Tax Changes Could Actually See App Prices Decrease In Britain, Not Increase
We heard recently that the closure of a tax loophole in Britain could see App Store prices increase by as much as 20 percent. It now turns out that the original research was wrong, and that the change may instead see the cost of digital content decrease in Britain from 2015 onwards.
In an article published yesterday, we explained how Britain’s Chancellor of the Exchequer George Osborne announced in the country’s new budget that a “tax loophole” for digital content had been closed.
Due to changeable tax rates across Europe, Britain’s government has decided to charge value added tax (VAT) at the rate of the member state in which the consumer is located. The official budget documentation explained:
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 original report from British newspaper the Guardian noted that because Apple presently sells content through Luxemburg, where the VAT rate is just three percent, the change would likely see iTunes Store and App Store prices rise in Britain (where VAT is much higher at 20 percent).
However, PCPro now explains that because Apple’s European base of operations is located in Ireland, where VAT is charged at 23 percent, iOS app prices aren’t expected to rise – if anything, they should decrease.
The publication draws attention to Apple’s VAT Help pages, where the Cupertino, Calif. company explains:
The VAT rate for Apple customers who purchase Electronic Software Downloads or other Apple products which are classified as services under EU Vat law will be 23% Irish VAT. This is because the place of supply of these products under EU VAT law is Ireland as the country from where Apple Distribution International makes these supplies.
As of Jan. 1, 2015, VAT on iTunes Store and App Store sales will instead be charged at 20 percent in Britain, as noted above.
Though as PCPro concludes, the small difference means consumers in the country aren’t expected to see iOS app prices decrease – instead, Apple is likely to simply hold on to a greater share of its revenue.
See also: Today’s Apps Gone Free: Convertizo, Ring Run Circus, YellingMom And More, Is This An Apple ‘iPhone 6’ Case In The Wild?, and Here’s Why Apple Bringing iTunes To Android Makes A Lot Of Sense.