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Apple App Store Impacted By EU VAT Change

by Ulrika Lomas,, Brussels

18 December 2014

Tech giant Apple has sent a notification to developers concerning the change to EU value-added tax (VAT) place of supply rules for broadcasting, telecommunication, and electronic services from January 1.

Its notice said that there would be a change to the way that value-added tax is to be calculated on purchases from its App Store for European Union consumers. "On January 1, 2015, VAT rates for apps will change for all territories in the European Union. VAT will be based on the customer's country of residence, instead of being the same across all EU territories," the company said.

"The effect for consumers is that prices for apps could potentially increase if customers reside in an EU country with a high tax rate." In fact, only consumers based in Luxembourg, where iTunes SARL is based, should see no change in the VAT they incur on purchases.

For developers, VAT at the appropriate rate will be deducted from their proceeds from EU sales, Apple said.

With small companies concerned that the administrative burden of the EU-wide changes could be overwhelming, Apple and other companies who act as agents or intermediaries are likely to benefit from the EU changes. To avoid the challenge of complying with the reforms, some businesses may instead decide to use app stores.

The changes require businesses supplying the following services to EU consumers to register for VAT, regardless of whether their supplies exceed the nation's VAT registration threshold:

  • Images or text, such as photos, screensavers, e-books, and other digitized documents, such as pdf files;
  • Music, films, and games, including games of chance and gambling games, and of programs on demand;
  • Online magazines;
  • Website supply or web hosting services;
  • Distance maintenance of programs and equipment;
  • Supplies of software and software updates; and
  • Advertising space on a website.

Companies may, however, register in a single member state under the Mini One Stop Shop (MOSS) schemes being offered by EU member states to account for VAT on the services in a single member state.

TAGS: compliance | VAT rates | VAT registration / deregistration | tax | business | VAT cross-border transactions | Luxembourg | gambling | European Union (EU) | services | VAT goods & services classification | VAT compliance matters | Europe

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