The new legislation on the taxation of digital products (including eBooks) became effective with the new year: Since 01.01.2015, the country of the customer – and not any longer, where the company is settled – has been relevant for the VAT. What are the consequences for self-publishers?
The country specific VAT is a new legislation in the EU and concerns all transnational eBook sales: All European eBook retailers have to use the location of the costumer, since 01. 01. 2015.
If an eBook is sold within an EU nation, there will be no effects, because the company (online shop / author) and buyer are in the same country.
What are the effects of the new legislation on self-publishers with XinXii?
The new VAT-legislation has no effect on the royalties, because our royalty system is based on the net sale prices of an eBook – not on net revenues of the eBook sale. This highlights the advantage of XinXii as a distributor: We carry the costs of the eBook shops, eg. the amounts (“digital shipping costs” or country specific royalties), that reduce the royalties of authors on Amazon KDP.
Why is the new legislation relevant especially for self-publishers on Amazon KDP?
Amazon has its registered business address for the book section in Luxembourg and was profiting from its low VAT of 3% – and benefited form an enorm competitive advantage compared to eBook retailers not based in Luxembourg.
According to the new VAT-legislation, Amazon has to calculate with the VAT of the costumer’s country – in Germany 19% instead of the former 3%.
01. 01. 2015, Amazon changed the gross prices automatically by adding the VAT of the respective countries to the net price.
Effects in the German Kindle shop
… illustrated on an example:
The eBook price of 2.99 EUR was increased on 1st January: Amazon added the German VAT on the net price – increasing from 3% to 19% and the new price to 3.45 EUR.
As a consequence, this eBook will be offered for different prices due to country specific VAT; eg. in France with the 5.5% VAT for 3.06 EUR and in Italy with 21% for 3.54 EUR.
What are the consequences of Amazon KDP’s changes for self-publishers?
Authors, not using a distributor, have two options:
- The author does not react and leaves the net price unchanged
Then, the eBook is offered to a higher price (3.45 EUR), and his royalties are not changing. But: He violates the German Fixed Book Price Agreement, when he offers the eBook in other online shops with the former, lower price of 2.99 EUR. Amazon will “regulate” and reduce the price, as a consequence.
- The author reduces the changed gross prices to the “old” price
… and gets less royalties paid.
In general, each author, who uploads a new eBook to Amazon KDP, sets the gross prices (the actual sales price) and not longer the net prices. Amazon pays the country specific VAT of an eBook sale automatically.
It’s more simple for authors, who use XinXii’s services:
They have to do nothing We take care of everything and transfer the updated prices for the Kindle shop to Amazon on time, to guarantee the Fixed Book Price Agreement. Because of the price adaption, the author’s royalties are not changing on XinXii (see above).
Furthermore, the price limits for the royalties are still remaining on Amazon, as follows:
- Regular royalties
for eBooks between 2.99 EUR and 9.99 EUR
- Reduced royalties
for eBooks below 2.99 EUR and over 9.99 EUR