Forum Moderators: buckworks
The law adds a 15 to 25 percent levy on select Internet transactions such as software and music downloads, monthly subscriptions to an Internet service provider and on any product purchased through an online auction anywhere in the 15-member bloc of nations.
rest of article
[bizreport.com...]
This jurisdiction of a web transaction, will most likely go court, appealled, and counter appealled, and may eventually end up before the world court in the Hague.
We should have an answer in lets say 5 - 10 years.
What really pisses me off, is that the EU is to lazy to collect the tax themselves at their end, and expect foreign companies to do it for them.
But excuss me, we have enougth government paperwork to fill out in our own country.
Ign is right, the issue would be: where is the jurisdiction of the transaction. In the case of a sale to a non-business person, almost certainly it will be the place of residence of that person.
The VAT can be enforced upon businesses trading under the jurisdiction, because it *is* the law within such jurisdiction, whether you like it or not.
dmorison: international treaty obligations allow a judgement in favour of a party to be pursued and enforced by that party in the country of the losing party. If the losing party is in the US, the EU based tax authority which has presumeably won such a case could therefore pursue it against the US business *within* the US. If you think it through, without such treaty obligations international trade would break down; non-resident businesses could flout local laws when trading in other countries without worry. Dont forget, such treaty obligations work the other way too: an EU resident business trading in the US may expose itself to US jurisdiction, may be sued there, and if successful such judgment can then be enforced within the EU country of the sued party.
Theoretical Law:
Anyone who makes $10 at a flea market , wins $20 at bingo, or wins a $7 bet on the superbowl commits a CRIME by not reporting that income.
Practical Law:
They don't care. They say they do, but they don't have time for this. One Federal Public Defender I know points out in almost every criminal case he handles where money is made - the feds could go after you for tax evation.
They don't in 99% of cases. If they aren't going to go after criminals - they aren't going to go after you.
Of course we are talking about more money in some cases here than $7. However, I think the EU has better things they do than start international law cases against US citizens for not collecting EU taxes. They would have to get a judgement in a court over there - and then have the judgement entered in a court over here (if they wanted to collect). I have seen this done in divorce cases and it takes ALOT of time - and the one case I personally saw in front of a court of special appeals in my state was basically laughed out of court by the judges (granted it was from lebanon). You are talking probably $25 - 50,000 in legal fees to get that judgement started in the EU and then enforced over here. They don't want to spend that type of money when they could spend far less with greater enforcement power in their own jurisdiction.
COULD they do it? MAYBE. The day I start worrying about it is the day someone in my same situation gets in trouble for it.
Sorry, but I got enough tax forms to fill out.
If Canada rules that jurisdiction of a transaction is Canada, and UK rules that the jurisdiction of a transaction is UK. Then you have two governments who disagree on the same law. Which law applies.
I believe the United States are working on a law that will make the jurisdiction of a transaction that of the sender, not of the receiver, for web transactions.
I hear that you need to pay a special tax to own a TV in the UK. Maybe the EU can levy a tax to all it citizens equivalent to what they would lose on Electronic Commerce, rather than waste all
their money on litigation. And EU customs can collect VAT on all physical goods entering the EU.
I think I will start selling Screw EU tshirts :)
We have goods in the US for sale. The internet merely facilitates this transaction no more than if they ordered by post or telephone. We will do everything we can to affect this transaction to the satisfaction of the buyer within the limits of the laws that govern us.
When the day comes that Nell can cast a vote in elections of German Prime Minister Schoder or French President Chirac she will gadly pay a tax to the EU.
Current situation...
Assume you are a US company.
If you are selling to a EU company, you do not collect the VAT, the EU company is already paying the VAT on the purchases they make from you.
If you are selling to a EU consumer, you do not collect VAT, and the EU consumer does not pay VAT.
The way its supossed to work moving forward....
Assume you are a US company.
Sales to EU businesses will be handled the same way as before. ie The CUSTOMER pays the VAT
For sales to consumers, VAT-registration is only required if you sell over a certain Euro amount. (100,000 euros?) The US company can register in any EU country they wish. They then charge the VAT rate based on the country in which THEY are registered, not the VAT rate that the various consumers are in.
