital sellers have express public outrage on Twitter in reaction to this law. They’ve also started an online petition that is gaining momentum quickly. You can vote on this petition here.
But apart from expressing disappointment at this law, you need to do the following things.
- Consult with your ecommerce software provider and tell them about this development. You’ll need their help in collecting buyer data as purchase evidence. You need to collect buyer location data based on the IP address and credit card information.
- You need to keep this record with you for at least 10 years so that you can present it anytime it is required.
- You need to submit your VAT returns every quarter to MOSS.
- Or you can take the hard decision and stop selling to EU buyers completely to avoid any of these legal issues. But you’d need the help of your ecommerce software provider here as well, because you’d need to block buyers from selected countries on the basis of their IP address and credit card information. You can’t do it manually.
Several ecommerce software providers have made announcements on what they’re doing about this law and the additional requirements that it has brought with it. PayPal recently announced that they’ll be able to store buyer location with their API. But there hasn’t been any announcement from them about data storage and country blocking.
In the last week, Selz has introduced a series of features that cover all the VAT-MOSS requirements. By enabling the EU VAT-MOSS feature in your Selz dashboard, you can receive automatically degenerated reports about the exact location of your buyers based on their IP address and credit card.
Selz will calculate the applicable VAT rate in your buyer’s country, which you can add on top of your product’s sales price. It also stores this information for up to 10 years and lets you export it into an excel sheet for MOSS submission.
In case you decide to completely block EU buyers (approx. 507,000,000 potential customers) Selz allows you to apply country based restrictions on downloads.
There’s a hot debate in the blogging community about the EU VAT-MOSS that will come into effect from 01 January 2015. There’s still some confusion about its application and how it will impact bloggers and digital sellers from different countries. You can follow Twitter updates on this subject on #VATMOSS and #VATMESS hashtags. At the same time, you should make sure that you have the right tools to record the required buyer information for VAT submission, in case the law remains unchanged.