Mikey Campbell
In an email sent out to iTunes Connect members on Wednesday, Apple reminded developers of an upcoming value-added tax (VAT) rate policy change that will see customers pay fees based on their country of residence rather than other EU locales with lower taxes.
As seen in Apple's email, provided by AppleInsider reader Gregg, VAT rates for apps are slated to change in all European Union territories starting Jan. 1, 2015, with the new policy potentially upping prices for customers living in high tax countries like the UK. App Store customers are currently charged a flat VAT across the EU.
The move comes after British Chancellor of the Exchequer and Second Lord of the Treasury George Osborne announced new laws in March targeting tax loopholes that allowed Apple to sell app downloads via low-VAT countries. For example, UK App Store customers are currently able to bypass a 20 percent VAT through Apple's routing of purchases through countries like Luxembourg, which has a 3 percent tax rate.
From a UK budget document released at the time:
"As announced at budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services. From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue."
It is unclear if Apple intends to apply the new tax rule to all iTunes purchases, including music, movies and e-books, though UK budget laws set for enactment cover all digital downloads.
Apple's note also points out that while App Store prices will change to reflect appropriate VAT rates, developer proceeds are to remain constant as they are calculated without tax.
Christine McKee
Malcolm Owen
Amber Neely
Chip Loder
51 Comments
Based on my reading of this and the chart, unless the EU prices get raised this means developers will be on the losing end of this change. I understand why this is happening and the countries should get their tax amount - but I do think Apple needs to make an adjustment for it as well. [IMG]http://forums.appleinsider.com/content/type/61/id/53440/width/200/height/400[/IMG]
Well, both Apple and the developer get less because they are paid out from post-tax earnings.
It's really up to the developer to decide whether or not to increase Euro pricing to compensate for the loss of the low-VAT loophole, not Apple.
Let's say it's a 10 euro app, but the VAT is 20% in Country A. That means €2 goes to the Government A, with Apple and the developer splitting the remaining €8 percentage-wise 30-70, resulting in €2,40 to Apple and €5,60 to the app developer.
That same €10 app would result in greater developer revenue where the VAT is lower (Country B), less revenue where the VAT is higher (Country C). At the end of the day, the developer has to analyze whether or not the number of copies sold (Countries A, B, C, D, E...) is resulting in enough revenue per copy. If not, the price needs to go higher.
Remember, nothing is forcing the developer to charge anything at all: free apps still remain free and no VAT is assessed.
[quote name="mpantone" url="/t/183960/apple-to-instate-country-specific-app-taxes-in-eu-starting-jan-1#post_2652789"]Well, both Apple and the developer get less because they are paid out from post-tax earnings. [COLOR=000000]It's really up to the developer to decide whether or not to increase Euro pricing to compensate for the loss of the low-VAT loophole, not Apple. [/COLOR] Let's say it's a 10 euro app, but the VAT is 20% in Country A. That means [COLOR=000000]€[/COLOR]2 goes to the Government A, with Apple and the developer splitting the remaining [COLOR=000000]€[/COLOR]8 percentage-wise 30-70, resulting in €2,40 to Apple and €5,60 to the app developer. That same [COLOR=000000]€10 app would result in greater developer revenue where the VAT is lower (Country B), less revenue where the VAT is higher (Country C). At the end of the day, the developer has to analyze whether or not the number of copies sold (Countries A, B, C, D, E...) is resulting in enough revenue per copy. If not, the price needs to go higher.[/COLOR] Remember, nothing is forcing the developer to charge anything at all: free apps still remain free and no VAT is assessed. [/quote] Eh no. Apple lets us set ONE price. A tier. So a USD 10 app is tier 10. Tier 10 has specific prices for each country. So no we developers do not get to raise our EU prices. So yes it is up to Apple to raise the euro price tier based on the country. To be clear, I've been dealing with taxes and accounting for a global business since 2000. I'm aware of how VAT works and how economy of scale and all that fun stuff works. The point that your response misses is my response above - we developers don't set per country pricing. We set one tier. Apple sets the country pricing. As a result this means less to the developer.
The article summary is wrong as the first two commenters posted. The government is going to eat everyone's lunch on this one.
[quote name="Akac" url="/t/183960/apple-to-instate-country-specific-app-taxes-in-eu-starting-jan-1#post_2652794"][quote name="mpantone" url="/t/183960/apple-to-instate-country-specific-app-taxes-in-eu-starting-jan-1#post_2652789"]Well, both Apple and the developer get less because they are paid out from post-tax earnings. [COLOR=000000]It's really up to the developer to decide whether or not to increase Euro pricing to compensate for the loss of the low-VAT loophole, not Apple. [/COLOR] Let's say it's a 10 euro app, but the VAT is 20% in Country A. That means [COLOR=000000]€[/COLOR]2 goes to the Government A, with Apple and the developer splitting the remaining [COLOR=000000]€[/COLOR]8 percentage-wise 30-70, resulting in €2,40 to Apple and €5,60 to the app developer. That same [COLOR=000000]€10 app would result in greater developer revenue where the VAT is lower (Country B), less revenue where the VAT is higher (Country C). At the end of the day, the developer has to analyze whether or not the number of copies sold (Countries A, B, C, D, E...) is resulting in enough revenue per copy. If not, the price needs to go higher.[/COLOR] Remember, nothing is forcing the developer to charge anything at all: free apps still remain free and no VAT is assessed. [/quote] Eh no. Apple lets us set ONE price. A tier. So a USD 10 app is tier 10. Tier 10 has specific prices for each country. So no we developers do not get to raise our EU prices. So yes it is up to Apple to raise the euro price tier based on the country.[/quote]I think the point was you can change your tier.