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That logic can be applied in a lot of ways. In some countries my opinions are illegal. So if one of those countries passes a law saying that it is illegal for everyone outside of their country, and retroactively punishable by death, do I stop tweeting because I don't know if I might be held under their law years down the road?
I know that's an insane case but that's what it is. Do you, or has any business you've ever worked for, respect the laws of every country in the world? Is it not ludicrous to expect you to? Even if you ship something to someone in that country, or sell them a VPS because your country doesn't forbid you from doing so, how can you possibly respect the laws of every other country? They even contradict each other at times, it's physically impossible.
If your country passes laws that hurt local business then that is your burden to tackle as a citizen of that country. It might feel sane to demand that everyone else in the world take on that burden and level out your economy, but that's not their job. Your country can build a wall and halt imports if they don't want their economy impacted by lower restrictions on business overseas. This is how economic competition works, you either play ball or you wall it off. You send a bill to the importer within your borders, not to the foreign exporter with which you have no tax treaty. Or you get greedy and legislate your citizens into poverty, that happens too.
You know what your country is willing to allow other countries to do to your citizens by way of treaties, and I can promise you this: The US will NEVER hold US-only entities responsible for back taxes claimed by a foreign government. You will need bombs and tanks for that to happen. It has never happened, there is zero precedent for it. A US-only entity has zero reason to assume they will be responsible for back taxes claimed by a foreign government to which they have no legal relation with as long as they themselves remain physically outside of the borders of that country.
Far more likely they'll hold their own citizens liable for not paying taxes on goods purchased outside of the country. US companies charging VAT either have an entity inside the EU or plan to, or have legitimately been the recipient of incompetent or activist accountants.
MOSS is not about you paying taxes from the US, you are charging them to the consumer, collecting them and remitting to relevant EU authority. An unpaid tax collector in effect, welcome to the EU and what the rest of us have to do.
Generally I have no idea what your on about in that post, however it does not appear relevant to my quote and my quote does not apply to you in the US.
It's not about me paying taxes, but it's about me collecting money and sending it to them? That's what paying taxes means. Charging tax, gathering it, and shipping it off to the tax collector.
There's nothing wrong with asking foreign entities to do that, but there's something greatly flawed with thinking that they are then obligated to do so simply because "A tax treaty might one day exist." Taxation in the US has always been a very sensitive topic, and it would be suicide for our government to enter into a tax treaty that involves back taxes owed to a foreign country by US-only entities. This means it is not dangerous for US-only companies to not do this at all, it is in fact very sane and legal, unless the UK intends to use military to enforce taxation.... again. Didn't go so well for them last time as it pissed off France too. How quickly we forget that the world is a pendulum swinging back and forth
Easy. I edited to add this and I think it summarizes nicely:
This is nothing new, it's a tale as old as trade by sea. The internet is merely a new medium, that's all. If you want to prevent lower standards outside of your country from hurting your local businesses, you either compete or you hunt down the importers and punish them for not paying taxes on the goods they purchased from overseas, or you halt all imports (see: economic nationalism).
Ok, I get what you're saying, but the world is a vastly different place than it was early in the digital (internet) age, electronic borders don't really exist and ultimately that is what they are trying to create and capitalise on.
How that plays out in years to come I have no idea, the EU are on it, I see other countries following on from this but again it's going to be messy.
Don't get me wrong I don't want to sound hypocritical, I had many years screwing the USA at $2 to a £1 on the exchange rate and not having to pay taxes, but times change, I am only interested in my bottom line, nobody else's.
I understand what @jarland is saying as follows. mxroute operates a server for mail service in London (if I'm not mistaken). According to the EU MOSS legislation, mxroute should collect VAT from EU residents -- even if the mail service that they purchase is located on a server in Texas -- and then remit the VAT to the EU (via MOSS). @jarland is saying that there's no way for the EU to enforce this legislation on mxroute (because mxroute is a US company). In the worst case, the EU could seize his server in London and prevent him from selling mail service there, but this is the worst harm that the EU could do to mxroute. (I agree.)
