EU VAT Treatment of Digital Services

NOTE: If you live in the UK, USA, Canada, Australasia or any other country outside the European Union, the information given here does not apply to you and you can ignore it.

As a result of new EU VAT legislation that came into force as of 1st January 2015, we are unable to sell downloaded products to customers in any EU countries except for the UK. However, you can still obtain our products on CD or USB stick. The countries affected are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Irish Republic, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

Why is this?

From 1st January 2015 the VAT rules for 'digital services', which includes downloaded software, changed. VAT must now be paid in the country where the customer resides, and not in the country of the seller. Digital services are those which are ordered and delivered online with no or minimal human involvement by the seller.

The legislation is intended to target large multi-national Corporations who tend to trade within the EU from wherever the VAT rate is lowest. Whilst we agree with the intention behind this, in practice the way the EU has chosen to go about it will cause many small businesses a huge problem and expense, and will even force some to stop trading.

We have considered this situation carefully and taken professional advice. The options available to us are:

  1. Register for VAT in every EU country we supply, calculate the VAT on every affected sale according to which country the customer lives in, complete VAT returns to each of those countries on a quarterly basis, and of course make VAT payments if necessary.
  2. Register for HMRC's "Mini-One-Stop-Shop" here in the UK, calculate the VAT on every affected sale according to which country the customer lives in, then complete VAT and VAT MOSS returns and any payment to HMRC, again on a quarterly basis.
  3. Use a third party marketplace to sell our affected products within the EU instead.
  4. Discontinue selling downloaded applications to the affected countries.

In deciding our response to this issue an important consideration is the fact that the very large majority of our customers are resident either in the UK or in countries outside Europe altogether, such as the USA. Very few of our customers reside in countries affected by the new regulations.

If we chose option 1 or 2 above the amount of work required for us to collect all the information needed to prove the location of each customer and hence the correct VAT rate to apply, and complete the necessary paperwork, not to mention accountants fees and so on, would be more than the value of those sales. Furthermore because of the requirement, as part of these new regulations, to store detailed customer and bank payment data for 10 years (yes, can you believe it, ten years!) we would also need to register as a data controller under the Data Protection Act.

We have considered option 3 but at present the commission and fees they take (as well as the VAT) would mean the prices would have to rise substantially.

So, with some reluctance, we have chosen the last option, to discontinue selling downloaded applications to the affected countries. Although this is unfortunate for our customers in those countries, in practice we have little choice. Downloaded applications to the affected countries were previously a very small proportion of the sales through our site, and losing that income will have much less consequence on our business than any of the other options. Furthermore, customers in these countries can still obtain our products but not as direct downloads from our website: they remain on sale on CD/USB.

So what happens if you live in an affected EU country and you attempt to buy a downloaded product?

If you live in one of the affected countries, and you attempt to purchase a product to be downloaded from our website, we will not honour the sale. Instead, we will cancel the sale and refund any money paid. You should instead correctly declare in our checkout process that you live within a non-UK EU country, and order the CD/USB version instead.

How does this impact upon existing customers in affected EU countries?

If you are an existing customer in one of the affected countries, note that this does not affect what you have already bought (prior to 2015). Up and until your current support/updates expiration date, you will still be able to download updates to your products(s) as and when they are made available, because you paid for them prior to the new legislation taking force. But, when you buy any new products, or you buy any further support/update extensions to existing products including those you bought before 2015, you will only be able to buy those on CD/USB, and updates to those products will only be available on CD/USB. Access to customer support is not affected by the new legislation, because it is not a digital service as it requires manual response by ourselves.

Where can I get more information?

For further information please visit the EU VAT Action website. You could also lobby your MP and/or MEP, and ask them to raise the matter with the appropriate ministers both at national and EU level.

Breeders Assistant® is a product of Tenset Technologies Ltd, All Rights Reserved. Breeders Assistant is a registered trademark of Tenset Technologies Ltd in the United Kingdom. v5.24
Apple, Mac and Macintosh are trademarks of Apple Inc., registered in the U.S. and other countries. Microsoft and Windows are registered trademarks of Microsoft Corporation in the U.S. and/or other countries. Lytebox image popup software ( © Markus Hay, used with permission under the terms of the Creative Commons Attribution-Share Attribution 3.0 license. Privacy Policy