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Thread: Pricing for the new VAT or... Hunh?... Wtf?


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dallassketchman

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Registered: 08/02/10
Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 1, 2014 8:35 PM
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I've just read the email from KDP about new pricing for euro taxes. I have no clue as to what they're doing. Anyone translate this?
Donna St Felix

Posts: 5,414
Registered: 09/18/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 1, 2014 8:50 PM   in response to: dallassketchman in response to: dallassketchman
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The country (UK & ?) had changes to their VAT tax rate. Prices will adjust in that/those areas.
Amazon will adjust the book prices and collect it.
Don't worry about it. There is nothing you or anyone can do about it.
mpjones661

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Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 1, 2014 9:01 PM   in response to: Donna St Felix in response to: Donna St Felix
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That's actually not true on two counts. What has happened is that the EU has finally got wise to what has been going on.

There have been no changes to VAT rates charged in Europe. What has changed is that the applicable VAT rate will no longer be based on where the seller resides (i.e. Amazon) but where the buyer resides. Therefore instead of 3% VAT being applied on our European ebook sales (which I believe is the rate in Luxembourg), it will be much higher now (20% in the UK for example).

The impact to us will be that the minimum prices will increase (in the UK) from 75p to 99p for the 35% rate and from 149p to 199p to take the VAT into account. Amazon will siphon off the VAT "off the top", rather than us setting a VAT free rate and they add it on.

End Customers will end up paying significantly more for our books and we will be receiving less of a cut of what they have to pay, in other words we will only receive a royalty on the net amount excluding the VAT.

If you sell barely any books at all in Europe then it is not going to affect you. If you do, then it will, not least because (in the UK at least) hard copy books are VAT free and so that might give life to the print market over the ebook.

Personally, some of my books are long enough to justify a 149p price but 199p is a bit of a stretch. But if I leave at the same price, I will be losing the VAT amount plus only earning 35%.

Fortunately, 90% of my sales come from the US, so it won't make too much difference to me, although it probably rules out hope of me diversifying more into Europe.
Pineapplelover

Posts: 430
Registered: 03/16/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 1, 2014 9:54 PM   in response to: dallassketchman in response to: dallassketchman
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I think I get it... maybe y'all can confirm my understanding?

All of my books are priced at $2.99, so I get 70% royalties.

As things stand now, the UK price for my books ranges between 1.83 GBP and 1.90 GBP (not sure about the reasons for this slight discrepancy, but there you go). Those prices INCLUDE 3% VAT, and delivery to the Kindle device.

OK so far, right?

Now, the way I am reading the e-mail is that a new VAT rate of 20% in the UK (I am sure it will be different elsewhere) will apply.

So now my books will cost slightly more - I calculate around 2.30 GBP. This extra cost is absorbed by THE BUYER. Not Amazon, and not me. I will earn my royalties on the book price BEFORE VAT (as I do now), so they will remain unaffected by the VAT rates, no matter if they are 5% or 55%.

So, the big change, as I see it, is for the buyers, who must absorb the added VAT.

Is this understanding correct??
Brooke Powley

Posts: 60
Registered: 04/18/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 1, 2014 10:56 PM   in response to: Pineapplelover in response to: Pineapplelover
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This isn't good news for me - My books are selling well at £1.59 in Amazon UK. I think that the jump to £1.99 is quite a big one and it will mean that not as many people will take a chance. Most readers will know nothing about this change. Under the new guidelines on a £1.99 book nearly 40p will be VAT, so my profit will remain the same but the buyers cost much more.

It'll be interesting to see how things pan out....
Rose King

Posts: 1,421
Registered: 11/30/14
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 1, 2014 11:00 PM   in response to: Pineapplelover in response to: Pineapplelover
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Pineapplelover wrote:
I think I get it... maybe y'all can confirm my understanding?

All of my books are priced at $2.99, so I get 70% royalties.

As things stand now, the UK price for my books ranges between 1.83 GBP and 1.90 GBP (not sure about the reasons for this slight discrepancy, but there you go). Those prices INCLUDE 3% VAT, and delivery to the Kindle device.

OK so far, right?

Now, the way I am reading the e-mail is that a new VAT rate of 20% in the UK (I am sure it will be different elsewhere) will apply.

So now my books will cost slightly more - I calculate around 2.30 GBP. This extra cost is absorbed by THE BUYER. Not Amazon, and not me. I will earn my royalties on the book price BEFORE VAT (as I do now), so they will remain unaffected by the VAT rates, no matter if they are 5% or 55%.

So, the big change, as I see it, is for the buyers, who must absorb the added VAT.

Is this understanding correct??

I think you are on the right track. As a UK citizen who never wanted anything to do with Europe, I sincerely hope come the next election we will be out of it, but that's another argument. Most of my sales are in the US, so I am not too concerned just yet. Incidentally, there is no VAT on physical books, our paperback versions, so that will not change.
Brooke Powley

Posts: 60
Registered: 04/18/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 1, 2014 11:03 PM   in response to: Rose King in response to: Rose King
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Think it's time to leave the EU....
Rose King

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Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 1, 2014 11:07 PM   in response to: Brooke Powley in response to: Brooke Powley
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Brooke Powley wrote:
Think it's time to leave the EU....
We can only hope.
Pineapplelover

Posts: 430
Registered: 03/16/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 1, 2014 11:35 PM   in response to: Rose King in response to: Rose King
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Hi Rose.

