As a Canadian bootstrapped startup, please note we are not tax lawyers, and we don't give formal legal or tax or accounting advice!

However, what we can say is that we do actually charge VAT for EU sales ourselves, as well as GST / HST for Canadian sales. (We take care of collecting and remitting the VAT under the VAT OSS program, which does apply to non-EU companies like us. We also remit VAT separately to the UK.)

We pay royalties on the price of the book before sales taxes are applied, since obviously the appropriate government gets to keep all the taxes they are owed. This is the pre-VAT price for EU sales and the pre-GST / HST price for Canadian sales.

From our perspective, the money we pay our authors should be considered royalty income by those authors, and those authors should pay taxes appropriately to their respective country / countries.  We don't provide advice on how to do that.

But the big point for your accountant is:
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EU & UK VAT has already been collected and remitted by Leanpub.

We do the whole "collect and store three pieces of evidence, make sure that 2 of the 3 pieces match, etc" thing for you.  Us handling this for you is one of the big benefits of using the Leanpub storefront if you sell ebooks into the EU.

(Believe it or not, any merchant anywhere on the internet is responsible for complying with the VAT OSS program, even if you have no physical presence in Europe.  The VAT OSS program is not just for European citizens or companies--our understanding is that it even applies to small bootstrapped Canadian startups, and potentially even to individual self-published authors.)

By the way, if that wasn't fully clear, here's another way to think about it:

Regardless of whether you get the royalties as an individual author or as a company, they are royalties.  And if you sold on Amazon KDP, your accountant would (probably) not think about emailing https://www.amazon.de and asking them for their sales breakdowns on KDP (since VAT has 3 pieces of evidence, see http://help.leanpub.com/reader-help/why-do-book-prices-have-vat-added), so that they could figure out what to do. Instead, your accountant would simply ensure the royalty income was reported correctly.

If you have any feedback or questions about this article, please email the Leanpub team about it at hello@leanpub.com!

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