----
Thats a simplistic explanation, and there are other factors involved, of course. But I think it makes sense.
My question is, "What has the US government said about this whole situation?"
However it is spun, if you supply anything, directly or indirectly, from anywhere in the world into the EU and you do so to a level above that they define, you must charge VAT/IVA etc. Arguing about point of supply is useless,
They headline it is about IT services and Digital delivery but in reality it is much wider.
I wil worry when they do this for income taxes, a much more complex matter: each member state wants the dosh and thus they never agree: Point of supply is easy to agree: point of creation and residence is much harder ;)
I would think it still applies in this case.
If you are American business shipping to the EU, you don't charge VAT. That is up to the governemnt to collect when it passes the border.
If you're an EU business shipping to the US, you do not charge VAT either. The US customer will have to pay duties/taxes when they go to pick it up.
If the US merchant wants to play the game of "let's mark this $10,000 item as $50 so the customer doesn't have to pay VAT on $10,000 but only $50 when it goes through customs" ... then they can do that at their own risk.
If a US merchant sells something to an EU customer, and they are in the US on vacation and get it shipped to their hotel, they don't have to pay VAT. When they go back to Europe and go through customs, it is up to them wether they want to declare it or not as a purchase while they were in the US.
But it is NOT the responsibility of a merchant to collect any duties and/or taxes for international customers or any country they're not based in. You collect taxes for your local customers and that's it. Let the governemt do their job and tax people!
What we need are laws, to protect E-business's conducting ethical business practices from foreign governments.
This goes way beyond taxation. Contests are another big legal headache. How about when you sell a perfectly accepatble item in the west which would be considered a violation of Shari (Archaic form of Islamic law), in a country that still practices it.
Does anyone know what the situation is with regard to tax havens?
Assuming that you're selling digital-only products, can you just register a company offshore and be exempt - and would the servers have to be located in the tax haven? Presumably an offshore company can have employees within the EU?
Any pointers to info on this would be appreciated.
Take the link, then follow the 'Welcome' link at the bottom. Then select the FAQ's.
If a non-EU business supplies e-Services to non-business customers in the EU then you must comply with this directive else you are breaking the law in all EU countries in which you have non-business customers to which you make such supplies.
Here is a small quote from that FAQ:
Your business will need to register with a VAT authority in one EU Member State of your choice. If you have decided to select the UK, you can enter your company’s details via this website.
For private and non-business customers VAT should be accounted for at the rate applicable in the Member State where the customer resides.The VAT due in each Member State must be submitted electronically with payment to the Member State in which you have registered. That Member State will then pass the VAT on to the Member State where the tax is due. This procedure will save your business from having to submit VAT returns in every EU member state in which you have a non-business customer.
Your company’s legal obligations will therefore include:
- Submitting a VAT declaration electronically for each calendar quarter to the member state in which you chose to register;
- Paying the VAT due into a bank account in the currency of the Member State of registration, i.e. GBP (Pounds Sterling £) for UK registrations; and
- Notifying us of any changes in your details, especially those which mean you are no longer eligible to use the scheme.
(1) It only applies to electronically supplied services like eBay type auction services or web-site hosting for example not physical goods.
(2) It only applies to sales of these services to individuals not companies.
(3) As far as the UK is concerned the total annual sales in the UK need to be over £56k before you are required to register.
I think this means that 99.99% of the people here like me don't have to worry about it. :)
(3) As far as the UK is concerned the total annual sales in the UK need to be over £56k before you are required to register.
That is a separate issue related to UK businesses own VAT accountability - nothing to do with foreign companies collecting VAT on e-services provided to EU citizens...
Isn't it...?
dmorison: yes I think you are right; the £56k turnover level is the point at which a UK business must register for VAT. I don't think this is relevant to the VAT on e-Services issue for non-EU businesses selling to non-business EU resident customers - but check yourself to be sure; dont rely on my view!
(3) As far as the UK is concerned the total annual sales in the UK need to be over £56k before you are required to register.
That is a separate issue related to UK businesses own VAT accountability - nothing to do with foreign companies collecting VAT on e-services provided to EU citizens...
Isn't it...?
