The seller has to be able to provide at least 2 pieces of evidence that proves the buyer's country of residence (meaning, in practice, that if you're just accepting PayPal payments and don't collect the full address of the buyer, you'll be violating the rule).
I've done a fair bit of research on this, and from what I can see, there are not a whole lot of options for an EU marketer who wants to, for example, sell a WSO. To stay compliant, you'll need to:
1. Collect and verify the address of the buyer and also the IP address
2. Look up the current VAT rate of the buyer's country and charge it (and provide an invoice/receipt that shows it) - UNLESS the buyer is a company, in which case they'll have to provide their valid VAT number, then no VAT should be charged
3. Periodically report the VAT charged to customers in each individual country through a local web portal in your country
As far as I can see, the only feasible way to keep selling digital downloads will be going through a middleman that handles all this (like Clickbank). Or, build your own custom system that handles it all, but then you'd still be responsible for the actual reporting. Simple selling through services like JVZoo will be against the law as you won't be able to correctly charge VAT.
I'd say 99% of EU warriors who are selling WSO's will be in violation of this come Jan 1. Exceptions being anyone who's selling through a middleman like Clickbank.
Personally, I'm outraged. I understand they're trying to level the playing field and prevent large companies from selling from a low-VAT country like Luxemburg, but these large companies will have no real trouble following the rules. For small players like us, however, it's practically impossible.
What are your thoughts?
Here's some more info:
Telecommunications, broadcasting & electronic services - European commission