Selling online is complex because once you reach a certain turnover in a foreign jurisdiction, you are required to register for VAT in that jurisdiction, start collecting VAT at the local rate and then pay VAT to the local jurisdiction (rather than HMRC). The threshold depends on the country and is either €35,000 or €100,000 (
see full list there). Setting up the right infrastructure for distance selling requires that you are able to identify the location of your foreign clients and bill them appropriately. It is not always an easy task especially if you sell virtual goods or if you rely on a third party distribution platform such as the ones provided by mobile app vendors. Especially since each platform behaves differently. Here is a quick summary of what you need to know:
Apple AppStore
You supply your products to Apple, who then market and supply them to consumers. Apple charges VAT to the consumers based on their location. Apple’s commission is a markup to the price, which they then add VAT to. Because of this, under HMRC rules this isn’t deemed to be a supply of “agency services” from Apple to you. So you can account for VAT on your supply to Apple as normal. Because you are supplying software to Apple’s EU subsidiary, and because the subsidiary is based in Luxembourg, you can zero rate the VAT. You will have to report the sales onto an EC Sales list however. As with many things Apple, this model is very slick!
