Changes in EU VAT legislation, which came into effect on the first of January 2015, now mean sales of all digital products and services online to consumers in the EU, for example from the UK to another EU member state (goods and non-digital services sold over the internet are currently excluded from the new legislation) will be subject to VAT. The VAT charge is determined by the country the customer is in, not where the seller is based, meaning anyone selling digital products online to any other country in the EU, will have to charge VAT in the country of the buyer instead of the seller.
Online businesses selling to consumers will also need to register and keep records for VAT, as the previous policy of exempting businesses with a turnover of less than £81,000 from VAT is now being removed. Though a recent update states:
“UK micro-businesses that are below the current UK VAT registration threshold, and who register for the VAT Mini One Stop Shop (MOSS) may, until 30 June 2015, base their ‘customer location’ VAT taxation and accounting decisions on information provided to them by their payment service provider. This means the business need not require further information to be supplied by the customer. As payment service providers already collect and hold a minimum of 2 pieces of information about the member state where the customer usually resides, the transitional period, until 30 June 2015, will give micro-businesses additional time to adapt their websites to meet the new data collection requirements.”
For more information check out the HMRC website article: VAT: businesses supplying digital services to private consumers and European Commission guidelines here: http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm#current_rules