26.01.15

VAT rules changed for businesses supplying digitised services to consumers in the European Union

On 1st January 2015, changes were made to EU VAT rules affecting businesses that supply “digitised services” direct to consumers. How does this affect independent labels?

  • If you sell digital music direct to fans around Europe from your OWN website, you may be affected by the changes. Please see further below.
  • If you sell digital music through an intermediary such as a digital music store (iTunes, Spotify etc) OR through a digital distributor (eg The state51 Conspiracy/Greedbag or Bandcamp) then the intermediary will deal with the VAT changes and obligations for you.
  • Sales of physical goods, including CDs and vinyl, are not affected by the change.

If you are selling digital music direct to consumers:

The new rules mean that the place of taxation is now determined by the location of the customer who receives the service, rather than the location of the supplier of the services. This triggers a VAT liability in every country in which a consumer has purchased a digital item directly from a seller.

If your business sells direct to consumers online, you can either register in each EU member state where you supply digitised services (which is likely to be complex), or you can register under the UK VAT ‘Mini One Stop Shop’ (VAT MOSS). Registering with VAT MOSS will mean that businesses will not have to register in each EU member state in which they have customers. Businesses have been able to register to use UK VAT MOSS since 20 October 2014 and an online registration service is available.

For more information on registering with UK VAT MOSS visit gov.uk/register-and-use-the-vat-mini-one-stop-shop

For further information on these changes, please visit gov.uk/vat-on-digital-services-in-the-eu

More information on this may become available in the coming weeks so AIM members are advised to keep an eye out for updates from us. Meanwhile, if members have any questions, feel free to contact AIM’s Legal and Business Affairs team.