Changes to VAT rules in Europe
The year 2015 is coming and it’s bringing a slew of changes with it. One of those changes affects the way VAT tax is applied on “electronic services” (such as a domain name) purchased by European residents.
Simply put: people living within the European Union must pay for these electronic services (i.e. “nonmaterial goods”, more info on this is linked to further down on the page) no longer with the TVA of the country where the merchant is located (practically speaking, from where the services were purchased), but rather, the VAT of the country of residence (country where the service was consumed). The territorial rules pertaining to purchases made by European organization which have an intra community VAT number (mainly companies) remain unchanged.
Since Gandi sells electronic services, all of our products (except t-shirts) will be affected by this change.
To give you a concrete example, take the VAT rates of a few EU countries:
- France: 20%
- Spain: 16%
- Denmark: 25%
If a French customer buys a domain that costs €10 from a company located in Spain, he or she will pay €12 (€10 + 20% French VAT). A Danish customer buying the same domain from the same Spanish company would pay €12.50 (€10 + 25% Danish VAT). And finally, a Spanish customer would pay €11.60 (€10 + 16% Spanish VAT).
Note that this measure only affects so-called “Telecommunications, broadcasting & other online services”, as defined by the VAT Directive. Therefore, actual physical goods sold via “distance selling” (clothing, etc) over the Internet are not affected by this change.
Note also that the sale of electronic services to persons who reside in a non-European Union country will not be subject to European VAT (export), even if these countries are geographically European (ex. Switzerland).
Some examples of electronic services concerned by this are:
- Providing and hosting of websites, remote maintenance of programs and hardware,
- Providing of software and their updates,
- Providing of images, information and texts, and databases,
- Providing of music, films, videogames and online gambling, as well as political, cultural, artistic, sports, scientific, or entertainment programs,
- Providing of online educational services.