That's really the struggle. You see the more extreme approaches in countries that control access to the internet. Ultimately, tax treaties are the best way to solve it. It's not hard to think that these treaties will begin to flow. I am at least confident that I would not be entered into one by force which allows back taxes, those would be ignored and instead a date for future compliance would be set with notice. I can be very confident in that. Else I'd be paying taxes to a lot of little countries.
Correct. I'd be out immediately and I'd never look back.
We dont pay VAT to the US. Its paid to our government instead from our VAT balance.
He is a very good accountant, with over 30 years experience.
Yes in Portugal everyone has a VAT number. Both companies and individuals. Everyone. Only companies are eligible for VAT exempt/reversal.
Frankly, I don't understand why any small(er) US company would be at all eager to comply with the EU MOSS legislation, unless their income from selling services in the EU were really essential to their livelihood.
Go back to sleep.
The 2 are different things, they could seize the server if it is owned by jarland, not rented. If rented, it is not his, therefore they cannot seize it, except, maybe, to copy the data as evidence in court.
As it stands now, US entities have no obligation to collect taxes for EU, and US is not asking EU entities to collect taxes for sales to the US.
I presume that sooner or later something will be done, but not with isolationists in the white house and congress.
There are many loopholes in international trade that can be exploited, we find out about money stashed away pretty often, in the end both US and EU lose out by allowing their citizens to use the other to avoid taxes, but even if they had a traty, the trade will simply use a third party, Amazon will ship from the cayman islands, which, while nominally a British territory, has own trade and customs. In this way they can be in EU and not in the same time.
In case you have VAT registered company and you operate under EU MOSS VAT conditions, you have to charge european union customers with vat rate of their state where they live in. On the other hand, if you have EU VAT registered company and you buy something from Clouvider (which is UK vat?), there is reversed vat tax and in invoice there is written VAT 0% and thats it.
I agree and if I was one I wouldn't. Which, I would suspect only those that have significant income/infrastructure would to stay on the right side of the track and avoid the hassle. As is always the case it is easier for the EU to have a push against providers like DO, Linode and other for not playing along.
I have spoken to him about MOSS when we started the company, 2 years ago. He wasnt aware of it. At least by the name MOSS. Things are very regulated in Portugal and we were already audited. We are obliged to send all records every quarter. I think people, generally, just try to push it and create a case when there isnt one. We are talking about a very good, highly experienced accountant. As I said, the way it works here, is that we dont pay VAT to any company in the US, unless they are incorporated in EU with a valid VAT number. If they are not, then we do not pay VAT to them. Its liquidated from our VAT balance.
Keep in mind that, as per our country's law, we might just do VAT exempt in case its a service etc. Things are... Complicated here. Im not an accountant though. Just saying what I know of, a bit, since I handle the billing side of our company. Lots of paper work... Meh.
Not really, those are reported at EU level and should be traced, however, I doubt it works even badly, I mean, to actually catch criminals using non-existing companies or which exist only for this purpose. Romanian authorities introduced a drastic measure in allocating VAT numbers, you need to basically prove you have a healthy business and you are not a criminal.
Why? Where are you from?
As always, you're a man of fine distinctions. :-)
Yes, indeed, but I was imagining that the server was @jarland's in order to imagine the worst case scenario. If he's just renting the server, then there's even less possible harm to be done.
(@jarland, just make sure to have a backup of the London server outside of the EU, though you'd probably be pretty safe with @cociu in Romania. ;-) )
http://europa.eu/youreurope/business/vat-customs/cross-border/index_pt.htm
Got it now, @Lee?
@Lee,
Furthermore, as per our country's law, we're not obliged to signup for Moss.
As per our lawyer:
"Rules apply where the service is delivered from", dunno if they would consider MXroute's company information/Jarland, or the actual servers location... tbh.
But, I think that what applies is where he bills the clients from / is incorporated.
As I tried to say earlier in this thread, the original motivation for the EU MOSS legislation as applied to US companies was to go after the really big boys, Apple, Amazon, Microsoft, etc.
I guess that DO and Linode feel that they are now big enough that they would prefer to play by the EU MOSS rules.
But I'm puzzled why RamNode feels the need to play by the EU MOSS rules with only a server presence in Amsterdam.
