Creative Market and VAT Compliance
Being a worldwide community gives us the benefit of amazing user diversity. It also means that we have to evolve based on how marketplaces are required to operate in different parts of the world. One such evolution is The European Union’s Value Added Tax (VAT), which will soon be implemented across Creative Market. We’ve received many questions about what VAT is, how it works, and how invoicing will be handled. To help make sure everyone is on the same page before VAT is implemented across the site, we’ll be answering many of these questions here in this post.
Why is Creative Market Implementing VAT?
VAT is a sales tax that we are required to charge on behalf of the European Union. VAT is implemented on purchases originating from, or in cases where the buyer lives in, an EU country. The changes we’re making are legally mandated for all online marketplaces that serve EU buyers.
If the EU made the change in 2015 why is Creative Market only now charging VAT in 2016?
Over the past year, Creative Market has implemented the systems necessary to collect, remit, and properly invoice for transactions requiring that VAT be levied. As the EU requires Creative Market to collect and remit VAT, Creative Market has taken the measures necessary to assess and pay all VAT arising from 2015 sales.
Who Will This Affect?
The breakdown of who will and won’t be affected by VAT is fairly simple:
- This tax only applies to purchases by customers located in the EU.
- If you live outside of the EU, you won’t be charged VAT.
- VAT is not part of the earnings calculation for Creative Market shop owners.
When Will VAT Be Implemented on Creative Market?
We will begin collecting VAT on Creative Market on May 16th, 2016. In the next section, we’ll go over some of the most common VAT questions and answers. You can also learn more in our VAT FAQ.
Here are some helpful educational resources from the EU:
If you have questions that you don’t see covered below, please write us at firstname.lastname@example.org.
What is VAT?
The European Union value added tax (or EU VAT) is a consumption tax levied on goods and services within the European Union (EU). Different rates of VAT apply in different EU member states. The VAT rate may differ by country.
Why are you charging VAT?
Changes to the EU’s VAT law that took effect in 2015 require us to begin charging VAT on all electronically supplied services (“ESS”), which include products offered on Creative Market.
Who must pay VAT?
Buyers who are located in the EU and don’t provide a valid VAT registration number must pay VAT.
The European Commission states that “located” means:
- For a business (taxable person) = either the country where it is registered or the country where it has fixed premises receiving the service.
- For a consumer (non-taxable person) = the country where they are registered, have their permanent address or usually live.
What is a valid VAT registration number?
A VAT registration number (or a VRN in the UK) shows that a buyer is a registered business in an EU country and therefore won’t be charged VAT by Creative Market. If you are a business, but do not have a valid VAT registration number, you will be charged VAT.
Will I be charged at purchase if I provide a valid VAT registration number?
Upon your first purchase of a Creative Market product, you will be asked to confirm where you are located. If you affirm you are in an EU country, your purchase (as well as all subsequent purchases) will be charged VAT based on the EU country where you are located. Upon receipt of a valid VAT registration number, Creative Market will not collect VAT on your transactions, and will instead provide an invoice for your records.
How is VAT calculated?
The VAT rate in the EU country where you are located determines the percentage of the product’s price that will be assessed as VAT. Product prices you see on Creative Market prior to purchase do not include VAT. At checkout, the amount of the VAT will be shown.
What is the VAT rate in my country?
For your country’s VAT rate please see these resources:
How will I know what country and rate you’ll charge me for VAT?
Before you confirm your purchase, we will indicate the country, VAT rate, and total VAT amount.
Is Creative Market or the shop owner considered the seller for VAT purposes?
For the purposes of EU VAT, Creative Market is deemed to be the seller. Creative Market determines, collects, and remits VAT for all purchases by EU buyers.
Will buyers be sent a VAT invoice for each purchase?
VAT invoices are automatically created at the time of purchase and will be emailed to the respective parties. All invoices are designed to comply with the legal requirements set forth by each EU member state. Additionally, all invoices will be archived in Creative Market’s tax compliance system.
As a shop owner are my earnings affected by VAT?
No, VAT is not part of the earnings calculation.
What is Creative Market’s registered VAT number?
Our registered VAT number is EU528002441.
Who will remit the VAT collected to the EU?
Creative Market determines, collects, and remits VAT for all purchases by EU buyers.
As a buyer, how will I know what the total price of a product, including VAT, will be before I purchase?
The prices shown on Creative Market products do not include VAT. The total price including VAT, the VAT country, and the VAT percentage/rate will be shown after you click “Buy Now” but before you confirm your order.
If you’ve made a purchase previously and were charged VAT the same rate will be added each time you purchase. For example, if you are a French buyer you will always be charged 20% VAT. So if you buy a product for $10 you will be charged $2 in VAT. If you then buy a $20 product you’ll be charged $4 in VAT.
Read our full VAT FAQ for more information.
Contact Us If You Have Any Questions
We know firsthand that tax laws can be complicated and confusing. We’re very sorry for any inconvenience these changes may cause you and want you to know that we are doing our very best to both comply with EU laws and support our amazing community. We also know and empathize with the fact that there will be an adjustment period, and that buyers and shop owners will have specific concerns on this matter. Please contact us with your questions and concerns and we’ll do whatever we can to help: email@example.com.
Nothing here is intended to represent tax, accounting, or legal advice. As always, please consult your tax advisor.
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