I've seen reports of people arguing along those lines to circumvent the new rules for now, e.g., selling software on CD that is posted to the purchaser with a free accompanying download. Some are trying a similar strategy without any physical element involved, but instead relying on the presence of some manual step, such as attaching a PDF to an e-mail sent by a real person rather than being a fully automated download.

I haven't seen anyone challenge the validity of the physical product workarounds so far, but note that similar rules are due to apply to physical sales as well as digital ones from next year, so this is probably a temporary reprieve at best.

Has there been any concrete evidence that the EU plans to extend these rules to physical goods as I've only seen speculation.

For now, I'm trusting the comments from the various trade and campaign groups on that point. They've been in meetings I haven't with organisations like HMRC, and they all seem to be telling a similar story, though also with a similar lack of detail so far.

I completely agree that some official guidance we can all see and act on is well overdue on this point. There are several issues connected to the new EU VAT rules that are being widely reported but I'm having trouble finding official citations; probably the most important one I've come across is the legality or otherwise of declining to sell to customers in the EU but outside your home nation in an attempt to avoid the whole mess.

Maybe. Some countries have all sorts of anti avoidance rules when it comes to tax.

As a small company, do you really want to go to court because you're selling beans instead of downloads? I assume this will be spotted relatively quickly when authorities do an audit. Also, the larger players, they would never use this.

The rules apply to digital products AND services (e.g. memberships, cloud storage ...). You'd need to physically ship something to avoid the rules, but then, other burdens (import/export/customs/taxes) come in place.

What if, and I'm just thinking out loud here, the digital product (software) was free but you had to receive an activation code (by snail mail) to use it?

Terrible user experience for sure, but under what taxation would this fall?

I have read 'masters of doom' last night and I can't believe we used to ship around 'installation disks wrapped in ziploc bags', but maybe it's time to get back to that? j/k

Grey area IMO and different EU tax authorities may have differing views, just to make things more complicated.

you also have to pay VAT on physical products when you import them. When I receive a package from the US, I have to pay VAT and customs fees on delivery (unless the sender declares it as a "present", but that's illegal)

There is usually a threshold under which no VAT is levied (different for each country however).

There aren't any of those. That's pretty much the point of the EU.

One workaround is to change your business model and accept donations instead. That obviously won't work for everyone, obviously.

This works because tips and gratuities are not considered taxable consideration for VAT purposes and therefore outside the scope of VAT. It has to be a genuine tip though - i.e. voluntary, no minimum or recommended amount and not a condition of purchase.

There is a platform out there that lets you sell things under this model but I can't remember it's name.

Physical goods are already subject to VAT in the EU; in many cases at higher rates than apply to digital goods.

You gain nothing by selling beans (with free downloads) except extra costs for you and extra hassles for your customers.