Correct. From what I've read, it's targeted to multinational/big companies, not to small companies. We don't even need to signup for Moss / comply with it. At least as per Portugal's law.
@Maounique,
http://www.agenziaentrate.gov.it/wps/content/Nsilib/Nsi/Home/CosaDeviFare/Richiedere/Regimi+Opzionali/MOSS/
Looks like it's not mandatory in Italy as well.
Anyway, @Jarland can run his business just fine without charging VAT to EU residents/companies.
@MikePT different rules apply to e-services like hosting. The information quoted is not relevant to them. Hosting has place of supply shifted.
Example, since you mentioned it a few times.
Had you not given Clouvider your EU VAT number, we’d charge you Portuguese VAT that would then be passed on to your Portugal Customs every quarter. Have I not done it, Portuguese Customs could demand this payment and issue a penalty.
If you’re not paying relevant taxes in other EU countries (via MOSS or by a direct arrangement) it won’t be directly the Portugeese government that will be after you , since you don’t owe them anything, (although they will assist and formally enforce) but for example UK government if you don’t pay UK tax in which case UK penalties will apply.
It can also be very easily found out. Hypothetical. Customer A from Germany is a business not registered for VAT (under threshold) and buys a service from you with no VAT under his private name but puts it in his business accounts as an expense regardless. VAT should have been paid and now Germany is at a loss. He has then a tax audit in Germany where they notice the invoice and realise VAT should have been billed to him by you. They take a copy of the invoice, ask your Customs for assistance who does inspection at your place, confirming you have indeed not collected the tax and audit your accounts for German government under EU law. Germany levies a penalty and charges you backdated taxes which you have not charged your Customers for, so you’re at a loss, because it was your responsibility to settle them.
Now had you collected and settled them in the first place, it doesn’t cost you anything and gives you a guarantee that you won’t be out of pocket in the future.
This is very well explained here, https://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/where-tax_en, deep down in exceptions. Example is based on Hosting for B2C in Portugal coincidently.
This rules have been implemented in local systems of all EU countries since 2015
The particular EU law that was implemented in all EU countries local law systems is this change, http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32006L0112
Now, @MikePT, I’m not picking at you, don’t be defensive. I just spent looking for the relevant acts the last half an hour to help you, nothing else.
Registering for MOSS is optional, but charing taxes not. You’re free to either register directly with all EU countries you have B2Cs in or do it via MOSS but it’s clearly spelled out with an example in the official legal documents, with the particular service, web hosting, listed, and even the country, that local VAT has to be charged
@Clouvider,
I'm not, but our accountant is aware. Of course you'd need to bill me if we didn't have a VAT number, that's what we would do as well.
Read what I quoted above. MOSS is not mandatory. We still pay VAT, just not to the country we order from, it's deductible...
All VAT numbers are validated in the billing system (Moloni), if it's not valid, then we bill VAT, as it's not registered as a company. A properly registered company ready for trading, has a VAT number. E.g in Portugal all companies have, ltd or not, everyone has it, even citizens do, although their VAT isn't valid for VAT exempt. Only companies are (outside Portugal in our case).
-
As per http://europa.eu/youreurope/business/vat-customs/cross-border/index_en.htm
Yep. Selling to businesses -> We don't charge VAT outside Portugal, same applies to telecommunications, etc.
As per consumers, we always charge VAT, but I didn't read the last part properly, and it's something I need to double check (disclaimer: don't have clients outside Portugal, it's mostly B2B, and mostly from USA)... I quoted the very same text above but was inclined to state charging B2B, not B2C, looks like we need to check this further, since it's basically telecommunications/electronic services.
But good point @Clouvider. I'll check this with the accountant, I might need to do a few adjustments in our WHMCS setups.
BTW, thank you for the time you spent checking this out.
I wonder if WHMCS EU VAT module can distinguish the difference between companies/individuals, and bill the right amount of VAT for customers, since companies just don't pay VAT to us. This shit is confusing.
For B2C, looks like B2B it won't apply, charging the local VAT.
Pretty sure we're not registered for MOSS, although our accountant handles everything for us.
For the love of fuck...
What's the issue discussing this, really?