Knowledge center

The upcoming EU VAT changes applicable from January 1, 2015

What is changing?

As per the new EU VAT rules, beginning from January 1, 2015, the place of taxation will be determined by the location of the consumer, not the location of the business. Thus, businesses will be required to charge and account for VAT in the customer’s country.

These rules only apply to all B2C sales of telecommunications, broadcasting & digital services made within the EU. Sales of physical goods will remain unaffected.

To remain compliant, businesses will be required to collect two pieces of information as an evidence of the customer’s location and then store the collected data for a period of 10 years.

For more information, you can check out our resource site that has detailed information about the new EU VAT rules - http://euvat.chargebee.com

Our new EU VAT 2015 feature will help you comply with the new rules. 

How do I configure the new EU VAT feature in ChargeBee?

To get going with this, you’ll just have to do two things in your site settings -

a) Specify whether you sell digital services or not

b) Select the EU countries in which you’re registered for VAT or select all 28 EU countries if you’ve registered for VATMOSS.

The configuration will just take a couple of minutes to complete. (it can only be done by admin users)

Here’s a step-by-step instruction guide: https://www.chargebee.com/docs/tax.html#european-union-value-added-tax-eu-vat

How does it work?

Once a consumer based in EU signs up for your service, the following process will be followed for location validation - 

• First, the location is identified as the “country” that is entered as the billing country in the billing information.
  
• In the next step, the identified country is verified - with the IP address or Credit Card’s Bank Identification Number, provided during the transaction.

The appropriate VAT rate is applied as per the identified EU country.

If a valid VAT registration number is provided during checkout, it will be considered a B2B transaction and VAT will NOT be applied. A VAT exemption note will be added to the invoice.

For manual invoices, you’ll have to maintain previous sales records as proof of evidence.

What happens to my existing subscriptions? 

To ensure that existing subscriptions are compliant, we’ve already done an assessment and have reached out to some of you, who have accounts that will get affected. If you haven’t received any notification related to this, your existing subscriptions will renew without any trouble, if you have completed the above mentioned steps.