VAT on all internet sales to consumers resident in any state within the EU
 

Got an e-mail today from a company that wants to help me with the VAT for a mainstream site of mine.

I don't really handle these things myself but how are they gonna check what sales came from an EU country?
Will they ask the billing processors to hand over the sales information?

I have no idea how they'll handle this.

If they will get the info it means you need some kinda script that adds the right % per country to the subscription.
the % is 15 to 25% extra.
Surfers won't like that.

Here's a link to an article.
http://news.bbc.co.uk/2/low/business/1973390.stm

How the hell can they force non-EU companies to collect taxes on their behalf?

15% to 25% is totally insane. I guess that's just what you have to expect when you put leftists in control everything.

I think it's all kinda stupid.
It'll be hard to get that done.
And I don't see how they are gonna check it.
I haven't charged or paid VAT so far.
The registerd and hosted in the US. The billing is done in the US. But now with these rules they want everybody to pay VAT for EU sales.
Insane.

You're not selling to the customer directly (unless you have your own merchant account). Surfers become customers of i.e.CCBill and you do business with CCBill not with the single surfer. So it is of no concern form where the customer is, because he has no dealings with you


I'd rather not suggest things like "let processors reveal surfers country and let the webmasters pay % accordingly to where they are from..." because it does absolutely not apply to the typical third party processing and/or sponsor sales situation, and suggesting stupid shit ain't good, it might come true if repeated often enough

Considering that these VAT rates in Europe have survived through a long range of right wing parties, that's a ridiculous statement.

google already enforcing it on advertisers!

It may seem insane for you. But EU companies have ALWAYS been obligated to charge VAT on all sales they do, provided their sales are above a certain threshold, regardless of whether they are online or offline, so for companies in EU that aren't blatantly violating the law this is good news, because it levels the playing field for them by making it as expensive for non-EU companies to reach EU consumers as it already is for EU companies.

This is no different that any other trade protection measure.

Yes, it will suck for US and other non-EU companies that don't have expenditure inside the EU they can reclaim the VAT on, but the EU exists to further European concerns, not protect US companies from fair competition with EU based companies.

If you are based outside the EU and have significant business in the EU, look into whether there any goods you can buy at competitive rates in the EU to use to reclaim VAT, or whether it would be worth your while to set up an offshore company in Luxembourg, or similar. It has the potential to save you VAT payments, and you might be able to use it effectively for tax planning.

This type of tax exists here in Canada ( GST plus PST) . We are required to charge it on ALL sales ( the location of the client or of the server is not relevant) , memberships or hard goods sale.

If you do not want to have to collect taxes, let's say to stay competitive with the US sites, then you need to do a US company and pay witholding tax and income tax to the US.

But this will come also to the US, mainly with the hiuge deficit: after spending, the next step of a government is to generate and collect revenues. The net is like a virgin " oil field"....

As far as I know you don't have to pay VAT for a customer outside of the US so you do not have to pay VAT on ALL sales you make.
So I still wonder how they are going to check this.
And if the billing processors will have to pay the VAT it means they'll have to add the correct % per EU country with some kinda script.

How are they going to collect the money?

The purchase is probably made overseas by an EU resident.

so who is liable the EU resident ot the overseas resident?

Are they going to send tax inspectors to other countries to collect money from a company based there? What are they going to do if that company says no, put them in prison?

And why then do they give back the tax spent by overseas visitors when they return home?

The whole thing looks like bureaucrats in Brussels dreaming up another hair-brained scheme.

Charging the right amount of VAT based on country is trivial. Yes, they would have to add it with a script. So?

I don't know what you mean with "As far as I know you don't have to pay VAT for a customer outside of the US". If you're in the US, sales tax only apply to sales within the same state, and there are exemptions for a lot of online commerce. If you're in most other countries in the world you pay VAT (under whatever name it is given locally) to your own government for sales within the country, but not usually for exports.

The issues is of course whether they can enforce it. The answer is, if your company is small enough , and don't have any assets in the EU, then it probably wouldn't be worth their time. But any company with assets in the EU would risk having their assets seized if they don't comply.

