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The VAT rate for ebooks in my country changed recently, but Leanpub is still charging the old rate. Why is that?
The VAT rate for ebooks in my country changed recently, but Leanpub is still charging the old rate. Why is that?
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Written by Leanpub Support
Updated over a week ago

For a long time, some European countries have been offering discounted VAT rates for print books, but not offering discounted VAT rates for ebooks. So, in those situations, the print book VAT rate has been under 10%, whereas the standard VAT rate (which also applies to ebooks) in those countries has been 20% or higher.

Now, recently this is changing for the better in some European countries, and ebooks are being given access to a discounted VAT rate, much like print books have.

(At Leanpub, we firmly support this: most of the ebooks we sell are educational, such as computer programming books, and represent the kind of social good that policymakers want to encourage, by providing a discounted VAT rate.)

Sometimes, however, there are complications: some countries require an ISBN on ebooks, other countries exclude specific types of books, etc.

Furthermore, since we are based in Canada, we file our VAT returns for all for the countries in the EU through a single European country using the VAT OSS system. This system puts us under a number of constraints that are out of our control.

For example, we cannot just change a rate because we see it reported somewhere, regardless of whether that's a reputable news source or even a government website. Instead, we need confirmation that the lower ebook rate will be actually available to us to use in the VAT OSS system when we file our quarterly VAT return.

The only time that we can confirm with 100% certainty what VAT rates will be available for us to use on our next quarterly VAT return is when we actually use the web form that we use to file our next quarterly VAT return.

We cannot file a quarterly VAT return until the quarter has ended, nor can we use the web form for that quarter until the quarter has ended. Quarters end on March 31, June 30, September 30 and December 31. So, the very next day after a quarter ends is the earliest that we can check which VAT rates are officially available on the web form provided by the European country that we file our VAT OSS returns with.

Specifically, this means that the earliest dates that we can confirm which VAT rates are actually available for us to use going forward are at the beginning of each new quarter: January 1, April 1, July 1 and October 1. On each of those dates, if there is a discounted ebook rate which is actually available to us (i.e. if there are no restrictions around ISBNs, etc.), then shortly thereafter we change the VAT we charge in our online store to reflect the discounted ebook rate.

This only affects the new quarter, however, not the quarter which just ended. Any change going forward is not retroactively applied to VAT we have already collected.

To be clear, when we remit quarterly VAT, we remit 100% of the VAT that we have collected in that quarter, based on the rates (either Standard VAT Rate or Discounted Ebook Rate) that we had been using. If it turns out that there was a Discounted Ebook Rate that we could have used, but we used the Standard VAT Rate instead, we still remit the full VAT we collected using the Standard VAT Rate. None of that VAT we remit is ever returned to us. We always remit 100% of VAT at the rate at which we collected it.

Finally, we are a Canadian startup, and we have no input into the VAT rates charged by various European countries -- we just comply with them!

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