App prices on the App Store to possibly increase from January 1, 2015 because of new EU VAT laws

app store iphone 6

Apple has sent out emails to app developers informing them about the change in VAT rates that will be applicable from January 1, 2015. The change is likely to force app developers to raise the prices of their apps. 

Apple currently charges a flat amount of VAT across all apps downloaded by users in the EU region. However, once the new policy goes into effect, Apple will be be applying the VAT rate based on the country the user downloads the app from. In certain regions of the EU, the VAT amount can be as high as 20% while in other regions it is as low as 3%. The earnings of developers on the App Store are also going to be negatively affected by this rule. Google had announced a similar change last month for app developers on the Play Store.

Why are value-added tax (VAT) rates changing, and when?

The European Union approved changes to VAT legislation impacting the applicable VAT rate for the sale of digital goods, including apps. Previously, VAT rates for apps in the European Union (EU) were based on the retailer’s country. Beginning January 1, 2015, the applicable VAT rates in EU territories will be based on the country in which a customer is resident.
VAT rates for customers in non-EU countries like Norway (25%) and Switzerland (8%) will remain unchanged.

While developers on the Play Store can circumvent this rule by increasing the price of their app on a per-country basis, Apple only allows developers to set their app price on a tier basis — meaning that if their is a change in price, it will be applicable for non-EU customers as well.

The new VAT laws from U.K cover all “e-services,” but it is unclear if these changes will also be applicable for music, movies, e-books and other digital content downloaded through iTunes.

[Via Apple]