Agreed. I do business in 3 countries and have no issues, and buy stuff from small and big web shops in different countries without issues. I'd really like to know how many shops exactly closed down, as well as a representative sample of case studies.
I'm running one of those companies affected by this and it is a huge pain in the behind. For many of the countries the administrative fees are a large multiple of the amounts due.
On top of that they're a bunch of incompetents, I got hit with a 4500 euro 'overdue' notice from the Irish tax department which they pulled entirely out of thin air. It's a huge annoyance and I'll be more than happy if this goes away or if I simply have to pay the dutch high VAT tariff.
Amazon got to reap the benefit of their tax avoidance scheme for years and small businesses end up with the balance of the burden.
What exactly has changed for you? How are you addressing it, and how does it cost so much more? I'm really curious, since on my end nothing has changed at all.
> I got hit with a 4500 euro 'overdue' notice
This and the mention of the 100_000€ bill in the article makes me think one of the main issues seems to be incompetent handling by the offices in question. Does that seem accurate?
If nothing changed at all, you may be doing it wrong.
Which country are you billing from, which european countries are you selling to ?
Are you selling a single product/services, several with each different tax rates ?
How do you know which VAT rates you have to apply, are you vatmoss registered ?
It's a difficult subject, I'm really surprised it seems so easy for you (or anybody else)
Germany to UK, Germany and France. I sell my services as a developer. And according to my tax advisor (who has power of attorney for me and handles everything) my invoices to UK and France are perfectly fine with a note stating that they are without VAT due to specific laws in the respective countries.
And i think that maybe the fact that it is difficult for some people, but a complete non-issue for others is what keeps this entire issue from being effectively communicated to europe at large; since everyone talking about it treats it like the end of the world, but doesn't give specific details on the issues or the costs; while for many people they don't even need to think about it.
Not sure what answer you expect here, but my tax advisor handles the paper work and just sends me notes on how much money i need to wire the tax office.
In the UK there's also a difference in VAT and taxation if you are registered as self employed, contractor or if you are running you own business.
HMRC actually has quite a good selection of tools for paying VAT and taxes that simplifies things to some extent especially for self employed individuals or contractors.
Please note that in most countries you are still responsible for overdue taxes even if your accountant has power of attorney, you are the one who will be liable for it, you can sue your accountant for damages for sure but you'll be the one left stranded to sort things out if the payments were mishandled.
Looking at the invoices, they invoke the reverse charge procedure, which is also mentioned in your link, and the german §196 MwStSystRL. That looks safe to me. What do you think?
Not an accountant so i can't really have an opinion either way, and i really don't know squat about German tax laws, if they do a reverse VAT charge than it might be fine, but making claims that you don't charge VAT, especially online is a bit risky ;)
You can usually contact the tax authorities in countries you do business and ask for their procedures, HMRC at least is really good at helping people out regardless of where they live (UK, EU/EEA, rest of the world) since they see them selves as a "business enabler" and have their services aligned to achieve just that.
Clearly not, the rates differ from each country and country and heck the new regulations confuse things even further in many EU countries books is 0%, Ebooks in many countries are considered books, under the new EU regulations Ebooks should be taxed so what do you do? ;)_
On top of that you have to prove source of supply and source of consumption which is very tricky for allot of small businesses.
People in the EU can move allot some one might register with their account with a UK address and pay with a German credit card, heck what happens if they pay with a non-EU card? What if they use Paypal or another payment provider? What do you use to prove source of consumption in that case?
Proof of supply well GL on that with how the internet works these days....
Say you are a small business that sells Ebooks in Chinese, you are a UK registered companies, the books you sell are serviced from a partner you have in China, you now need to be able to define where your customers are based, register for either the HMRC Union VAT MOSS(As far as i can tell the only country that actually built one) figure out what VAT rates need to be taxed when and adjusted it from your inclusive amounts, which means that your customers will still pay the same price but the VAT portion will vary from customer to customer based on their country.
This is the most simple scenario and it's not that simple you have to be able to figure out the point of consumption (to a satisfactory level according to the new regulations which isn't well defined) then update your software to deal with all those cases and to ensure that it will keep up with VAT and regulation changes, then you need to have to keep records for VAT returns for each state and file them separately for each state you have costumers in if you are a 1-2 man business this isn't going to be easy, cheap, or even doable....
