From 1 January 2015, new regulations apply to VAT charged on telecommunications, radio, television and other electronically provided services. From now on, a service of this kind must no longer be charged at the VAT rate in force in the EU Member State in which the service provider is based, but at the rate that applies in the country of the recipient. Take, for example, a company based in Germany that is selling an e-book or an app. From the beginning of this year it can no longer charge VAT at a flat rate of 19% for this, unless it is selling it to a customer in Germany. A Swedish customer will be charged VAT at 25%, a customer in Luxembourg 15%, a Belgium customer 21% and so on.
Apart from the expenditure that the new rule entails for a company that provides its services throughout the EU, the question of how to determine the location of the buyer arises. Unlike physical deliveries, no delivery address is required and, in theory, a fake address in a country with a lower rate of VAT could be given.
For this reason, from now on providers of digital goods and services will need independent sources that will allow them to determine the buyer’s country of origin. One possibility is geolocation via the IP address; another is to determine the country of origin based on the payment, e.g. via the bank account used or the use of country-specific payment methods. The PPRO Group has changed its interface specifically for this purpose, so that with every transaction it can report on the country from which a payment has been made. Retailers and providers of digital services should ask their payment provider about similar services.