New Rules on the Sale of Digital Items to Buyers in the European Union gets sorted out. I can't be registering myself to all EU countries to submit VAT to each and every countries when there's buyer from there, and Etsy is not helping!
So I have done following steps to temporarily block EU customers on Etsy until they release any tools that might possibly help.
1. Create a new Shipping profile, name it as "BlockEU", then add "European Union", type 1000 for "Cost", and 1000 for "With another items"; add "United Kingdom", type 0 for "Cost" and 0 for "With another items". (So when EU customers checking out the item the shipping cost would at least stop them from proceeding to paying with PayPal.
2. Edit your digital products, there are two things you need to change:
a) Change them to
"Physical". Please take note that you can't really remove the file, they
system won't allow you to do that. Instead, you must just change the
product type from "Digital" to "Physical" and then click on Save.
b) Change their shipping profile to "BlockEU", then click "Publish".
The reason why I've suggested to set UK as free shipping is that currently UK has agreed that if you would send the digital product via Email manually then the transaction can be exempted.
The reason why I've suggested to prevent EU buyers from proceeding to PayPal is that although you could issue a refund after you decided to cancel the transaction, PayPal would not refund the $0.30 Fixed PayPal transaction fee (20p for UK PayPal account owner).
If you are looking to sell your digital products elsewhere that would take care of your VAT submission, try Payhip, or Smashwords - you get to choose whether or not you want their system to collect VAT and then submit it on your behalf.
Though I have found a temporary workaround, I am not happy.
Please accept my sincere apologies, customers from the European Unions, you may visit my official website, http://de-cors.com, for my digital products, there has links to my other venue that would take care of VAT on my bahalf.