A 1 man business working with 20 EU members states now has to keep 20 VAT accounts and manage their books according to 20 different VAT regulations at this point even a good and expensive cart won't help you that much since the book keeping alone can bring you under so you are left with either switching to a 3rd party market place losing upto 80% revenue, defining a narrow market say UK, France and Germany and geoblocking everyone else or if you are lucky and big enough pay a hefty sum to update your eCommerce platform and get a good accountant....
Oh and to top it up if you are a non-EU member company you have now to register in the EU to provide digital goods to EU member states, yep I'm sure all those small businesses from the developing world are really exited about that....
This was probably the most obscene tax mandate the EU has passed so far it does virtually nothing besides put people in a hard place heck they've even managed to some how ads into this since "advertising space on a website" is now digital goods apparently...
Heck if you supply a bundle of a physical and a digital product now you have to charge VAT differently as digital goods and GL on estimating the amount you have to charge for them since before that it was a bundle this can include stuff like a technical journal with supplementary online content, a DVD with access to online streaming of content or a music CD with digital download.
So if i was an artist selling my music on CD's and allowing people to also download my songs once they bought a CD well now I have to start charging separate VAT on both, and since the regulation states that i need to charge VAT at each "delivery" well what does it mean that every time you download my music I'm supposed to charge you VAT(And I've actually asked a couple of accountant friends and they don't know either, I've also asked a couple of them what happens if I'm a German that is buying an Ebook with a German payment card while visiting the UK from a say Danish company where does the VAT goes? well round round and round it goes where does it should no body knows was pre...
As for the the rest of your text, I know these new rules bring difficulties with them when dealing with customers. But my point, that the rules for VAT are mostly the same across the EU and any capable account will know them, still holds true.
As far as I understand the issue, I think that's only true as domestic sales are concerned. Like you, UK to UK.
But if you are from another european country, even under your own country thresholds, you have to apply UK sales tax if the UK customer is not VAT registered.
That's if they choose not to register for VAT you can register for a VAT number in the UK as self employed under any threshold.
In many cases the savings from VAT returns might be sufficient to justify the cost of handling VAT on your end.
How ever non-UK member state suppliers complicate things, if you are VAT registered in Germany, you are treated as a VAT registered businesses/individual by the HMRC so in this case the reverse VAT charges need to happen (the company which received the service in the UK will clear the VAT on the invoice).
What i don't understand is why they've simplified things beyond reason for B2B but complicated things in B2C, heck what happens if you have a tax exempt business (UK example: self-employed people with small earnings exemption) and you cannot register for a VAT number or produce a VAT invoice and you have B2C transactions with other member states that now require you to charge VAT?
Business to business services are a lot easier as they don't sell to the customer directly, and the company buying the services will apply the correct tax (if I remember correctly).
I think, we reached the end of the thread, I can't reply to you. So, sorry for the messed reply.
I'd like to ask more questions.
Are your french customers corporates or individuals ? If corporate, do they have a VAT intra-community number, do you have one ? Are you billing VAT in Germany ?
As I'm french, could you give me this not stating they are without VAT due to specific french laws.
Beware, I don't know if the situation is the same in germany, but in France you have no recourse if your accountant is wrong, the burden is on you.
I'm afraid many people think "they don't even need to think about it", but are actually wrong. (Not I'm saying it's your case, but here even the tax office is not really sure how to deal with it, the only one who seems to know is the one giving fines, and he's not an adviser, just an inspector ...)
If the reply link doesn't appear, click the timestamp, and it'll be there. :)
As for french invoices, i use this phrasing:
--
You gave this contract using your VAT-IdNr.: *
As per "Art. 196 MwStSystRL" the tax liability is transferred to you as service recipient (reverse charge process / TVA due par le client).
--
Since i invoke the same § for the UK invoices, i suspect that it's a germany-specific thing.
Notable is also, that, as others mentioned, i don't deal with non-business customers.
Also yes, i did sign a contract with him that specifically assigned liability as long as i follow his instructions and provide accurate information.
Do you keep track of the 2 non contradictory proofs of the receiving country end ? Article 24d : http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELE...
Do you keep this localisation proofs for the 10 mandated years ? Can you prove this saved data have not been tampered ? Do you have an audit log on this data ? Do you comply with directive 95/46/CE for the protection and treatment of this data ?
Hopefully for you, you are only dealing with VAT registered corporates, so you are on the easy side. Now imagine the nightmare if you are for example selling e-books or saas or traditional software to VAT / non VAT registered corporates and individuals wolrdwide. It's not so easy anymore.
For every subscription sold I have to record which country that person is from, prove that they actually were from that country and accurately account for and pay VAT into the coffers of that particular country's VAT administration.
