The UK government aims to close a tax loophole that could see Steam titles taxed at 20% VAT, suggesting that the price of games on Valve’s marketplace – in Britain at least – could rise in kind.
Develop reports that presently; Steam games are sold to the UK market through the company’s Luxembourg office Valve S.A.R.L. The nation has, for some time now, allowed companies within its borders to charge a VAT rate of 3-15% on goods. That percentage will rise to 17 in 2015.
UK gamers have been paying the lower VAT rate for some time on games purchased through Steam, but they will have to pay the British rate when the loophole closes completely on January 1 2015. Currently, that rate stands at 20% suggesting that Valve, and other companies using this method – such as Apple with its iTunes marketplace – will have to hike prices to include the new VAT rate.
A line from the UK’s recent budget report states, “As announced at Budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services. From 1 January 2015 these services will be taxed in the Member State in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue.”
Speaking with Develop, Harbottle and Lewis lawyer Nic Murfett has confirmed that Valve will have to consider the local EU VAT rates when selling games in local territories. “From January 1st 2015, Valve will have to account for the VAT payable on each purchase made within the EU at the rate applicable in the Member State in which the relevant consumer is located and not the Member State in which Valve is registered,” he explained.
“Therefore, it’s likely that, rather than including a flat VAT rate in the retail price for each game that is made available on Steam in the EU, Valve will either start distinguishing the VAT that is payable on each purchase from the retail price of that purchase (as the amount of VAT will vary depending on the Member State in which the consumer is located) or raise the price of all of its games across the EU in order to account for its increased VAT liability.”
We’ll keep our eyes peeled for more on this, and we’ve contacted Valve for comment. What do you think?