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From 1st January 2015, the rules around taxation when selling digital services such as PDFs and graphics to private customers within the European Union changed. The place of taxation for digital services is now determined by the normal residence of the customer.

Guidance from HMRC:
VAT: businesses supplying digital services to private consumers

Note that the new rules apply only where a UK business meets all the following criteria:
  • supplies digital services from the UK to another EU member state (goods and non-digital services sold over the internet are not within scope)
  • supplies those services to a private consumer in another EU member state (business to business sales are not within scope)
  • charges for that supply (digital services provided free of charge are outside the scope of VAT)

I sell PDF patterns, printables or graphics on Folksy. Are these digital services?

The definition of whether or not something is a digital service depends on the level of human intervention that occurs in that supply. As there is no automated system to allow customers to download purchased items from Folksy, the majority of sellers will not currently be affected by the new legislation, but there could be a very small number who will be.  
The new rules do not apply to PDF patterns, printables or graphics sold through Folksy if they are supplied to a customer by manually attaching a PDF or file to an individually written email. 

However, if a PDF pattern, printable or graphic is sold through Folksy but delivered to a customer by automatic download from another site (e.g. your own website), then this may be regarded as an e-service as the level of automation is more significant. In this instance, the new legislation does apply and you will need to register for the VAT MOSS scheme.

Why isn't Folksy handling the VAT for me?

The HMRC have produced a flowchart which indicates that the new rules do not apply to individual sellers when selling through marketplaces. This is because on many marketplaces, the sales contract is between the buyer and the marketplace, unlike on on Folksy where the transaction is directly between you and your buyer. After reviewing how the Folksy platform currently operates, HMRC does not consider that our platform is responsible for accounting for the VAT on business to consumer supplies of digital services.

I am affected by VAT MOSS. Is Folksy doing anything to help me comply?

We will be extending the information that sellers receive about each sale to include the country code the item has been sold to and the price of that item (excluding VAT). This will be given to sellers either monthly in their bill or as a separate document.

Further Reading

If you still have concerns or questions about VAT MOSS, please use the contact form or email and we will do our best to answer them.

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