The MOSS makes this marginally easier but it is still a ridiculously complex system especially given the fact that there is no 'minimum amount' below which you can abstain from filing. Essentially you're going to have to have to spend 10's of euros per country per month to file pennies. It makes no sense.
And incompetence on the part of the Irish authorities surely plays a part by they're not the only ones that came up with this scheme by themselves.
A news search on "EU Digital VAT" shows numerous articles from numerous places claiming the same thing. But I'm not up to speed on what constitutes an objective news source for the EU on the matter.
26 comments
[ 3.6 ms ] story [ 61.0 ms ] threadNumbers and sources for this please.
Considering this comes from "EU VAT action" I somewhat question their objectivity. They rather try to back their agenda.
On top of that they're a bunch of incompetents, I got hit with a 4500 euro 'overdue' notice from the Irish tax department which they pulled entirely out of thin air. It's a huge annoyance and I'll be more than happy if this goes away or if I simply have to pay the dutch high VAT tariff.
Amazon got to reap the benefit of their tax avoidance scheme for years and small businesses end up with the balance of the burden.
> I got hit with a 4500 euro 'overdue' notice
This and the mention of the 100_000€ bill in the article makes me think one of the main issues seems to be incompetent handling by the offices in question. Does that seem accurate?
If nothing changed at all, you may be doing it wrong.
Which country are you billing from, which european countries are you selling to ? Are you selling a single product/services, several with each different tax rates ? How do you know which VAT rates you have to apply, are you vatmoss registered ?
It's a difficult subject, I'm really surprised it seems so easy for you (or anybody else)
And i think that maybe the fact that it is difficult for some people, but a complete non-issue for others is what keeps this entire issue from being effectively communicated to europe at large; since everyone talking about it treats it like the end of the world, but doesn't give specific details on the issues or the costs; while for many people they don't even need to think about it.
Since you are delivering services from outside of the UK a reverse charge needs to be assigned.
http://www.hmrc.gov.uk/manuals/vatpossmanual/vatposs06300.ht...
In the UK there's also a difference in VAT and taxation if you are registered as self employed, contractor or if you are running you own business.
HMRC actually has quite a good selection of tools for paying VAT and taxes that simplifies things to some extent especially for self employed individuals or contractors.
http://www.hmrc.gov.uk/gds/online/new.htm
Please note that in most countries you are still responsible for overdue taxes even if your accountant has power of attorney, you are the one who will be liable for it, you can sue your accountant for damages for sure but you'll be the one left stranded to sort things out if the payments were mishandled.
You can usually contact the tax authorities in countries you do business and ask for their procedures, HMRC at least is really good at helping people out regardless of where they live (UK, EU/EEA, rest of the world) since they see them selves as a "business enabler" and have their services aligned to achieve just that.
On top of that you have to prove source of supply and source of consumption which is very tricky for allot of small businesses.
People in the EU can move allot some one might register with their account with a UK address and pay with a German credit card, heck what happens if they pay with a non-EU card? What if they use Paypal or another payment provider? What do you use to prove source of consumption in that case?
Proof of supply well GL on that with how the internet works these days....
Say you are a small business that sells Ebooks in Chinese, you are a UK registered companies, the books you sell are serviced from a partner you have in China, you now need to be able to define where your customers are based, register for either the HMRC Union VAT MOSS(As far as i can tell the only country that actually built one) figure out what VAT rates need to be taxed when and adjusted it from your inclusive amounts, which means that your customers will still pay the same price but the VAT portion will vary from customer to customer based on their country.
This is the most simple scenario and it's not that simple you have to be able to figure out the point of consumption (to a satisfactory level according to the new regulations which isn't well defined) then update your software to deal with all those cases and to ensure that it will keep up with VAT and regulation changes, then you need to have to keep records for VAT returns for each state and file them separately for each state you have costumers in if you are a 1-2 man business this isn't going to be easy, cheap, or even doable....
A 1 man business working with 20 EU members states now has to keep 20 VAT accounts and manage their books according to 20 different VAT regulations at this point even a good and expensive cart won't help you that much since the book keeping alone can bring you under so you are left with either switching to a 3rd party market place losing upto 80% revenue, defining a narrow market say UK, France and Germany and geoblocking everyone else or if you are lucky and big enough pay a hefty sum to update your eCommerce platform and get a good accountant....
Oh and to top it up if you are a non-EU member company you have now to register in the EU to provide digital goods to EU member states, yep I'm sure all those small businesses from the developing world are really exited about that....
