The publishing industry has seen much change over the last few years and this has created a number of new VAT challenges.
5As the world embraces the digital age, the publishing industry is seeing demand shift from the usual printed books, magazines and newspapers to e-books, digital editions and online digital media subscriptions.
The introduction of new rules for electronically supplied services supplied on a B2C basis, that became effective on 1 January 2015 , have put extra burdens on those in the industry making these “digital” supplies. This is because such supplies are now subject to local VAT in the country where the customer belongs – a rule that has the consequence of businesses potentially needing to obtain and manage additional registrations in countries around the EU.
The selling of printed publications can also create in some instances the need to register for VAT in the Member State where the publications are delivered to. Therefore, it is important for the person to understand the different rates of VAT that each Member State applies to these products as well as local legislation and the compliance obligations that this brings. When a business supplies both physical and electronic products, the compliance obligations can be doubled.
Generally, most B2B supplies within the industry will not create a liability to register for VAT in other Member States, unless certain circumstances arise and local sales are made. For example, when publications are printed and delivered from local locations.
However, if you are making B2C supplies into other Member States, whether this be printed books or e-books, it is important to understand that the both can mean having to register for VAT in the Member State you are selling to but for different reasons.
The sale of books, magazines and similar publications fall under the place of supply rules for goods and this means that the distance selling rules have to be considered. Whereas the sale of e-books, online magazines and other electronic publications will fall under the place of supply rules for electronically supplied services.
Where the obligation to account for local VAT arises due to the supply of goods, a VAT registration in the Member State where they are delivered to will be necessary. The VAT registration application process varies between Member States, with differences in the documentary evidence required by the local tax authority, prior to approval of the application. More information on our VAT registration service can be found here. If an obligation to account for local VAT is created following supplies of the services then a registration might also be required but in some instances, use of the mini-one-stop-shop (MOSS) could be possible.
The selling of goods online or by mail order which are delivered from one Member State to a customer in another Member State, who is not registered or liable to be registered for VAT, is known as distance selling. This can include the making is supplies to not only private individual consumers but also non-registered entities such as public bodies, charities and businesses which are not VAT registered because their turnover has not yet breached the threshold.
Each Member State has its own distance selling threshold ranging from €35,000 to €100,000. Once the value of your supplies in a calendar year breaches that threshold you will be liable to register and account for VAT in that Member State. You can find information on each countries distance selling thresholds here.
As noted above, e-books, online magazines and similar digitised documents are for VAT purposes electronically supplied services. The place of supply of these services for B2C supplies is where the customer belongs. Therefore, because there is no threshold for these supplies (unlike the distance sales of goods) as soon as a sale is made to a private individual or non-VAT registered person in another Member State, you may need to register and account for VAT in that Member State.
It should be noted, there are lots of complex rules around what constitutes electronically supplied services and determining where the customer belongs and how to evidence this. We would advise contacting Accordance to discuss this further if you think your business is making these types of supplies.
When the new rules came in on 1 January 2015, the VAT MOSS was also introduced. This is an optional, simplified way of declaring VAT on B2C supplies of electronically supplied services without having to register for VAT in each Member State you sell to.
If you are registered for VAT in one Member State, you can complete a quarterly VAT return that allows you to account for the VAT due on all of your B2C electronically supplied services made across the EU. That one MOSS VAT return will calculate the VAT owed to each EU Member State, however, you will only be required to make one payment of VAT. The tax authority which receives the MOSS return will then provide each other Member State’s tax authorities with the individual amounts of VAT due and send the payment to them.
It is important to note that Member States apply different VAT rates to the supplies made in the industry. Most Member States apply zero or reduced VAT rates to the supply of books, magazines, newspapers and similar publications. Whereas for e-books, online magazines and newspaper, the standard rate of VAT would usually apply, although the EU is now in consultation to bring these types of digital publications in line with the printed versions.
Therefore, it is important to understand the different rates within each Member State and how these may apply to the products you sell. With VAT rates on these products ranging from 0% to 27%, it can be especially important when you offer one gross price on your website and the VAT due hits your profit margin.
Accordance has vast experience on providing advice in relation to the publishing industry and our team is on hand to assist.