Press Release

New legal framework requires companies to rethink their approach

Changes to VAT rules pose difficulties for companies with online shops

Karlsruhe/Germany – October 16, 2014 – The European Union’s change in VAT rules regarding the taxation of individual areas of eCommerce within EU member states will take effect on January 1, 2015, creating major challenges for many companies. asknet, a provider of eCommerce solutions based in Karlsruhe, is extremely familiar with the upcoming changes, which is why it is assisting its customers in organizing their online shops so they comply with the directive. 

Beginning next year, VAT for private individuals’ online purchases of electronically supplied services (e.g. software downloads) will be charged in the country where the buyers live, and not in the country where the company selling them is registered. This change is expected to increase revenues for most governments of EU countries, though it will have tax-related and monetary consequences for the companies that are affected. So what do companies need to do to be equipped for the reform?

According to Dr. Louisa Specht, an attorney and specialist in IT law, it is key that companies deal with the requirements in a timely fashion so that they can implement all necessary changes before January 1, 2015. “There are many consultants and companies that know what one needs to keep in mind when adapting business processes to meet the require-ments of the VAT directive to ensure that no loss is made during the changeover.” Dr. Specht recommends creating a checklist with specific tasks and then tackling each one in order so that nothing is overlooked. “The first thing companies should do is determine whether they even offer cross-border services affected by the directive and whether they are directed at private individuals.” The reason for this is that according to the VAT directive, tax is to be levied at the beneficiary’s place of residence only for services rendered to private individuals. Services provided to businesses are still subject in the EU to the mechanism of reverse charging.

Companies are required to list the final price ? including VAT ? when customers make purchases in online shops. However, a company does not always know in which country delivery will occur. “Companies looking to make things easier for their customers can, for example, show a single gross price on the webpage, and list the VAT applied only after the potential buyer has entered all purchase information. In such a case, VAT is calculated out of the gross price shown,” Specht says.  

People such as Specht and her colleagues, as well as the specialists of established eCommerce companies like asknet are familiar with the challenges that the VAT directives entail and solutions for tackling them. Such specialists have years of experience and expertise when it comes to operating international online shops. International directives continue to make the legal situation ever more complex, including the traps that companies with online shops can fall into. Not only does asknet AG provide up-to-date shop technology that enables global sales, it also handles all purchase-related processes and services to eliminate any pitfalls. Companies who sell services online and wish to have peace of mind will benefit from contacting asknet at sales@asknet.com. 

About asknet
asknet, a leading global provider for customized e-commerce solutions allows merchants to sell into more than 190 countries around the globe. asknet's e-commerce gateway exceeds market standards for software and digital media distribution. The company develops and maintains portals for software distribution and supplies 80% of all German universities with software products. asknet acts as a large account reseller for Adobe and Microsoft in the Academic Market. asknet offers students a wide range of software downloads for personal use through its leading Internet platform „studyhouse.de“. asknet’s customers include numerous providers of specialty software and licensing products. asknet was founded in 1995 as a spin-off of the Karlsruhe Institute of Technology (KIT, formerly the University of Karlsruhe). In 2013 the company’s transaction revenues amounted to around 96 million euros. For more information, visit www.asknet.com.