European Union (EU) tax laws have changed regarding the taxation of digital products (including eBooks). Previously, Value Added Tax (VAT) was applied based on the seller’s country; now, VAT will be applied based on the buyer’s country. As a result, starting on January 1, 2015, you can set your suggested customer prices to include VAT for all of the EU marketplaces: Amazon.co.uk, Amazon.de, Amazon.fr, Amazon.es, Amazon.it, and Amazon.nl.
Here’s a summary of changes:
List Prices: We've added applicable VAT based on the primary country of the marketplace to the VAT-exclusive list prices for all of your books on the EU marketplaces. You will see your updated list price with the applicable VAT added on your KDP pricing grid; you will also see the price without VAT which is what you can use to calculate your estimated royalties.
Minimum and Maximum List Prices: The minimum and maximum list prices for the 35% and 70% royalty plans in the EU have been updated to include VAT. Books must be priced within the new ranges. If your list price falls outside of the new range we will adjust it to meet the new minimum or maximum to ensure you remain in your chosen royalty plan. Learn more about the new minimum and maximum list prices: https://kdp.amazon.com/help?topicId=ANRML55B0BWBK
Price Matching: As always, if you list books with a lower list price on other sites, we may price match to the lower price. We recommend you review your list prices on or after January 1st to determine if you need to make any updates.
List Prices Based on Your U.S. Price: If you select to match the EU marketplace prices automatically from the U.S. list price, we will convert the U.S. list price to local currency and that will be the list price that includes VAT, we won’t add additional VAT onto that price. Learn more about setting list prices for EU Kindle stores: https://kdp.amazon.com/help?topicId=A30464Q6OVH578
Other reminders: Detail Pages: The price on your EU detail pages will be updated to show the new VAT-inclusive list price that you see in your KDP account. These updates will start on January 1st and will continue over the next few weeks.
Royalties: Any sales that occur before your price is updated on your detail page will be adjusted so that you earn the right royalties. We will manually adjust your royalties so that they are based on the VAT-exclusive price that you provided before January 1st. Once your list price is updated on your detail page to include the applicable VAT, we will pay your royalties on the VAT-exclusive price. Learn more about how EU prices affect royalty payments: https://kdp.amazon.com/help?topicId=A30XCAGX3E5QDC
For pre-orders that were placed before January 1, 2015 on books that were set to release after January 1, 2015, we will pay your royalty as though VAT were still only 3%.
Kindle Countdown Deals: Any Kindle Countdown Deals scheduled on Amazon.co.uk on or after January 1, 2015 will run as expected, even if the list price does not fit the new requirements of being priced between £1.99 and £15.99, including the VAT.
Lastly, as of January 1, 2015, Italy has put in place a new law. Applicable VAT for eBooks sold in Italy will depend on whether the book has an ISBN. All eBooks with an ISBN will have a 4% VAT rate and eBooks without an ISBN will have a 22% VAT rate. This is the rate that is added to your price on January 1st and is the rate deducted when an Italian customer purchases your book. If you obtain an ISBN after January 1st, the 4% VAT rate will then apply for future sales but we will not adjust your list price automatically.
Amazon is not responsible for this. Amazon is merely complying with either (1) the greed of EU politicians who see a new lucrative source of tax revenue they can swipe, or (2) a way to protect the clunky traditional publishing industry throughout the EU, or (3) both. I've written earlier how I think this will derail author royalties and at the same time quell demand for digital ebook by making them more costly from the end consumer's point of view.
However, it remains to be seen if the new Kindle Unlimited service which debuted at the end of 2014 will allow readers to get "all-you-can-read" ebooks without having to fork over VAT on each title borrowed, read and returned on their Kindle. Time will tell.
So far in 2015 my own digital Kindle books are moving at about the same pace as they did in 2014. I'll track sales and KU borrows over the months ahead and report trends I'm seeing and the feedback I hear from other self-pub'd writers and indie publishers who will also be affected by this new tax scheme.