Following a change to VAT (value added tax) legislation in the United Kingdom, there have been a lot of reports suggesting that Apple customers in the U.K. may soon have to pay more when buying from iTunes and the App Store.
As it turns out, those reports are likely incorrect.
You see, Apple has been charging Brits 23% VAT on digital content until now — but the U.K. VAT rate is only 20%.
When the government announced its latest Budget last week, it closed a tax loophole that allowed companies to charge customers VAT based on where their download was originated. So, even if they made their purchase in the U.K., they often paid foreign VAT rates.
A lot of companies, including Amazon, took advantage of this loophole and sold digital content from countries where the VAT rate is low — such as Luxembourg, where it’s just 15% — so that they could charge less. But Apple didn’t.
Instead, Apple is serving its digital content to U.K. customers from Ireland, where the VAT rate is 23%.
The Cupertino company confirms this in the “Payment & VAT” help section on its website, which reads: “The VAT rate for Apple customers who purchase Electronic Software Downloads or other Apple products which are classified as services under EU VAT law will be 23% Irish VAT.”
“This is because the place of supply of these products under EU VAT law is Ireland as the country from where Apple Distribution International makes these supplies.”
With that being the case, customers in the U.K. will actually pay less VAT under the new rules, meaning iTunes and App Store prices should fall a little.
In reality, Apple is likely to leave them as they are and pocket the difference — but at least prices won’t be going up like you may have been led to believe.