Overview

As of January 1, 2015, new rules became effective on how to collect taxes on digital services sold to customers in the European Union (EU). Read this article to learn more about the new EU Value Added Tax (VAT) rules and what you can do to become compliant.

What has changed?

Before these new rules, calculating the VAT rate was based on your legal place of business. With the new rules, you must charge a VAT rate based on the location of your customers. You must now collect and report on many VAT rates.

These new EU VAT rules apply if:

• You sell digital services.

Digital services are products that are delivered in a digital format over the internet, telecommunications infrastructure, or broadcast service. For example, video on demand, music downloads, downloaded apps, and e-books are digital services. Placing an order through an electronic system for physical products is not a digital services and are excluded from these new rules.

• Your customer is a consumer with a billing address in the EU.