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 1, for any titles already published in KDP, a one-time adjustment to convert VAT-exclusive list prices provided to VAT-inclusive list prices will be made. Subject to minimum and maximum thresholds, KDP 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 for amazon.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 1 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: