Value-added Tax and the Fixed Price Law
Indie authors planning to sell their translated books on the German market should be aware of two important regulations in pricing: the value added tax, and the fixed book price law.
In Germany, the retail price of all products must include the value added tax (VAT). For most products, including ebooks, VAT is 19%, but for print books merely 7% VAT must be charged to the customer. Since January 2015, VAT is determined by the country of the buyer, and not, as before, the country of the seller.
So, if you want to sell your ebook on Amazon.de, the list price you enter in KDP includes the 19% VAT, which will be deducted from the price before calculating your royalties. Luckily, you still get 70% royalties on ebooks between 2.99 € and 9.99 €, even if the 2.99 € includes VAT – it will just be less net payment for you.
If you do not manually adjust the list price on KDP for each country, Amazon will calculate it from the US price – but you will end up with odd numbers, such as 3.17 €, which look unattractive to customers.
You don’t have to worry about the taxes if you use a distribution service.
Fixed Book Price Law
German book prices are governed by the so-called Fixed Price Law/Agreement (“Buchpreisbindung”), which basically dictates that a specific book has to be sold at the same price in all outlets.
This is supposed to protect the book as a cultural asset, and ensure availability of the product in a wide variety of sales channels. In addition to protecting the book as a cultural good, it is also meant to protect smaller book stores from being outcompeted by large chains offering big discounts.
This applies to:
Books, and products that reproduce or substitute books (=ebooks)
This does not apply to:
Used books, foreign language books (but to their translated versions!), and cross-border sales within the EU
The fixed price law is effective for 18 months after the first publication of the book. After this time period, authors are not bound to the terms anymore.
- Change your book price – but make sure to change it in all (German) sales channels at once!
- Sell your book exclusively in one sales channel (e.g. Amazon KDP Select), which makes it much easier to comply with the law
- Give your book away for free
- Sell your books at different prices in other countries, if they don’t have a fixed price law (which is true for the US and UK). Countries that do have fixed price laws are: Austria, Denmark, France, Greece, Italy, Holland, Norway, Portugal, Spain, and Hungaria
- Enter your ebook into a subscription service or library (although there is an ongoing discussion in France right now whether Kindle Unlimited does or does not violate the Fixed Price Law, it seems to be accepted in Germany at this moment, because books are not actually sold)
- Give away coupons for your books that allow purchase at a reduced price (but you can give them away for free)
- Offer discount deals in the context of an affiliate program
- Participate in Book Bundles (where buyers can choose the price they want to pay) or box sets* (collection of books sold at a discount)
*A note on box sets: You can still do one if you promote it as a new, independent product. For example, you can put three novels together in a single (new) ebook, as long as you don’t promote it as a discount version of the individual books. Wrong: “Buy all three ebooks and save 3 Euro”. Right: “New: the ebook collection of all three novels… only x Euro!” (information by Matthias Matting)