New EU VAT Rules 1-Jan-15 #VATMOSS #VATMESS #EUVAT

Global effect, not just EU

[Frank_Rizzo]

1st Jan 2015 new EU rules on VAT (Value Added Tax) come into play.

From that date if you make an e-sale (digital download, webinar, online course, e-book etc.) to any EU customer you have to register for VAT in that country and pay the tax.

That's quite shocking itself as it means you have to register for and administer for *every* EU country you trade with, which is a red tape nightmare.

UK VATMOSS
To ease the pain for us small time e-tailers (who are not already VAT registered) Her Majesty's Revenue and Customs have created a new scheme called VATMOSS. This means that we only have to register once (in the UK) and pay the taxes here ...

But wait. This means that you now have to pay VAT on ALL your sales, even if you are below the VAT Threshold (£81,000).

This is terrible. An online business selling digital services to UK customers and turning over £80,000 does not have to register for or pay VAT at all. But if they make one sale to any other EU country (even for just £1) they now have to pay the VAT on the full £80,000 !

Spying By the Vat Door
And it gets worse. You now have to record a ridiculous amount of information on your customers. You now how to record for 10 years:

* Full Address of customer
* IP Address
* Location of Bank
* Country code of SIM card used by the customer
* Location of customers fixed Land Line
* Product codes, which link the purchases to the customer

[Frank_Rizzo]

That's a good point Ron but it's not fair for the majority.

Your beef should be with the NL tax authorities. You should be asking for a VAT threshold like other countries.

A VAT threshold is a safety net for small traders who can not afford the cost and time of running VAT.

Of course the answer to all this new mess is for there to be an EU wide threshold. Take us all out of this nonsense if our turnover is less than €100,000

That would not only level the playing field between me and you Ron. But it would totally level the playing between all of us small traders and Amazon.

[RonPK]

@frank I aim to make more than €100,000 ;)

@zara Adsense is a b2b service, and the changes only apply to b2c services. Also, the reverse-charge mechanism makes that no VAT changes hands between the webmaster and G.

Here's an informative page from the horse's mouth: [ec.europa.eu...]

[nomis5]

Agree with ron above.

Its scary though. One day the difference between b2b and b2c will unravel as far as Adsense is concerned. The EU is to be taken seriously, and if you don't like them being able to control ur business vote them out of ur country.

[Frank_Rizzo]

The only thing I can agree with Ron is to earn more than €100,000 ;-) that way I could afford extra accountant and legal fees.

As for voting them out you can't vote out the EU. You can only vote out your own government. Voting UKIP would be of no use either because the EU are imposing this on *The World* regardless of which country you are in or what type of government you have.

The EU created this new VAT rule not the UK government. HMRC did little to consult with business (they only consulted the whales). HMRC did nothing at all to inform us small fry. There are many MPs who were not even aware this was happening.

So Ron's playing field will be levelled but in so doing thousands of micro businesses will be razed to the ground. That's the reality of all this. Thousands of kitchen table entrepreneurs; mom and pops; ambitious youngsters will have their dreams vanquished.

This is a war between the EU, Amazon, Skype and such. This is not our war. We should not have been dragged into it. A Europe wide VAT threshold will keep us out of it.

[brotherhood of LAN]

Just finished implementing some code to accommodate this for a new site.

I'm using maxmind to get an idea of where a user is (checked once upon sign up), comparing the response to ISO's of European countries and offering a pop up inviting them to confirm their country and optional VAT number, confirm name/address and then charge VAT accordingly.

For any PHP inclined people, here's some simple code to verify a VAT number (though note that their API is merely a collection of individual country's databases and is not up to date at any one time). You will be told whether they think the VAT number is valid, and potentially return a name and address with it.

$iso = 'GB';
$vatnumber = '123456789';

$client = new SoapClient("http://ec.europa.eu/taxation_customs/vies/checkVatService.wsdl");
$response = $client->checkVat(array('countryCode' => $iso,'vatNumber' => $vatnumber));

[Frank_Rizzo]

That's all good stuff but the issue is that mom and pop won't have a clue how to do this.

They are hosting sites on a £1.99 a month plan and simply can't do any of this. This is why there should be an exemption.

--

Of those who are embracing the new rules are you not concerned about abandoned carts?

If you currently collect name and address, but you now have to ask:

Do you have a VAT Number?
Which country are you in?

etc. then this is an extra hurdle to overcome before the transaction is complete.

And then what if they answer Spain to the country question but GEO IP states they are in Portugal?

If that happens you can not complete the transaction. You have to stop the purchase and put it on hold until you then gather further evidence of which country the transaction is deemed to have taken place in. If you do not, and if you get it wrong you can face damaging fines.

---

Some are relying on PayPal to help here. But PayPal will only give you one piece of evidence and that evidence (from the latest info update from PayPal) is only the country of residence of the PayPal buyer from when they registered with PayPal. It is not the location of where the customer may be now.

[graeme_p]

It is insane, and easy to slip into by accident.

The authorities will have consulted big companies who are all VAT registered anyway, so it makes little difference to them (given the MOSS facility).

[SmallP]

There has been a new development for the UK which you can read about by searching for "Business Brief 46 (2014)". It was issued on 10th December.

In summary:

A small business with turnover below the UK VAT threshold can now register for VATMOSS without charging UK VAT. You still have to register for VAT and account for it (and fill out a quarterly VAT return), but you charge VAT to UK customers at 0%.

Bad: small businesses will have 8 new forms to post on the HMRC website every year

Good: they will no longer have the added disadvantage of having to charge VAT on UK transactions.

Who is affected?

That same business brief sums up what and who comes under the new rules in a very clear way. Interestingly, if you are manually sending out a pdf file with a personal email to buyers (rather than having an entirely automated process) you are probably exempt.

Keeping records:

HMRC advises the following:

Step 1: when customer places the order they should confirm either their EU member state or their billing address

Step 2: when they pay, whoever takes payment should provide the customer's billing address and the country code of their bank / credit card.

If Step 1 and Step 2 tally, that is sufficient and you keep both as records (for 10 years).

If they don't tally you can still accept the order but you must contact the customer and ask them to reconcile the discrepancy!

Data - this is important:

If you haven't already done so, UK e-sellers MUST now register as a data controller in the UK (because of the requirement to hold 10 years of records). That costs £35 a year.

As an aside, my online shop provider appears to be doing nothing about this. Does anyone have an alternative that is pro-active with the VATMOSS issue?

[Frank_Rizzo]

Just to correct you there SmallP

There is absolutely no need to register as a data controller.

If you follow the ICO walkthrough on the subject you will see an exemption for storing information like this that is used purely for accounting purposes. Seriously you don't need to register. Many business do "just in case" but there is absolutely no need if the purpose of keeping that data is for accounts (of which this procedure is).

You want a way out of all this?

Increase your minimum human intervention. All you have to do is to make sure that either the ordering process, or the support and service includes things like a Live Chat Box. It's in the rules so you can do just that and thus state your website is not an e-service.

If they don't tally you can still accept the order but you must contact the customer and ask them to reconcile the discrepancy!

That shows how crazy this is. You sell a 99p ebook and if a customer says they are in Poland but the IP says they n Slovakia then you have to stop the transaction right there. You do have to contact the customer so there are two howlers here.

1. You may have to call the customer by phone and the cost of the phone call could exceed the income from the sale!

2. The fact that you have to phone the customer, or if you had the email the customer for further information negates your site being categorised as an e-service. As you have had to intervene more that what is minimal then you are effectively now not an e-service!