We dread having to even use brain cells on this issue -- and yet, here goes:
Anyone self-publishing books through Amazon's KDP program likely received the below email (way, way below in red).
This is our extremely abbreviated version of what-you-need-to-know and what-you-need-to-do come January 1, 2015:
- It is our understanding that you need to do NOTHING to the European prices of any of your Kindle ebooks that are currently published within your KDP. Amazon will be making a one-time adjustment to the European price for you in all its European territories. This price adjustment will ensure that the European price shown to potential customers on each Amazon's European sites -- like Amazon.co.uk or Amazon.de or Amazon.es or whatever -- will INCLUDE the proper percentage of VAT tax for that particular country. So again, you don't need to do anything, except maybe pay attention to the changes that they make.
- That said, if you are selling ebooks on OTHER distribution sites like Kobo, Apple's iBooks, Barnes&Noble, etc., you need to make sure that the European prices of your ebooks sold in European territories INCLUDES the VAT tax. If you do NOT check to make sure that your prices are VAT-inclusive on the other distribution sites, you run the risk that they do NOT include the VAT tax. What will this mean? This means that you run the risk of unintentionally subsidizing the VAT tax by NOT properly raising your prices to include it. Check to make sure that your current pricing on other distributors properly includes the VAT tax. If you are uncertain, then you might want to raise your prices by 20% across the board to cover yourself.
- IMPORTANT: If you ignore this issue, and do NOT check your European prices on the other distribution sites, you run the risk of Amazon price-matching its higher properly adjusted VAT tax prices to your other vendors' lower non-properly inclusive VAT prices. So you'll lose money on your European Amazon sales because they will be "price-matched" lower than they should be.... Europe is going to take the tax from you either way. The price they show the European consumer assumes that it INCLUDES the VAT tax (and the percentage of VAT tax is different in each country). In other words, the price that European consumers expect to see is ebook + VAT tax = retail price. This is confusing to Americans because retail prices in the US almost never include sales tax -- and the consumer does not get charged sales tax on digital goods like ebooks at all.
- Feel free to poke your eyes out at anytime
AMAZON'S OFFICIAL EMAIL SENT DEC 16, 2014 to ALL KDP CUSTOMERS
This is a follow-up mail to remind you of the upcoming changes in European Union tax law and what this will mean for your books in Kindle Direct Publishing.
On January 1, 2015, European Union (EU) tax laws regarding the taxation of digital products (including eBooks) will change: previously, Value Added Tax (VAT) was applied based on the seller’s country – as of January 1st, VAT will be applied based on the buyer’s country. As a result, starting on January 1st, KDP authors must set list prices to be inclusive of VAT. We will also make a one-time adjustment for existing books published through KDP to move from VAT-exclusive list prices to list prices which include VAT. We'll put these changes into effect starting January 1st; you may always change your prices at any time, but you do not need to take any action unless you wish to do so.
One-time Adjustment for Existing KDP Titles:
Starting January 1st, for any titles already published in KDP, we will make a one-time adjustment to convert VAT-exclusive list prices provided to us to VAT-inclusive list prices. Subject to minimum and maximum thresholds, we will add the applicable VAT based on the primary country of the marketplace to the VAT-exclusive list price provided. For example, if an author had previously set £5.00 as the VAT-exclusive list price for amazon.co.uk, the new VAT-inclusive list price will be £6.00 because the applicable VAT rate in the UK is 20%. Please note, if an author had set a consistent VAT-exclusive list price for all Euro based Kindle stores, those prices will now be different due to varying VAT rates for the primary country of each Kindle store. For example, if an author had previously provided a €6.00 VAT-exclusive list price foramazon.de, amazon.fr, amazon.es, and amazon.it Kindle stores, the list prices including VAT will be €7.14 (19% VAT), €6.33 (5.5% VAT), €7.26 (21% VAT), and €7.32 (22% VAT) respectively.
Minimum and maximum list prices for the 35% and 70% royalty plans will now also include VAT. For books published before January 1st that would fall outside these new limits after VAT is included, we will adjust the list price to ensure the book remains in the same royalty plan that was previously selected.
Learn more about the new minimum and maximum KDP EU list prices:
Royalties will continue to be calculated based on the list price without VAT. The amount of VAT applied depends on the country where the customer is located. Consider a book with a £6.00 VAT-inclusive price on Amazon.co.uk, for sales to customers in the UK we would apply the UK’s 20% VAT rate and the price we use to calculate royalty would be £5.00. The 23% Irish VAT rate will apply to purchases from Ireland, so a customer buying from Ireland would still see £6.00 but, applying the 23% Irish VAT rate, we would calculate royalty based on the VAT-exclusive list price of £4.88.
Learn more about how EU prices affect royalty payments:
eBooks available for pre-order, scheduled to release after January 1, 2015:
For pre-orders placed before January 1, 2015 on books that will release after January 1, 2015, we will pay your royalty as though VAT were still only 3%.
eBooks scheduled for a Kindle Countdown Deal:
If you currently have one or more books scheduled to run a Kindle Countdown Deal in the UK marketplace during or after January 1, 2015, your book will still be eligible to finish that promotion, even if the list price does not fit the new requirements of being priced between £1.99 and £15.99, including the VAT.
Setting List Prices for EU Kindle stores:
Starting January 1st, to make it easier to set customer friendly list prices without having to calculate VAT for each country, authors will set list prices for EU marketplaces that include VAT. To accommodate this, the KDP pricing grid will be updated to accept VAT-inclusive list prices. Previously, if an author wanted to provide a suggested list price of “£1.99”, he would have to set “£1.93” as the VAT-exclusive list price to account for the 3% VAT we would have applied. Now, authors can simply enter “£1.99” and we will deduct the applicable VAT to calculate royalties. In the pricing page, authors will also see their suggested price without VAT displayed for the primary country of the marketplace to help them understand how royalties will be calculated for sales to customers from that primary country.
For those authors who set their EU marketplace prices automatically from their US list price, we will convert the US list price to local currency and that will be the list price that includes VAT. For example, if an author sets the US list price to be $10.00, then we will convert that price to Euros for the German marketplace, and assuming the exchange rate is 0.8, the Amazon.de list price including VAT will be €8.00. For purchases in Germany, we would deduct 19% VAT and calculate royalty on a VAT-exclusive list price of €6.72.
Learn more about setting list prices for EU Kindle stores:
As always, if an author list books with a lower list price on other sites, we may price match those books to the lower prices. We recommend authors review their list prices that include the new VAT on January 1st when these changes go into effect to determine if they want to make any updates.
We think that respecting your VAT-exclusive list prices and keeping books in their chosen royalty plans offers the best experience for authors. If you would like your books to be handled in a different way, contact us with your feedback:
Kindle Direct Publishing Team