{"id":192,"date":"2014-12-17T14:34:09","date_gmt":"2014-12-17T22:34:09","guid":{"rendered":"https:\/\/authorcoach.com\/blog\/?p=192"},"modified":"2014-12-17T14:34:09","modified_gmt":"2014-12-17T22:34:09","slug":"itunes-royalties-and-vat-inclusive-pricing","status":"publish","type":"post","link":"https:\/\/authorcoach.com\/blog\/itunes-royalties-and-vat-inclusive-pricing\/","title":{"rendered":"iTunes Royalties and VAT-Inclusive Pricing"},"content":{"rendered":"<p><span style=\"color: #000080;\"><strong><em>Yesterday I wrote about Amazon KDP royalties and how the changes in VAT in the EU would affect author and publisher income from Kindle sales.\u00a0 Today, let&#8217;s tackle iTunes Royalties and VAT-inclusive pricing.<\/em><\/strong><\/span><\/p>\n<p><span style=\"color: #000080;\"><strong><em>You may not know this, but Apple&#8217;s prices have always been VAT-inclusive at a rate of 3%. This means that your eBook prices on Apple should have been 3% higher than they were at Amazon and, if they weren&#8217;t, you were making less per eBook sold than on Amazon.\u00a0 Now that both Amazon and iTunes will be pricing VAT-inclusive, Amazon will be the winner, because Amazon offers greater pricing flexibility than iTunes, though it may mean that your iTunes royalties will be higher per sale because your price on iTunes will be higher.<\/em><\/strong><\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"decoded alignright\" src=\"http:\/\/www.sunnewsnetwork.ca\/archives\/sunnews\/business\/media\/2012\/10\/20121009-170824-g.jpg\" alt=\"Changes in EU VAT structure could lower authors' iTunes Royalties.\" width=\"246\" height=\"138\" \/><\/p>\n<p><span style=\"color: #000080;\"><strong><em>On December 5th, Apple sent out a modest email on the subject of the VAT changes, including a link to more information.\u00a0 Here&#8217;s what you get when you click the link:<\/em><\/strong><\/span><\/p>\n<p style=\"padding-left: 30px;\"><strong><span id=\"eu_vat_books\">Why are value-added tax (VAT) rates changing, and when?<\/span><\/strong><br \/>\nThe European Union approved changes to VAT legislation\u00a0impacting\u00a0the applicable VAT rate for the sale of digital goods, including electronic books. Previously, VAT rates for electronic books in the European Union (EU) were based on the\u00a0retailer\u2019s country. Beginning January 1, 2015, the applicable VAT rates in EU territories will be based on the country in which a customer is resident.<\/p>\n<p style=\"padding-left: 30px;\">VAT rates for customers in non-EU countries like Norway (25%) and Switzerland (8%) will remain unchanged.<\/p>\n<p style=\"padding-left: 30px;\">Contact your tax or legal advisor for further information about these changes.<\/p>\n<p style=\"padding-left: 30px;\"><strong><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/itc.mzstatic.com\/itc\/images\/faq\/images\/topicarrow.gif\" alt=\"\" width=\"7\" height=\"10\" border=\"0\" \/>How are VAT rates changing?<\/strong><br \/>\nBefore January 1, 2015, iTunes\u00a0has\u00a0applied\u00a0the electronic book VAT rate for its country of residence,\u00a0\u00a0Luxembourg\u00a0(3%),\u00a0for all sales in the European Union.<\/p>\n<p style=\"padding-left: 60px;\">Beginning January 1, 2015, the following VAT rates (current as of November 30, 2014), based on the customer&#8217;s country of residence, will be applied:<\/p>\n<table style=\"padding-left: 30px;\">\n<thead style=\"padding-left: 30px;\">\n<tr style=\"padding-left: 30px;\">\n<th style=\"padding-left: 30px;\" align=\"left\">Country<\/th>\n<th style=\"padding-left: 30px;\" align=\"left\">VAT Rate Applied to eBooks<\/th>\n<\/tr>\n<\/thead>\n<tbody style=\"padding-left: 30px;\">\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Austria<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">20%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Belgium<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">21%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Bulgaria<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">20%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Croatia<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">25%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Cyprus<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">19%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Czech