{"id":184,"date":"2014-12-16T14:21:55","date_gmt":"2014-12-16T22:21:55","guid":{"rendered":"https:\/\/authorcoach.com\/blog\/?p=184"},"modified":"2014-12-16T14:21:55","modified_gmt":"2014-12-16T22:21:55","slug":"amazon-kdp-royalties-cut-vat-pricing","status":"publish","type":"post","link":"https:\/\/authorcoach.com\/blog\/amazon-kdp-royalties-cut-vat-pricing\/","title":{"rendered":"Amazon KDP Royalties To Be Cut by VAT Pricing Changes"},"content":{"rendered":"

The following email has shown up a couple of times from Amazon’s KDP team and it contains a little hidden information that requires you to do some math to understand that changes in the EU tax laws will mean lower Amazon KDP royalties.\u00a0 Read on.\u00a0 I’ll stop you when we get to the places you really need to pay attention (and I made the text red<\/span>).<\/em><\/p>\n

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\u2019s country \u2013 as of January 1st, VAT will be applied based on the buyer\u2019s 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.\"Do<\/p>\n

One-time Adjustment for Existing KDP Titles:<\/p>\n

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 \u00a35.00 as the VAT-exclusive list price for amazon.co.uk, the new VAT-inclusive list price will be \u00a36.00 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 \u20ac6.00 VAT-exclusive list price for amazon.de, amazon.fr, amazon.es, and amazon.it Kindle stores, the list prices including VAT will be \u20ac7.14 (19% VAT), \u20ac6.33 (5.5% VAT), \u20ac7.26 (21% VAT), and \u20ac7.32 (22% VAT) respectively.<\/p>\n

Minimum and maximum list prices for the 35% and 70% royalty plans will now also include VAT.<\/span> 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.<\/p>\n

Learn more about the new minimum and maximum KDP EU list prices:<\/p>\n

https:\/\/kdp.amazon.com\/help?topicId=ANRML55B0BWBK<\/a><\/p>\n

You skipped that link, didn’t you?\u00a0 Well, you shouldn’t have, because what this email doesn’t say, is that the maximum prices for UK and EU books are <\/em>not rising, even though the pricing must now be VAT-inclusive.\u00a0 So if you are selling a book in the UK for \u00a39.99 VAT-exclusive, you will now be forced to have the same price VAT-<\/em>inclusive, meaning that your net Amazon KDP royalties will be cut.\u00a0 Why isn’t Amazon raising the max VAT-inclusive price given the changes in the tax laws?\u00a0 There’s no answer to that given and we can only presume that it is because Amazon is standing firm on its belief that eBooks should cost no more than 9.99, be it in US Dollars or UK Pounds.\u00a0 And also that Amazon doesn’t care that KDP clients are going to be screwed by this change.<\/em><\/strong><\/span><\/p>\n

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 \u00a36.00 VAT-inclusive price on Amazon.co.uk, for sales to customers in the UK we would apply the UK\u2019s 20% VAT rate and the price we use to calculate royalty would be \u00a35.00. The 23% Irish VAT rate will apply to purchases from Ireland, so a customer buying from Ireland would still see \u00a36.00 but, applying the 23% Irish VAT rate, we would calculate royalty based on the VAT-exclusive list price of \u00a34.88.<\/p>\n

Learn more about how EU prices affect royalty payments:<\/p>\n

https:\/\/kdp.amazon.com\/help?topicId=A30XCAGX3E5QDC<\/a><\/p>\n

eBooks available for pre-order, scheduled to release after January 1, 2015:<\/p>\n

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%.<\/p>\n

eBooks scheduled for a Kindle Countdown Deal:<\/p>\n

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 \u00a31.99 and \u00a315.99, including the VAT.<\/p>\n

Setting List Prices for EU Kindle stores:<\/p>\n

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 \u201c\u00a31.99\u201d, he would have to set \u201c\u00a31.93\u201d as the VAT-exclusive list price to account for the 3% VAT we would have applied. Now, authors can simply enter \u201c\u00a31.99\u201d 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.<\/p>\n

