If you sell digital goods, you might already know about the EU Value-Added Tax (VAT) laws. It’s important for any merchant to understand what this means and how to adjust accordingly — and Ecwid has all the tools for achieving this.
In this article:
The Value Added Tax, or VAT is a general tax in the European Union assessed on the value added to goods and services.
According to the EU VAT rules on digital goods, a merchant must pay VAT, if customers from EU countries purchase digital goods from their online store. The VAT rate is based on the EU country where the buyer is located regardless of from where store is. Please see this page for more information about the EU VAT changes: Key Facts About The New EU VAT Rules
Basically, you are affected by these VAT rules if the following things are true:
- You sell downloadable digital goods or services including eBooks, hosting services, e-courses, recorded training videos, music or audio downloads etc. Check for more information: What counts as a digital good?
- You sell to customers in EU countries regardless of whether or not you sell from a EU member state.
Here are the requirements for the merchants to comply with the new rules:
- identify the location of your customer;
- calculate the correct VAT rates basing on the customer location;
- save your customer’s location with two pieces of non-conflicting evidence such as a billing address and matching IP address. You’ll need to keep the information for 10 years;
- submit a quarterly VAT return to each EU state your customers come from, or use a MOSS (Mini-One-Stop-Shop), which reports to each EU state on your behalf.
Here’s what you’ll need to do in order to sell digital goods to your customers in EU countries and meet the requirements:
1. Register for MOSS and get a VAT ID
As a merchant you can register for the Mini One Stop Shop, or MOSS. If your business is based in an EU country, then you may already have a VAT ID and can easily register for MOSS. If you don’t have a VAT ID and operate your business from outside the EU, you can choose any EU country to be your Member State of identification.
2. Report quarterly
Each quarter, a merchant is required to submit a MOSS VAT return by electronic means, whether or not they have actually supplied e-goods. The MOSS VAT return (and accompanying payment) is required to be submitted within 20 days after the end of the period covered by the return. The Guide to the VAT mini One Stop Shop describes the matter in more details.
1. Charge VAT on your products
You can set up VAT through the Ecwid Control Panel. Read about Setting up EU value-added tax (VAT) in Ecwid
2. Collect customer location
Ecwid already has a built-in capability to ask for a customer’s country. All you need to do is to enable the billing address form at checkout in your store:
- Go to your Ecwid Control Panel Settings → General → Cart & Checkout;
- Enable Ask for a billing address during checkout.
3. Validate customer location by IP
By default Ecwid detects a customer’s IP address automatically. It is saved in the order details and displayed in the Control Panel. If a customer’s IP address doesn’t match the billing address they enter at checkout, Ecwid displays a warning message on the order details page. According to the law requirements, in this case you should contact the customer and ask them to reconcile the discrepancy between the two sources of information.
4. Store customer location information for 10 years
The information in your Ecwid Control Panel is stored for as long as you want. No action is required from your side.
As a global company, Ecwid understands the challenges the merchants face and aims at providing them with the tools to operate their stores in compliance with the laws around the world.
HMRC (Her Majesty's Revenue and Customs) requires data protection to be in place if the seller stores customer information. However, since Ecwid is SaaS and your store data is fully hosted with us, we’re responsible for the data protection and we do take care of this. You can rest assured that we take all necessary measures to protect your customer information. Additionally, Ecwid is PCI-DSS Level 1 Service Provider certified, which is the gold standard for e-commerce solutions worldwide and ensures the highest level of security.Back to top