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Author Topic: New EU VAT rules change the game for digital businesses  (Read 945 times)
wraith808
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« on: November 20, 2014, 09:15:48 AM »


Quote
The short version

From 1 January 2015 new rules on VAT (value added tax) come into force across the European Union (EU). These will affect you if:

  • you sell ‘digital services’ – explored in a minute, but yes, it does include ebooks, PDF products, training materials, software and music files
  • you sell business to consumer (B2C) to EU citizens, wherever you are based (B2B, business to business selling, is not covered by these rules).

The essence of the change is that the ‘place of supply’ for VAT purposes will now be the location of the purchaser, not the location of the seller. Sellers will have to add VAT to the purchase price at the rate for the customer’s country, and ensure that the appropriate payment goes to that country.

Due to the effects of harmonising countries’ rules and the way the admin will work, if you fall under the new rules you will have to register for VAT. All your digital sales will be liable for VAT, and once you’ve registered you’ll have to account for it on all your other activities too.

Am I just ... looking at this wrong?  Or am I seeing that even if I sell software to someone in the EU from the US, I have to pay taxes under this new regulation?

(more at link)
« Last Edit: November 20, 2014, 10:53:09 AM by wraith808; Reason: Silly me.. forgot link. » Logged

40hz
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« Reply #1 on: November 20, 2014, 09:39:25 AM »

Citation?  smiley

UPDATE: Never mind. Found it. All 92 pages of "explanatory" notes. Download link here.
« Last Edit: November 20, 2014, 09:49:55 AM by 40hz » Logged

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TaoPhoenix
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« Reply #2 on: November 20, 2014, 09:48:43 AM »

Citation?  smiley

Advanced Search, We luv ya! *

http://wordsthatchangethe...ld.com/2014/eudigitalvat/




* When my standby Startpage Advanced missed this, I was forced to go to the Evil G. So per some of my other posts, I don't know what database they are pulling from, but this is yet another hole.

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40hz
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« Reply #3 on: November 20, 2014, 09:58:09 AM »

Citation?  smiley

Advanced Search, We luv ya! *

http://wordsthatchangethe...ld.com/2014/eudigitalvat/




* When my standby Startpage Advanced missed this, I was forced to go to the Evil G. So per some of my other posts, I don't know what database they are pulling from, but this is yet another hole.



Yeah, read that one. Short version: this is serious but nobody knows precisely how it's gonna work or who/what is covered yet. huh

Typical for new tax legislation. Which is unfortunate. Because the devil is always in the detail when it comes to tax law. undecided
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wraith808
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« Reply #4 on: November 20, 2014, 10:57:05 AM »

^ I don't even see *how* it will work.  If I sell a digital download to someone in the EU... how would they even go after me?
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dr_andus
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« Reply #5 on: November 20, 2014, 12:00:12 PM »

^ I don't even see *how* it will work.  If I sell a digital download to someone in the EU... how would they even go after me?

From my perspective, as a consumer based in the EU, things have already worked like this for some time. Most payment-processing services have already been charging me for my local VAT (when I purchased a piece of software outside the EU).

So this is probably more of an issue for the less-informed or less compliant payment services that haven't been doing that yet, rather than for individual vendors. For non-EU vendors this just means that you better check with your payment processing service to make sure they do this.
« Last Edit: November 20, 2014, 12:05:44 PM by dr_andus » Logged
wraith808
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« Reply #6 on: November 20, 2014, 12:06:51 PM »

^ I don't even see *how* it will work.  If I sell a digital download to someone in the EU... how would they even go after me?

From my perspective, as a consumer based in the EU, things have already worked like this for some time. Most payment-processing services have already been charging me for my local VAT.

So this is probably more of an issue for the less-informed or less compliant payment services that haven't been doing that yet, rather than for individual vendors. For non-EU vendors this just means that you better check with your payment processing service to make sure they do this.


Most that are not part of an aggregation type service for payment have decidedly *not* been doing it.  And that onus should not be placed on someone that is in a different country doing business *just because* their place of receipt is in the EU, IMO.
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dr_andus
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« Reply #7 on: November 20, 2014, 02:27:55 PM »

re not part of an aggregation type service for payment have decidedly *not* been doing it.

I didn't say they were. I said *most that I've bought from in recent years.* In the early years of the Internet I could happily pay in USD and get the same deal with no taxes as the US customer. But in recent times many payment services would identify me as an EU shopper and would automatically apply the VAT—I can only presume it was due to pressure to comply with the local EU country legislation.

as for
how would they even go after me?

there would be an electronic payment trail linking the seller and the buyer, so it's just a question of access to the payment data + plus the right software and processing power to figure that out that an export/import transaction had taken place across the EU's borders.
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tomos
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« Reply #8 on: November 20, 2014, 02:43:29 PM »

re not part of an aggregation type service for payment have decidedly *not* been doing it.