Republic<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">21%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Denmark<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">25%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Estonia<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">20%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Finland<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">24%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">France<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">5.50%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Germany<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">19%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Greece<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">23%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Hungary<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">27%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Ireland<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">23%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Italy<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">22%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Latvia<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">21%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Lithuania<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">21%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Luxembourg<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">3%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Malta<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">18%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Netherlands<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">21%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Poland<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">23%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Portugal<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">23%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Romania<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">24%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Slovakia<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">20%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Slovenia<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">22%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Spain<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">21%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">Sweden<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">25%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\" align=\"left\">UK<\/td>\n<td style=\"padding-left: 30px;\" align=\"left\">20%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p style=\"padding-left: 30px;\">Note that VAT rates in EU member states may change at any time depending on relevant legislation. The standard VAT rate is used for all EU countries except France and Luxembourg, which have authorized a lower electronic book VAT rate.<\/p>\n<p style=\"padding-left: 30px;\"><strong><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/itc.mzstatic.com\/itc\/images\/faq\/images\/topicarrow.gif\" alt=\"\" width=\"7\" height=\"10\" border=\"0\" \/>Who is affected by these VAT changes?<\/strong><br \/>\nPublishers who sell books on iBooks in the European Union will be affected.<\/p>\n<p style=\"padding-left: 30px;\"><strong><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/itc.mzstatic.com\/itc\/images\/faq\/images\/topicarrow.gif\" alt=\"\" width=\"7\" height=\"10\" border=\"0\" \/>How do the changes affect me?<\/strong><br \/>\n<span style=\"color: #ff0000;\">The customer prices you deliver to iBooks are customer facing prices which include VAT, while Apple&#8217;s commission and the publisher\u2019s proceeds are calculated after VAT is deducted. We will not be making any automatic adjustments to your prices to reflect any new VAT rates. Unless you update your prices on iBooks, your proceeds for some book sales in the EU may change. <span style=\"color: #000080;\"><em>{Emphasis mine.}<\/em><\/span><br \/>\n<\/span><\/p>\n<p style=\"padding-left: 30px;\">For example, here is a comparison of how VAT calculations may change for a book you priced at \u20ac 9.99 in two different territories:<\/p>\n<table style=\"padding-left: 30px;\">\n<tbody style=\"padding-left: 30px;\">\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\"><strong>Customer&#8217;s country of residence<\/strong><\/td>\n<td style=\"padding-left: 30px;\">EU<\/td>\n<td style=\"padding-left: 30px;\">Spain<\/td>\n<td style=\"padding-left: 30px;\">France<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\"><strong>iBooks book price in country being sold<\/strong><\/td>\n<td style=\"padding-left: 30px;\">\u20ac9.99<\/td>\n<td style=\"padding-left: 30px;\">\u20ac9.99<\/td>\n<td style=\"padding-left: 30px;\">\u20ac9.99<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\"><strong>Year book was sold<\/strong><\/td>\n<td style=\"padding-left: 30px;\">2014<\/td>\n<td style=\"padding-left: 30px;\">2015<\/td>\n<td style=\"padding-left: 30px;\">2015<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\"><strong>VAT rate<\/strong><\/td>\n<td style=\"padding-left: 30px;\">3%<\/td>\n<td style=\"padding-left: 30px;\">21%<\/td>\n<td style=\"padding-left: 30px;\">5.5%<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\"><strong>VAT total<\/strong><\/td>\n<td style=\"padding-left: 30px;\">\u20ac0.29<\/td>\n<td style=\"padding-left: 30px;\">\u20ac1.73<\/td>\n<td style=\"padding-left: 30px;\">\u20ac0.52<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\"><strong>Amount after VAT deducted<\/strong><\/td>\n<td style=\"padding-left: 30px;\">\u20ac9.70<\/td>\n<td style=\"padding-left: 30px;\">\u20ac8.26<\/td>\n<td style=\"padding-left: 30px;\">\u20ac9.47<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\"><strong>Apple&#8217;s commission (30%)*<\/strong><\/td>\n<td style=\"padding-left: 30px;\">\u20ac2.91<\/td>\n<td style=\"padding-left: 30px;\">\u20ac2.48<\/td>\n<td style=\"padding-left: 30px;\">\u20ac2.84<\/td>\n<\/tr>\n<tr style=\"padding-left: 30px;\">\n<td style=\"padding-left: 30px;\"><strong>Publisher&#8217;s proceeds (70%)*<\/strong><\/td>\n<td style=\"padding-left: 30px;\">\u20ac6.79<\/td>\n<td style=\"padding-left: 30px;\">\u20ac5.78<\/td>\n<td style=\"padding-left: 30px;\">\u20ac6.63<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"color: #000080;\"><strong><em>{Whoa! I&#8217;ll make a full Euro less in Spain???!!