Google Play Store changes reflect Apple’s ‘pressure’

One tax expert thinks Apple has had the same effect as the European Union in forcing a rethink of the Google Play Store terms and conditions that have to change in January due to new rules on VAT in the EU.

Richard Asquith, VP of global tax compliance at Avalara, thinks that Google had Apple’s situation in the back of its mind when it was made to change the way it acts for its developers as part of the updated legislation.

“Google’s shift reflects the concerns of small and medium sized developers who have been overwhelmed by the new EU VAT regulations – not least having determine the location of all of their customers and charge the appropriate VAT rate. But it also comes from competitive pressure from Apple who have always taken care of VAT reporting for their sellers,” Asquith said.

On 1 January, Google is changing its trading terms for apps, gaming, video and music providers on its Google Play Store so that it becomes the legal seller to customers as opposed to the current situation where it acts as the agent. Right now it takes a commission from each sale and under the new system it will charge and report VAT to developers depending on the country they’re situated in.

Apple, through its App Store, has always acted as a seller for its developers and therefore the new rules won’t have as big an effect on how it operates in the EU.

Changes to how VAT is calculated for digital services come into play at the start of next year and mean that instead of the VAT being charged where the seller is located, it is charged on where the buyer is. All providers will also have to report and remit the VAT they collect using new online portals called Mini One-Stop-Shop [MOSS] portals.

Image Credit: Flickr (Rock Cohen)