This was probably the most obscene tax mandate the EU has passed so far it does virtually nothing besides put people in a hard place heck they've even managed to some how ads into this since "advertising space on a website" is now digital goods apparently... Heck if you supply a bundle of a physical and a digital product now you have to charge VAT differently as digital goods and GL on estimating the amount you have to charge for them since before that it was a bundle this can include stuff like a technical journal with supplementary online content, a DVD with access to online streaming of content or a music CD with digital download.
So if i was an artist selling my music on CD's and allowing people to also download my songs once they bought a CD well now I have to start charging separate VAT on both, and since the regulation states that i need to charge VAT at each "delivery" well what does it mean that every time you download my music I'm supposed to charge you VAT(And I've actually asked a couple of accountant friends and they don't know either, I've also asked a couple of them what happens if I'm a German that is buying an Ebook with a German payment card while visiting the UK from a say Danish company where does the VAT goes? well round round and round it goes where does it should no body knows was pre...
As for the the rest of your text, I know these new rules bring difficulties with them when dealing with customers. But my point, that the rules for VAT are mostly the same across the EU and any capable account will know them, still holds true.
Only applicable if you as supplier are registered for VAT.
Many smaller businesses and sole-traders selling less than the relevant home-country thresholds are unaffected.
In the UK that is £82,000 per year.
Source: being a small UK business that decided against VAT registration for that reason
How ever non-UK member state suppliers complicate things, if you are VAT registered in Germany, you are treated as a VAT registered businesses/individual by the HMRC so in this case the reverse VAT charges need to happen (the company which received the service in the UK will clear the VAT on the invoice).
http://www.hmrc.gov.uk/manuals/vatpossmanual/vatposs14100.ht...
What i don't understand is why they've simplified things beyond reason for B2B but complicated things in B2C, heck what happens if you have a tax exempt business (UK example: self-employed people with small earnings exemption) and you cannot register for a VAT number or produce a VAT invoice and you have B2C transactions with other member states that now require you to charge VAT?
I think, we reached the end of the thread, I can't reply to you. So, sorry for the messed reply.
I'd like to ask more questions. Are your french customers corporates or individuals ? If corporate, do they have a VAT intra-community number, do you have one ? Are you billing VAT in Germany ? As I'm french, could you give me this not stating they are without VAT due to specific french laws.
Beware, I don't know if the situation is the same in germany, but in France you have no recourse if your accountant is wrong, the burden is on you.
I'm afraid many people think "they don't even need to think about it", but are actually wrong. (Not I'm saying it's your case, but here even the tax office is not really sure how to deal with it, the only one who seems to know is the one giving fines, and he's not an adviser, just an inspector ...)
As for french invoices, i use this phrasing:
--
You gave this contract using your VAT-IdNr.: * As per "Art. 196 MwStSystRL" the tax liability is transferred to you as service recipient (reverse charge process / TVA due par le client).
--
Since i invoke the same § for the UK invoices, i suspect that it's a germany-specific thing.
Notable is also, that, as others mentioned, i don't deal with non-business customers.
Also yes, i did sign a contract with him that specifically assigned liability as long as i follow his instructions and provide accurate information.
It seems allright if you are doing all the duty procedures as well.
Do you verify the given VAT number to be legit and matching through the VIES system : http://ec.europa.eu/taxation_customs/vies/
Do you keep track of the 2 non contradictory proofs of the receiving country end ? Article 24d : http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELE... Do you keep this localisation proofs for the 10 mandated years ? Can you prove this saved data have not been tampered ? Do you have an audit log on this data ? Do you comply with directive 95/46/CE for the protection and treatment of this data ?
Hopefully for you, you are only dealing with VAT registered corporates, so you are on the easy side. Now imagine the nightmare if you are for example selling e-books or saas or traditional software to VAT / non VAT registered corporates and individuals wolrdwide. It's not so easy anymore.
The MOSS makes this marginally easier but it is still a ridiculously complex system especially given the fact that there is no 'minimum amount' below which you can abstain from filing. Essentially you're going to have to have to spend 10's of euros per country per month to file pennies. It makes no sense.
And incompetence on the part of the Irish authorities surely plays a part by they're not the only ones that came up with this scheme by themselves.
Sounds to me like there might be a market niche for escrows that will process the payments for local business and handle the tax issues.
This is a problem for smaller companies selling to consumers in various European countries every day.
I know companies for which these rules are a big problem.