When the chancellor announced the latest budget for the UK, it was revealed that a previous loophole allowing digital downloads to avoid tax in the UK will now be closed. As a result, when these new laws take effect, it could be that we see an increase in price for downloads from Apple’s iTunes and App Store.
The budget document read: “As announced at budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services. From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue.”
The new law will mean that downloads by UK customers will be taxed at 20%. Companies such as Apple and Amazon have been able to avoid the UK’s 20% VAT by selling their products from other countries where the tax rate is much lower, like Luxembourg for example, where it is typically 3%-15%.
Expect to see this change effect all digital downloads from January 1, 2015.
[Image via Apple]