Did something happen with VAT on Amazon UK?

[mr ploppy]

My ebooks are all cheaper than they were yesterday. Has Luxemborg changed their VAT rate or something?

[HarryT]

There was talk of Luxembourg changing their VAT rate on eBooks to 3%. I don't know if this has happened. Could account for it.

Can you give an example of a price change, and we can see if the numbers fit.

[HarryT]

To answer the question myself:

Last week I bought an eBook from Amazon for £8.87. Now that same book costs £7.93.

The £8.87 was for a Luxembourg VAT rate of 15%, so without VAT the price would be:

8.87/1.15 = £7.71

The price is now £7.93, which means the rate of VAT that's been charged is:

7.93 / 7.71 = 1.03

So yes, looks like the VAT rate is now 3%.

Very good news!

[pdurrant]

Oh, very good news indeed!

[HarryT]

I'm VERY surprised they've been able to do this. I was under the impression that the EU's "eCommerce VAT directive" required all member states to charge their full rates of VAT for eBooks.

[pdurrant]

And I can confirm this change for items published through Kindle Direct Publishing too. One of my books that used to be £0.89 is now £0.79, and in Euro-priced stores, the €0.99 price is now €0.89

Also, on the KDP pricing information page it now says

The list price you provide is VAT-EXCLUSIVE. The VAT we will add for sales to customers in EU countries from our EU Kindle Stores will be 3%. VAT rates, where applicable, vary for other countries.

[pdurrant]

Originally Posted by HarryT

I'm VERY surprised they've been able to do this. I was under the impression that the EU's "eCommerce VAT directive" required all member states to charge their full rates of VAT for eBooks.

I agree. As far as I can see, it does. However, I think that France is also reducing the eBook VAT rate to the same it uses for paper books.

I suspect that the EU regulations will be changed.

[HarryT]

Nice to have a piece of good news on eBook prices for once!

[mr ploppy]

Do the other ebook vendors dodge UK VAT as well, or is it likely to generate an automatic price war?

[HarryT]

Waterstones, etc, are UK-based and hence charge the standard UK rate of 20%.

[pdurrant]

Originally Posted by mr ploppy

Do the other ebook vendors dodge UK VAT as well, or is it likely to generate an automatic price war?

Strictly speaking, Amazon don't dodge UK VAT. As a non-EU company, they're allowed to choose where to register for VAT in the EU, and they chose Luxembourg.

I suspect that the increase in electronic goods will lead to the tax authorities deciding that the tax to be paid should be the rate in the purchasor's coutry, not that of the seller.

And we'll then have the anomalous situation that the point of sale is the vendor's location, but the tax paid will be based on the purchasor's location.

And it'll be some years before things settle down....

[HarryT]

It's strange, though, in the sense that when we buy physical goods from Amazon, we are dealing with Amazon UK, and we pay the standard UK 20% VAT rate. It's only for downloads that we deal with the Luxumbourg-based Amazon SarL, and pay (now) 3% VAT.

[Terisa de morgan]

Originally Posted by HarryT

It's strange, though, in the sense that when we buy physical goods from Amazon, we are dealing with Amazon UK, and we pay the standard UK 20% VAT rate. It's only for downloads that we deal with the Luxumbourg-based Amazon SarL, and pay (now) 3% VAT.

Well, I deal with Amazon.com, and no VAT for paper books but VAT acording to my country (Spain) for downloads. This is only another mess

[Little.Egret]

Originally Posted by pdurrant

Strictly speaking, Amazon don't dodge UK VAT. As a non-EU company, they're allowed to choose where to register for VAT in the EU, and they chose Luxembourg.

I suspect that the increase in electronic goods will lead to the tax authorities deciding that the tax to be paid should be the rate in the purchaser's country, not that of the seller.

And we'll then have the anomalous situation that the point of sale is the vendor's location, but the tax paid will be based on the purchasor's location.

And it'll be some years before things settle down....

"allowed to choose" I understand that Waterstones could do the same just by setting up a Luxenbourg subsidary company for downloads just as Amazon did.

Browsing the EU's site, I found that "rate in the purchaser's country" had already been agreed but not until 2015 !

And for printed books and other goods by Mail Order Amazon.co.uk already do it that way and charge EU customers at their country's VAT rate as soon as sales to that country exceed the VAT threshold.

[pdurrant]

Originally Posted by Little.Egret

Browsing the EU's site, I found that "rate in the purchaser's country" had already been agreed but not until 2015 !

Oh, good find. Hopefully by then the UK will have adjusted the UK's ebook VAT rate to match the UK's printed book VAT rate.

Until then, I'm a lot happier with 3% VAT on ebooks instead of 15%.