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 1st, for any titles already published in KDP, we will make a one-time adjustment to convert VAT-exclusive list prices provided to us to VAT-inclusive list prices. Subject to minimum and maximum thresholds, we 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 1st 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:
eBooks in the 70% royalty plan need to meet new minimum list price requirements
You currently have one or more books in the 70% royalty plan that will not meet the new minimum list price requirements. To make sure that your books still meet the minimum list price required for the 70% royalty plan after January 1, we’ll adjust the new list price that includes VAT to £1.99 and € 2.99 in order to meet the minimum for 70% royalty.
eBooks available for pre-order, scheduled to release after January 1, 2015
For pre-orders placed before January 1, 2015 on books that will release after January 1, 2015, we will pay your royalty as though VAT were still only 3%.
eBooks scheduled for a Kindle Countdown Deal
If you currently have one or more books scheduled to run a Kindle Countdown Deal in the UK marketplace during or after January 1, 2015, your book will still be eligible to finish that promotion, even if the list price does not fit the new requirements of being priced between £1.99 and £15.99, including the VAT.
Setting List Prices for EU Kindle stores
Starting January 1st, to make it easier to set customer friendly list prices without having to calculate VAT for each country, authors will set list prices for EU marketplaces that include VAT. To accommodate this, the KDP pricing grid will be updated to accept VAT-inclusive list prices. Previously, if an author wanted to provide a suggested list price of “£1.99”, he would have to set “£1.93” as the VAT-exclusive list price to account for the 3% VAT we would have applied. Now, authors can simply enter “£1.99” and we will deduct the applicable VAT to calculate royalties. In the pricing page, authors will also see their suggested price without VAT displayed for the primary country of the marketplace to help them understand how royalties will be calculated for sales to customers from that primary country.
For those authors who set their EU marketplace prices automatically from their US list price, we will convert the US list price to local currency and that will be the list price that includes VAT. For example, if an author sets the US list price to be $10.00, then we will convert that price to Euros for the German marketplace, and assuming the exchange rate is 0.8, the Amazon.de list price including VAT will be €8.00. For purchases in Germany, we would deduct 19% VAT and calculate royalty on a VAT-exclusive list price of €6.72.
Learn more about setting list prices for EU Kindle stores:
As always, if an author lists books with a lower list price on other sites, we may price match those books to the lower prices. We recommend authors review their list prices that include the new VAT on January 1st when these changes go into effect to determine if they want to make any updates.
We think that respecting your VAT-exclusive list prices and keeping books in their chosen royalty plans offers the best experience for authors. If you would like your books to be handled in a different way, contact us with your feedback:
Kindle Direct Publishing Team