Please be aware that I am not an accountant and the below information reflects my understanding of the situation. I highly recommend reading the links I’ve given at the end.
On 1 January 2015, European VAT law is changing. Instead of the old method of applying VAT at the seller’s location, it will now apply to the buyer. This means that if you sell directly to anyone in Europe, you will be liable to pay VAT to their country’s government – with all the administration that entails, including detailed record-keeping and quarterly returns to each of the 28 countries if you’ve sold even one item in each. Not fun!
As I understand it, this only applies to you if you sell directly from your website. There are platforms we can use to go between and take the tax responsibility. Selling ebooks via Kindle, for example, means that Amazon will take care of the VAT admin as stated in their message a few weeks back. If you still want to sell from your own website, you’d have to ensure you block purchases from the EU. This is technically not possible once we factor in things like proxies: a determined buyer can fake their location.
At present, EU law does not force sales platforms to take on the VAT responsibility, although many of them do already. It seems we need to ensure that the platforms we use are doing this.
From what I have read, the EU governments have failed to consider the impact on microbusinesses. No doubt this will become clear as the new law comes into effect, so that we can hope for further clarification as time goes on.
In the meantime, if you are selling anything directly from your own site, and if you don’t want to register for VAT, it might be a good idea to stop – and search for a suitable platform to use instead. What a bother, eh?
For more information, please read Tim Gray’s article at http://wordsthatchangetheworld.com/2014/eudigitalvat/. This is a good, simple summary.
There’s a long and detailed post at One Man Band Accounting, which is based in the UK – very good for understanding more of the ins and outs of it: http://onemanbandaccounting.co.uk/eu-vat-changes-2015/
Further news for those who use Paypal or similar: http://www.clarejosa.com/articles/from-passion-to-purpose/what-you-need-to-know-if-youre-relying-on-your-payment-processor-to-dig-you-out-of-the-vat-moss-mess/
Fill in the “EU VAT Action” survey about how this will affect your business