EU Directive-For non-EU traders - selling digital services

[smartboyinuk]

The New EU Directive came in effect from 1st July 2003 is also known as :

 

VAT Special Scheme / "VAT on E-Commerce" Directive

 

You can take a free simple assessment whether you are eligible for this scheme here

 

More FAQs about this scheme here

 

Please take professional advice - as there is no substitute.

[smartboyinuk]

Well, what this means for a layman like me is as follows:

 

Lets, for example, say that I am a digital service provider (selling software, ebooks, games, any kind of downloads, electronic services like hosting, SEO services, web-designing, domain registration, auction services like ebay, etc) and I am based in USA - lets assume for this example (anywhere outside Europe).

 

If in any sale, my client is a consumer based in UK (for example), then I have to charge him VAT based on the VAT rate in UK (17.5%). If my client was based in Germany, then I would have to charge him German VAT rate. 15 EU countries are covered in this scheme and if my client is based anywhere in these 15 EU countries, then I would have to charge the VAT rate of my clients country.

 

Now lets assume the second case, where my client (who is a VAT registered business - e.g. RKG Consulting Ltd based in UK) who is buying a software from me, then I do not have to charge him VAT. He will account for VAT himself (reverse charge) and pay the VAT to Her Majesty's Custome & Excise - the VAT collecting agency in UK. So he will self account and this will be displayed in his VAT return.

 

The assumption here is that I do not have any establishment (office or trading presence) in the European Union.

 

If you have any further simple questions, please post them here.[/url]