For the past several weeks, we’ve been working to determine the best way to handle the European Union’s new rules on value-added tax (VAT) for digital goods. The rules, which took effect on January 1, state that businesses selling digital goods and delivering them by automatic download to customers in European Union member countries will be required to collect and pay VAT based on the VAT rates of the country where the customer is located, not on the rates of the country where the business is located. The digital VAT rule applies to any business selling to consumers in the EU, regardless of where the business is located.
In a recent blog post, we announced that we will be collecting and remitting VAT on behalf of Etsy sellers based in EU countries who are providing digital goods to buyers in the EU by automatic download. We are now announcing that we will collect and remit VAT on behalf of all Etsy sellers providing digital goods to buyers in the EU by automatic download, whether or not the seller is based in the EU. That means you won’t have to process VAT returns on automatically downloaded digital items sold on Etsy to buyers in the EU, no matter where your shop is based.
To be clear, your EU buyers – not Etsy or Etsy sellers – will be paying VAT as part of their total purchase price. We’re working on the site update needed to begin collecting VAT during checkout and will provide more details on how the collection process will work soon. If you’re wondering if you should list your digital items, please know that Etsy will take responsibility for collecting VAT and remitting it to the appropriate tax authority.
If you have more questions about VAT on digital items, check out our responses to these Frequently Asked Questions. Please keep in mind that we can’t give legal or tax advice to individual businesses, so we encourage you to contact your local governments or professional advisors for specific advice related to your shop.
Thank you for your continued patience throughout this process. Your insights and feedback have been invaluable. Please continue to share your concerns and suggestions in the comments section below.