On January 1, 2015, the EU is implementing new rules for how VAT is calculated on digital items sold to consumers, including pre-recorded (asynchronous) online courses. There is considerable confusion about what EU VAT changes will mean for online course providers. This post provides our recommendation for how instructors can comply with rule changes using Skilljar’s course platform.
Disclaimer: We are not tax experts. Please consult your own advisor with questions and risks specific to your situation.
Rule changes:
Our summary: For certain digital items sold to EU consumers, instead of VAT being applied and calculated based on the seller’s location, it will be applied and calculated based on the consumer’s location.
Who it applies to:
- US (and non-EU) businesses who sell to EU consumers
- EU businesses who sell to EU consumers
- Packaged digital products, including eBooks, PDFs, MP3s, and recorded online courses
Who it does not apply to:
- US (and non-EU) businesses who sell to EU businesses
- EU businesses who sell to EU businesses
- Virtual live training courses
This means that if you are any business (EU and non-EU) that sells an online video course to an EU consumer, you are technically liable for VAT starting January 1. The responsibility is on the seller to track where consumers are located and calculate the appropriate VAT rate.
Our current recommendation if your business is affected:
- Register for VAT MOSS, the one stop shop for all EU countries. Instructions here.
- Use Stripe as your only payment gateway (instructions for setting up on Skilljar are here). Paypal does not provide sufficient tracking with only the consumer email address.
- Register for Quaderno, an automated way to send invoices to EU consumers based on your Stripe account and calculate appropriate VAT. Note that you should build VAT into your overall course economics. https://quaderno.io/stripe-vat-invoicing/
There is still uncertainty about the transition, so we will update this post if and when we learn more.