VAT on Digital Services
Do you sell digital services such as: music or software downloads, e-books or online videos? If so, do you know where your customers are, and whether they are businesses or individuals?When you sell digital services across international borders you will have to collect information about your customers to determine if they are businesses or not, and where they are based. Where your international sale is to a non-business customer, you have to charge that customer VAT of the country where he or she is located (if that's in the EU). You will also have to register in your customer's country. This is because the VAT threshold for traders selling into other EU countries is zero.
For many music and software creators - if you sell through a large online store, that store sorts out VAT. So you don't have to worry about it. However, if you sell your digital product directly to non-business customers who are located in other EU countries, you must deal with the VAT consequences.
The easiest way to do this will be through the HMRC website under a system called VAT-MOSS. It will allow you to account for VAT in all the EU countries you sell services to.
However, in order to use VAT-MOSS you must first be registered for in the UK. If you are not already registered, you need to pick one of these options:
- register for VAT in the UK;
- stop selling digital services to non-business customers outside the UK; or
- sell only through online stores or other businesses.
Cloud Accounting (NI) can help you make the right VAT choice and do the necessary registrations.