And any company with significant business in the EU might suddently find that the appropriate tax authorities manage to seize the money by going after banks and card associations to withhold payments.

An "easy" way to enforce this, for instance, would be to make it illegal for EU card issuing banks to not settle credit charges to non-EU recipients unless the recipient is registered for VAT in the EU, or even just to withold a percentage equivalent to the VAT percentage.

I don't see how this will be a problem for the EU at all, except if they try to enforce it against the very small amount of EU citizens with credit cards issued by banks in non-EU countries.

I'd assume that the EU will start working enforcement provisions into any updates to their tax treaties with other countries as well.

The overseas resident would be liable. As for sending tax inspectors, they don't have to. Who collects the money for you? A billing processor. How do they get the money? Through the systems of one of the card associations. How do they get the money? Usually from an issuing bank in the country where the customer resides.

If you don't pay VAT on EU sales, I think you'll quite quickly will find the last step pretty tricky.

As for giving back the tax spent, that is an historical issue. While the tax paid on purchase, it is still a tax that is ultimately paid by the residents of a country (or state in the case of the US) just as income tax. As such it has usually not been applied to sales of products that are exported.

There is of course also another reason for this: It makes businesses more competitive when exporting, which positively affects your trade balance, so there is an incentive for the government not to add VAT to exports.

When the internet came along, direct to consumer sales across borders exploded. In the US that resulted in various exemptions and moratoriums on some forms of taxations online. However in doing so the US is pretty unique. Most other places in the world, a company will be just as liable for VAT if selling online as offline.

What's happened now, is that the EU has realized that if EU companies are required to collect VAT when selling to consumers in the EU, and non-EU companies isn't, it has the net effect of giving non-EU companies a significant advantage online.

Coupled with the weakening dollar, and you have a really bad situations for European companies competing head to head with US companies in selling online products, where there are no import duties or shipping costs to even out the situation.

That left the EU with two choices: Cut VAT online, which would drastically reduce tax income for member states, or require non-EU companies to pay VAT when selling in the EU.

They chose the latter. If you're not in the EU, though. If you are in the EU, you have just seen your competitive position massively improve when selling to EU consumers. Though if you're not in the EU, you can likely improve the situation a lot by setting up a shell company in one of the low tax rate EU countries, or by trying to shift some of your expenses to an EU country in order to be able to reclaim some of the VAT.

Or you can try to get away with not paying, but I'd be very careful with that...

rather then talking bout VAT : go offshore :)

Sorry I ment outside of the EU.

Wrong for me atleast. In sweden were i've have been in contact with the tax agency for a very long time about this matter.

They way they see it is that i buy a service from a thirdparty biller like CCBill. And it's like an outsourcing service. You hire them to keep up your members billings and password handling etc.

So what i have todo is to add 25% tax to all EU customers. And nothing for the rest. But it's quite easy if you have a established company in the EU. Just to remember EU and Non-EU members and keep records of that. I don't have any higher memberfees for EU customers so they wont notice. And i won't notice the tax anyway couse it's deducted against the tax on your other bills for example.

But the point of this thread is that in the case of sales to EU going offshore won't work anymore, provided that they decide to enforce it properly (which they can by going after the card issuing banks).

In fact, for sales to the EU, it may now make more sense to have a subsidiary in a EU country and ensure you move some of your expenditure to the EU to make sure you have something to reclaim the VAT against. Provided of course that your exposure to EU VAT is significant enough to cover the costs of maintaining a shell and doing accounts etc. for it.

Now please tell me one thing:

A US based company uses an US biller to sell a membership (not tangible goods) to a EU citizen. How in the hell would someone figure out and even more force an US company with not even a single tie to the EU to collect and to pay VAT? No chance in hell

Fucking EU sucks badly. This is really insane thing. Now these bastard EU countires are going to follow US and try control things EU does not have fucking one word to say - wait until this fucking EU gets it's own president.

I want move out of the EU. Far far away of all taxes... ?