Apple Inc. To Charge Local VAT Taxes In EU

Apple will amend its VAT rates for apps in all European territories starting Jan. 1, according to an official email sent to iTunes Connect members. Apple Insider reader Gregg, who provided the letter, noted that the new policy will probably increase prices for customers living in high tax countries like the U.K. App store customers are at present paying a flat VAT across Europe.

Higher prices for apps

The iPhone maker made the decision after the announcement of new laws from British Chancellor of the Exchequer and Second Lord of the Treasury George Osborne in March to address the shortcomings in tax, from which Apple benefited by selling app downloads through low-VAT countries. For instance, U.K. App Store customers are freely avoiding the 20% VAT through Apple’s routing of purchases through countries like Luxembourg, which has a 3% tax rate.

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According to the announcement, the government will change the rules for the taxation of inter-Europe business to include consumer supplies of telecommunications, broadcasting and e-services. The new tax rules will begin Jan. 1 in the member state in which the consumer is located, making sure the items are taxed fairly and tax revenue is safeguarded.

Apple has not yet announced whether the new tax rules will be applied across iTunes purchases, such as music, movies and e-books. The new U.K. budget laws cover all digital downloads. Although App Store prices will change after the new rule, developers’ proceeds will remain same, as they are calculated prior to tax, says the Apple note.

Apple stock presents a buying opportunity

Apple shares are toppling as 2014 comes to an end, but analysts at Barclays and Goldman Sachs say this pullback is offering a potential buying opportunity for investors. Analysts at both the research houses are maintaining Buy rating on the stock.

Apple shares are up 33% this year, but since late last month, they have declined 8%, and analysts are suggesting that investors consider the stock for their portfolio in 2015. Ben Reitzes and Ryan Jones at Barclays mentioned in their report dated Dec. 17 that a few markets like Russia bear the impact of geopolitical and macroeconomic volatility, but Apple’s business appears to be in good shape in the United States, Europe and China.