Yes, I'm in Europe too... but quite faaaaaar East ;)

99% of my sales come from the USA and Canada, with a few in the UK, Australia, Germany and Mexico (I think I have one fan in Mexico who buys all my books. I love this person, whoever they are, because I get a kick out of seeing the Mexican currency conversion in my bank account every month).

Ahem. I digress. As usual.

My point is that I doubt I will be very affected by this change, but I do understand that many authors may well be. I hope it all shakes out in a way that is OK...

Interesting about no VAT on physical books; here in Poland, they slapped VAT on paper products about 3 years ago, I think, right before Christmas. The book sellers howled, because they feared that people who had planned to buy books as gifts would baulk at the 23% VAT thrown on top. As far as I know, it's all settled down again, with publishing houses finding cheaper suppliers, but it was a shock at the time.

Edited by: Pineapplelover on Dec 2, 2014 12:42 AM
Andrew Brown

Posts: 2,149
Registered: 05/25/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 2, 2014 12:26 AM   in response to: dallassketchman in response to: dallassketchman
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It does make me laugh sometimes. People in the UK were up in arms when it was discovered that Amazon based themselves in Switzerland to pay less tax, Google and Starbucks also came in for criticism yet when the EU enforce the laws to make sure that the correct countries get the correct amount of tax, because it affects us as a seller, we now complain.

Yes it's going to be a pain in that my second biggest market is going to see a 17% increase in my book prices unless I take some of the hit but we have to get over it and move on. There are only two things certain in life, death and taxes.

I do like the part that Amazon have introduced though about how the price we set will now be inclusive of VAT (after Jan 1st). Therefore those of us who deliberately set the price so that is hits a .99 or .49 price point can still do that without spending hours working out the different rates of tax for each EU country.
Michael Williams

Posts: 990
Registered: 01/31/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 2, 2014 1:10 AM   in response to: Andrew Brown in response to: Andrew Brown
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Makes me smile too. At the end of the day, for all our work, we're still talking about a price less than a grotty burger and a few french fries, and I know myself which is more nutritious :) The one regret I have about KDP is the introduction of the free-giveaway promotion which, alongside the 'industry' of book promotion sites, has resulted in a race to the bottom of the price list and the reality of a year's writing being worth €2.99 at most.I've more than that rattling around in the bottom of my washing machine ;)
Notjohn

Posts: 22,918
Registered: 02/27/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 2, 2014 2:12 AM   in response to: Andrew Brown in response to: Andrew Brown
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People in the UK were up in arms when it was discovered that Amazon based themselves in Switzerland to pay less tax, Google and Starbucks also came in for criticism yet when the EU enforce the laws to make sure that the correct countries get the correct amount of tax, because it affects us as a seller, we now complain.

Well, the location was Luxembourg with its 3 percent VAT, but yes, it's certainly worth a smile.

Politicians assess taxes. Corporations (and individuals!) avoid them as best they can.

Good luck! -- NJ

The book: Notjohn's Guide to Kindle Publishing: Ten Steps to Selling Your E-book on Amazon (Or Anywhere Else) (Fourth Edition)

The blog: Notjohn's KDP Guide
P Blake

Posts: 34
Registered: 05/17/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 2, 2014 2:13 AM   in response to: Pineapplelover in response to: Pineapplelover
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Pineapplelover wrote:
So now my books will cost slightly more - I calculate around 2.30 GBP. This extra cost is absorbed by THE BUYER. Not Amazon, and not me. I will earn my royalties on the book price BEFORE VAT (as I do now), so they will remain unaffected by the VAT rates, no matter if they are 5% or 55%.

So, the big change, as I see it, is for the buyers, who must absorb the added VAT.

Is this understanding correct??


No. Right now, you set a price. Amazon adds VAT to that price. Your royalties are from that price, so you don't have to worry about VAT.

After the changes, you set the price. Amazon assumes the VAT is in that price. Your royalties are now from the price minus VAT. If you want the same profit as before, you have to change your price. If VAT rates change for a country, you have to change your price. This means if you want the same profits, you have to watch the VAT rules of every country and be ready to calculate the percentages, because Amazon won't do it anymore. (They will change some stuff at the switch over, but after that it's on the author to do it.)

But you can't get entirely the same profit, as each EU Amazon site is likely to be used by members of several countries with different VAT rates. If you added 10% VAT to your price, and one customer is from a country with 20% VAT, you are the one who absorbs that cost. Amazon doesn't charge that person more than people from the 10% country. Two sales from the same Amazon site of the same book could earn you a different amount each, based on where the buyer lives.

In short, it's going to be a lot more complicated. Not because of the EU, but because Amazon has decided to switch from VAT-exclusive prices to VAT-inclusive.
Pineapplelover

Posts: 430
Registered: 03/16/13
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 2, 2014 2:28 AM   in response to: P Blake in response to: P Blake
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Aha. I get it. This part made it clear:

'Amazon has decided to switch from VAT-exclusive prices to VAT-inclusive.'

That's the big change, in a nutshell... thanks!
juice37

Posts: 28
Registered: 10/21/11
Re: Pricing for the new VAT or... Hunh?... Wtf?
Posted: Dec 2, 2014 2:32 AM   in response to: dallassketchman in response to: dallassketchman
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Don't they have an incredible way of simplifying explanations of T&C's and changes. I've the read the thing 3 times now, still non the wiser. And why add VAT to electronic books, when paper books are VAT free?

Edited by: juice37 on Dec 2, 2014 2:32 AM
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