Skype recently emailed all of their customers saying “VAT…it’s a tricky thing at the best of times. All those percentages that can make prices hard to understand. To help ease this, we’ll soon be making changes to the way we handle VAT when you pay for any Skype product”.
In the future Skype will charge VAT at the point of use instead of at the point of sale. That means then when you buy Skype credit VAT will no longer be added to the transaction. Instead as you make calls the calls will be charged with the relevant VAT rate at the point of consumption.
Although Skype don’t say so, doubtless these changes are in preparation for the new EU VAT rules for digital services coming in 2015 at which point they will have no choice but to change the VAT rates they charge. Broadcasting, telecommunications and electronic services in the EU will have to charge VAT based on the location of the end consumer instead of the current situation where VAT is charged based on where the supplier is physically located. By charging VAT when calls are made it should be easier for them to account for which country the VAT is due to be collected and submitted to.
We can expect other companies to make similar VAT announcements in the coming months as they all adjust their systems and the VAT rates charged in preparation for the changes.