I didn't say they were. I said *most that I've bought from in recent years.* In the early years of the Internet I could happily pay in USD and get the same deal with no taxes as the US customer. But in recent times many payment services would identify me as an EU shopper and would automatically apply the VAT—I can only presume it was due to pressure to comply with the local EU country legislation.

yeah, that's been my experience as well for a good few years now.


as for
how would they even go after me?

there would be an electronic payment trail linking the seller and the buyer, so it's just a question of access to the payment data + plus the right software and processing power to figure that out that an export/import transaction had taken place across the EU's borders.

not sure what exactly wraith meant, but the big question is how the EU would stop (or punish) a supplier from outside the EU selling without VAT (?)
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Tom
wraith808
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« Reply #9 on: November 20, 2014, 02:46:16 PM »

not sure what exactly wraith meant, but the big question is how the EU would stop (or punish) a supplier from outside the EU selling without VAT (?)

I meant, if I as a US citizen sold a digital item, and someone in the EU purchased it and downloaded it- then how would they enforce the strictures of these rules against me as a US citizen?
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tomos
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« Reply #10 on: November 20, 2014, 03:27:27 PM »

not sure what exactly wraith meant, but the big question is how the EU would stop (or punish) a supplier from outside the EU selling without VAT (?)

I meant, if I as a US citizen sold a digital item, and someone in the EU purchased it and downloaded it- then how would they enforce the strictures of these rules against me as a US citizen?

that's what I thought -- but dont have the answers either. But as dr_andus says, they're largely making it work already (via the payment processors).

How is it working in the States -- are there any states successfully implementing their own sales tax for suppliers from outside that state?
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40hz
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« Reply #11 on: November 20, 2014, 03:34:24 PM »

How is it working in the States -- are there any states successfully implementing their own sales tax for suppliers from outside that state?

Amazon is cooperating. That alone yields a massive amount of tax revenue. Most of the big online merchants are cooperating too.

In the US it's a little more complicated since each state has it's own "sales & use" tax regulations. So there are at least 50 different tax rates and exemptions. Some locales also assess county and local sales taxes on top of the state tax. There isn't a national VAT here. But there are federal excise taxes. States and localities can also assess excise taxes. Excise taxes most commonly get placed on luxury items and commonly used goods and services such as public event tickets, hotel rooms, and gasoline. Cleverly, they're usually built into the price charged to the consumer, so many people aren't aware they exist. Which makes excise taxes very popular with politicians looking for revenue opportunities.
« Last Edit: November 20, 2014, 03:46:55 PM by 40hz » Logged

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dr_andus
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« Reply #12 on: November 20, 2014, 04:51:51 PM »

not sure what exactly wraith meant, but the big question is how the EU would stop (or punish) a supplier from outside the EU selling without VAT (?)

I meant, if I as a US citizen sold a digital item, and someone in the EU purchased it and downloaded it- then how would they enforce the strictures of these rules against me as a US citizen?

that's what I thought -- but dont have the answers either. But as dr_andus says, they're largely making it work already (via the payment processors).

I wonder if it's even possible these days to make a cross-border electronic payment without 3rd party payment processors (maybe by using some cryptocurrency)?

But don't worry, we can just stop you from boarding your return flight on your next trip to Paris, until you pay up.  Wink Joking aside, I recall Europeans having been arrested or deported from the US under anti-terror legislation because they had an unpaid parking ticket from donkey's years ago...
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wraith808
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« Reply #13 on: November 20, 2014, 05:36:14 PM »

I wonder if it's even possible these days to make a cross-border electronic payment without 3rd party payment processors (maybe by using some cryptocurrency)?

It's not 3rd party processors... it has to be an aggregation service.  i.e. if I put a pay me now button on my site that goes to paypal, that VAT is not taken into account on the other end AFAIK.
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Renegade
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« Reply #14 on: November 25, 2014, 07:59:55 PM »

There is currently a push to internationalize the reach of taxation. The whole thing flies under the black flag of "catching tax cheats".

Here's one clip:

http://www.euronews.com/2...4/g20-eyes-tax-crackdown/

Quote
One of the key topics that heads and governments will discuss is how to crack down on tax avoidance and tax evasion.

Jean-Claude Juncker will represent the European Commission at an awkward moment.

A series of leaked documents show that major multinationals took advantage of Luxembourg’s lax fiscal rules to trim their own tax bills.

Juncker was the prime minister of the Grand Duchy for 18 years until last year.

Speeches he gave during his tenure indicate that he led the charge in tempting the likes of Amazon and Apple to set up shop there.

World leaders are expected to endorse an OECD plan to ensure company profits are taxed where they are generated.

Euronews’ Efi Koutsokosta spoke with Pascal Saint-Amans, the OECD’s director of tax, who is at the summit on Australia’s east coast.

Here's a list of companies doing business in Luxembourg:

http://www.businessinside...tax-deal-database-2014-11

It's long, so I'm skipping a quote.

The EU is trying to project power beyond it's borders, which is pretty sketchy to say the least.

There was a case in Canada where a fellow refused to collect taxes at his business. Of course he was taken to court, but he won. He claimed that forcing him to collect taxes on behalf of the government was forced labour, and the judge agreed.

So, in at least 1 common law country there is precedent for refusing to collect taxes.

I tried to find the reference again, but I can't manage to find it after almost a half hour. I remember that the case was near Ottawa, though I forget the name of the town.

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