The scope of the Taxamo according New EU VAT rules is quite extensive. The ecommerce market has grown at a phenomenal rate in the past decade, one the reasons why governments now want a slice of the action.
The introduction of the new EU VAT rules is an effort to reclaim revenue that has - by its very nature - been difficult to tax. The main change in the new legislation, which comes into effect on January 1, 2015, is that it now all about the end consumer's location. The existing rule determines taxation based on where the supplier of the service is located.
A French-based software download company with B2C sales (remember, the rule only affects B2C sales) in Germany, currently charges French VAT. Post-2015 that French-based company must start charging German VAT on all their B2C sales there.
The interesting element of the new EU VAT rules is what will those e-services suppliers who set up HQ in Luxembourg do with the price discrepancy that will arise post-2015.
Amazon, for example, is based in Luxembourg to avail of the country's 'super reduced' 3& VAT rate on ebook downloads. What will Amazon do with the 17%+ VAT difference when charging VAT on downloads post-2015? Will the company absorb the cost or pass it on to the consumer?
We all know the answer, so the consumer of this specific product will more than likely lose out due to the new rules. However, EU member states with a large number of ebook consumers will benefit from a VAT windfall as they will now receive the tax due on these products, not Luxembourg.
The ebook market is one part of the overall scope of the new EU VAT rules. The new rules everything from online gaming, to downloads of music, games, software, and to website hosting.
All electronic services merchants - no matter their size, or their revenue in the EU - must comply with these new rules. Governments around the world will be observing how this EU plan manifests itself. If it works then these new EU VAT rules will be replicated worldwide.