}<\/em><\/strong><\/span><\/p>\n<p style=\"padding-left: 30px;\">*Apple&#8217;s commission and Publisher&#8217;s proceeds are calculated after VAT has been deducted from the selling price on iBooks.<\/p>\n<p style=\"padding-left: 30px;\">\u00a0If you want to change the price of your books, you can schedule a price change to take effect\u00a0on or after\u00a0January 1, 2015.<\/p>\n<p><span style=\"color: #000080;\"><strong><em>In a way, I give Apple a bit more credit than Amazon for explaining what is happening.\u00a0 And while it would be nice if they increased the prices across the board for all books to reflect the new VAT, Apple has an advantage over Amazon because it allows you to <\/em>schedule<em> the price change to take effect when the new rates take effect.<\/em><\/strong><\/span><\/p>\n<p><em><strong><span style=\"color: #000080;\">That said, Apple should be making the change because it can do so programmatically and far more easily than any one author or small publisher.\u00a0 There are 28 countries in that list.\u00a0 Whereas you could previously log onto itunesconnect.com and change the US price and have that cascade down through all 51 of Apple&#8217;s iTunes stores, you will now have to manually update 28 of the 51 prices.\u00a0 If you have a couple of dozen or more titles, this is quickly going to become a nightmare.<\/span><\/strong><\/em><\/p>\n<p><em><strong><span style=\"color: #000080;\">Also, Apple&#8217;s application of tiers is going to limit you some and ultimately make all of your books more expensive on iTunes than other sites.\u00a0 For example, on Amazon a $2.99 book that goes from VAT-exclusive to VAT-inclusive needs to rise in price somewhere between 16\u00a2 and 75\u00a2.\u00a0 But Apple&#8217;s tiers are generally $1.00 apart.\u00a0 So if you are selling on Amazon, you can individually price your books in a number of EU countries more precisely than you can on Apple.\u00a0 And your titles on Apple are going to end up being more expensive.<\/span><\/strong><\/em><\/p>\n<p><em><strong><span style=\"color: #000080;\">Take the UK, for example.\u00a0 Apple&#8217;s chart says the VAT there is 20%.\u00a0 On Amazon, your \u00a32.99 book can be priced at \u00a33.59, an increase of exactly 20%.\u00a0 But on Apple, where the tiers restrict you, you have to go up a full Pound to $3.99, thus your titles on iTunes will be priced higher than on Amazon, BN.com, or Kobo, always, it seems.<\/span><\/strong><\/em><\/p>\n<p><em><strong><span style=\"color: #333399;\">I&#8217;ve contacted Apple and brought this to their attention.\u00a0 The big question is, will they do anything about it?<\/span><\/strong><\/em><\/p>\n<p><em><strong><span style=\"color: #333399;\">In the meantime, independent publishers need to pay careful attention to their pricing to ensure that all markets are now priced accordingly, or face a nasty surprise with the first royalty reports of the new year.<\/span><\/strong><\/em><\/p>\n<p><em><strong><span style=\"color: #333399;\">A.<\/span><\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yesterday I wrote about Amazon KDP royalties and how the changes in VAT in the EU would affect author and publisher income from Kindle sales.\u00a0 Today, let&#8217;s tackle iTunes Royalties and VAT-inclusive pricing. You may not know this, but Apple&#8217;s &hellip; <a href=\"https:\/\/authorcoach.com\/blog\/itunes-royalties-and-vat-inclusive-pricing\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":156,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28,42,27,26],"tags":[],"class_list":["post-192","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-amazon","category-apple","category-self-publishing-2","category-the-business-of-publishing"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>iTunes Royalties and VAT-Inclusive Pricing<\/title>\n<meta name=\"description\" content=\"Publisher Andrew Zack discusses the EU changes in VAT structure; publishers must reprice their books or risk vast reductions in their iTunes royalties.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/authorcoach.com\/blog\/itunes-royalties-and-vat-inclusive-pricing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Changes in EU VAT Could Lower Authors&#039; eBook Royalties\" \/>\n<meta property=\"og:description\" content=\"The EU laws on VAT are changing beginning January 1. 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