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 \u20ac8.00. For purchases in Germany, we would deduct 19% VAT and calculate royalty on a VAT-exclusive list price of \u20ac6.72.<\/span><\/p>\n

Whoa! Hold on! Allow me to interrupt this incredibly boring email with an observation: this will drive down the net price of the book and therefore your Amazon KDP royalties.<\/em><\/strong><\/span><\/p>\n

This appears to be a straight-forward explanation of what Amazon is doing and written in a way that one might say is intended to be seen as “helpful.”\u00a0 But is it?\u00a0 If you price your book at $2.99 in the US and allow Amazon to auto-price it, it will be \u20ac2.39 in the Germany.\u00a0 If that price is VAT-exclusive, your royalty is based on \u20ac2.39, but Amazon is saying that that price will be VAT-<\/em>inclusive.\u00a0 Why is Amazon doing that?\u00a0 Obviously it has tons of computing and programming resources, so it could make the pricing work however it chooses.\u00a0 And it is <\/em>choosing to have it work in a manner that will lower the net price of the book and therefore authors’ royalties.\u00a0 Don’t let them do it. (Use the link below to let them know your preferences.)<\/em><\/strong><\/span><\/p>\n

To the UK and European markets, coming January 1, it will look like eBook prices have gone up, in some cases over twenty percent.\u00a0 This could lead to a big hit in sales until readers realize the change in how VAT is applied.\u00a0 Let’s hope Amazon is educating Kindle customers as well as KDP clients.<\/em><\/strong><\/span><\/p>\n

To counter Amazon’s choice in pricing structure, you can no longer allow Amazon to calculate the price, until such a time as they give you the choice of how such prices should be calculated.\u00a0 I would want to set the base price, before VAT is added, and then let Amazon add the appropriate VAT.\u00a0 So for a $2.99 book, it would be \u20ac2.39<\/em> before VAT.\u00a0 It’s VAT-inclusive price would be \u20ac2.87 and my royalty would be based on \u20ac2.39.\u00a0 Therefore, I do not lose income because of Amazon’s choice in how to convert US prices to EU or UK prices.<\/em><\/strong><\/span><\/p>\n

Again, Amazon <\/em>could make their system calculate the converted price <\/em>before VAT, but is making the choice not to, probably because they don’t want customers to see a sudden increase in prices of twenty percent or more.\u00a0 But should you, the publisher, pay that tax?\u00a0 No, of course not.\u00a0 If Amazon wants to keep customers from having sticker shock because of the change in the tax laws, it should be willing to pay publishers royalties based on the VAT-<\/em>included price.\u00a0 Amazon will make less per sale, but certainly it can afford it more than KDP publishers can.<\/em><\/strong><\/span><\/p>\n

I now return you to this overly complicated and boring email.<\/em><\/strong><\/span><\/p>\n

Learn more about setting list prices for EU Kindle stores:<\/p>\n

https:\/\/kdp.amazon.com\/help?topicId=A30464Q6OVH578<\/a><\/p>\n

As always, if an author list 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.<\/p>\n

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:<\/p>\n

https:\/\/kdp.amazon.com\/contact-us?topicId=euvat<\/a><\/p>\n

Best Regards,
\nKindle Direct Publishing Team<\/p>\n","protected":false},"excerpt":{"rendered":"

The following email has shown up a couple of times from Amazon’s KDP team and it contains a little hidden information that requires you to do some math to understand that changes in the EU tax laws will mean lower … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28,27],"tags":[],"class_list":["post-184","post","type-post","status-publish","format-standard","hentry","category-amazon","category-self-publishing-2"],"yoast_head":"\nAmazon KDP Royalties To Be Cut by VAT Pricing Changes<\/title>\n<meta name=\"description\" content=\"Amazon's VAT-inclusive pricing will cut authors' Amazon KDP royalties. 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