Not according to the nice lady with a pretty accent on the VAT National Advice Service ( I got the number off the website +44 208 929 0152 )
Not according to the nice lady with a pretty accent on the VAT National Advice Service ( I got the number off the website +44 208 929 0152 )
I agree that this would make sense. Given that UK companies are not obliged to worry about VAT unless turnover is over 56K it would follow that foreign companies should also be "off the hook" if their turnover is low.
They're certainly keeping this quiet on the information provided online - as you say you had to telephone to find out....!
[theregister.co.uk...]
The person who buys owes the tax. No more than income tax is due and payable by the employee not the employer. If one doesn't pay their income tax the law doesn't chase the employer for it.
This isn't quite true in the UK. Indeed, numerous laws have recently been created to make employers more responsible in this area. In the UK, employers are also forced to pay 'employer contributions' towards an employee's tax burden. Of course, I know someone is going to argue that National Insurance isn't really a tax ;-)
And to the previous poster who corrected me by saying that you do not need to submit audited accounts if you are VAT registered, thank you, you're quite right. Bizarrely I seemed to have got confused between VAT and having a Privately Limited Company. :-)
Looks like anonymous proxy servers are going to become a hot item in the EU. If they don't know that you are in the EU, they can't tax you on the download.
The obvious answer is to check your credit card mailing address. However it is easy to get a secondary address for the USA, put on your credit card, using one of the many US mail forwarding services. The AVS will then come up clean on a US address, and once again you are scott free.
This may not be feasible for a one off purchase now and them, but if you regularly buy services online, then it doesn't take long to add up a big savings.
However it is easy to get a secondary address for the USA, put on your credit card, using one of the many US mail forwarding services.
Really? I find that UK credit cards (just as an example) are quite anal at checking addresses. They first check to see if it matches your entry in the Electoral Roll. If not, then they make you send in documentation proving you really live where you specify. Since my address is listed incorrectly, I've usually been asked.
I don't even think with my existing card I could change the address to a US address, although I might be finding out soon, as it seems I might be moving out there, and I wanna keep my UK card! ;-)
After all, the UK credit card company would be
very interested in you receiving their statements,
so you can pay the bill, while in the USA.
What happens if these companies simply do not pay the tax? As far as I am aware there are no treaties in place between countries for sales tax enforcement...and as far as I know a company incorporated in the US is ONLY governed by US laws and not EU or any other laws. I don't see any way in which the EU can enforce this.
I don't see any way in which the EU can enforce this.
You could have saved eBay and AOL a lot of time, money and effort if you had only told them before they complied :)
So we sell a product on a CD-rom and they pay the shipping, they can however download a free backup copy!
According to the nice fellow with the pretty accent, as a company doing business under the #56k threshold, I'm not required to pay VOES on transactions made to UK customers. Right, we all knew that, nice to have the confirmation, thank you for your time. "Do you do business in any other EU countries?" he inquired. When I told him I did, he said that each EU member country has it's own threshold (or no threshold); and that even if I register in the UK and do only a few thousand pounds business a year, french VAT laws will still apply to transactions with french customers, dutch laws to transactions in holland, and so on.
So, uh... Anyone able to find a link to each member countries' VAT laws -in english-? :) I'm not sure I'd like to trust BabelFish's notorious translation services on something tax-related.
<sigh>
Governments, don't you just love them with all your heart and soul? :)
<http://www.e-bdo.com/BDOINT/webcont.nsf/ee1fca5ef518609f8025695a004762b7/d35cd2d70944b2f480256c7d003e3cf3/$FILE/Brochure02_b.pdf>
Sorry if that doesn't wrap quite right. :( Page 10 has a table of VAT thresholds for each EU country, though it's a year old. :(
I do it all the time, and I only ever disputed my own comments twice, the second time was a bit heavy, so I'm still not speaking to myself.
Back on track, say we sell five products today, one to Nevada, one to France, one to germany, one to Belgium, one to Amsterdam.
We have to charge the relevent tax based on the countries laws and thresholds - so each identicle product will differ in price.
Do we then send each proportion on tax to each country ... including state tax for Nevada? (okay. it's not EU but it could be next in line for an online purchase tax.
Has anyone had major problems getting this ready for your business?
