The Short Version
- French Today will now be forced to add your country’s audiobook VAT rate to all purchases starting January 1st 2015
- Based on where in the EU you are located, this means prices will go up by 3% to 27% starting next month.
- Prices outside the EU will remain the same.
The Explanation: the EU law changes affecting all online stores
Few people are aware of it but the EU is making a significant change to the way VAT is calculated on virtual products (audiobooks, ebooks, software…). Up until now, the VAT rate was based on the location of the seller, but as of 2015, the VAT rate charged will be based on the location of the buyer. This means that all online stores now need to figure out where the buyer is shopping from, charge the appropriate VAT rate from that country and then report all these to all 28 EU countries every 3 months! Online sellers are even liable to insure that buyers don’t misrepresent where they are coming from AND keep all that data and relevant proofs for 10 years!
This change will affect all of you EU consumers as you will see online price changes in purchases ranging from Apple to Amazon (actually, this law was specifically put in place to stop large companies from moving their headquarters to the lowest VAT rate countries such as Luxembourg).
Why it affects French Today’s audiobook prices
France has a special audiobook only reduced VAT rate of just 5.5%. Because of that and the fact that EU accounts for less then 25% of our sales worldwide, we decided to absorb that cost into our benefits and keep a single worldwide price in place to make it easy for all customers. We’ve absorbed that cost for the last 2 years and filed our VAT requirements without impacting you the buyer.
Now that we have to calculate VAT based on the buyers location, if that buyer is in Hungary, it means a VAT rate of 27% instead of 5.5%. This means that of course we can not absorb this 4x or even 5x increase anymore.
So starting December 31st, our French Today store will automatically add the appropriate VAT to your shopping cart based on the EU country you are shopping from. Outside of the EU, audiobook prices will remain the same.
Brand new for everyone
This law is brand new and will most likely go through some adjustments in the next few years. It is already causing a huge issue with online retailers based in the UK for example and impacts many small businesses that are even deciding to stop selling electronic versions of their products altogether!
We wish this new law would not impact prices to the consumers but unfortunately, it’s not possible for us to avoid (note that technically, any online store – even based in the US or AUS – will have to adhere to these new EU regulations. It is not just limited to EU based merchants).
I hope my explanation was clear and that you understand how it will unfortunately affect our pricing to EU customers. Feel free to contact us if you need any additional clarification or if you have any questions.