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Our interpretation is that EU B2B will also apply if you cannot perform reverse charging (when no EU VAT number is supplied or is supplied but can’t be validated, else anyone can say they are a business), further explained at: https://ec.europa.eu/taxation_customs/business/vat/telecommunications-broadcasting-electronic-services_en#new_rules
Extract
Rules applicable since 2015
From 1 January 2015, telecommunications, broadcasting and electronic services are always taxed in the country where the customer belongs* – regardless of whether the customer is a business or consumer – and regardless of whether the supplier is based in the EU or outside
For a business (taxable person) = either the country where it is registered or the country where it has fixed premises receiving the service.
For a consumer (non-taxable person) = the country where they are registered, have their permanent address or usually live.
Correct, and we're doing reverse charge with you for example.
Another example, our vinyl supplier is from Italy, we do not pay them VAT, we deduct in our VAT balance. So yeah, but, still, need to check my WHMCS setup as B2C looks a little bit different than I thought. I thought we had to bill 23% for B2C in EU.
more likely this is only half of the truth/your laws.
you might be right, that you don't neccessarily need to make use of MOSS - you could instead register with the tax authorities in each country your customers may reside in and declare and payout the charged VAT directly instead through MOSS...
but this won't take off your obligation to charge a non-business european customer with the VAT according to his country. so if I would buy your (electronic) service without being a registered business, you'd need to charge 19% german VAT off of me (and afterwards pay it to german tax authorities, rather direct or through MOSS).
every european country has to take over the EU regulation into national law by a given timeframe. maybe portugal is late or something like that, but the whole topic really is nothing new, so I doubt that. and btw MOSS is quite big pointed out even on the front page of your highest tax authorities governmental webpage...
http://www.portaldasfinancas.gov.pt/at/html/index.html
to be perfectly clear please again note that I differentiate between the obligation to charge the according VAT at the customers local rate and the possibility to signup with MOSS and use it (because it's much easier after all) ;-)
the term 'MOSS regulations' maybe overused to just describe rules/obligations while you maybe right, that the signup with MOSS itself isn't neccessary if taxes are declared directly in the other countries... no small business would do the latter because it would be much more complicated anyway.
I’m writing all the above in the context of supplying / selling
oh sorry... I was late with my wall of text.
TL;DR; @clouvider is right.
@MikePT: no worries, you are right for the part not paying VAT if buying as a business with valid VAT ID, nobody denies that ;-)
Also right about MOSS; not being mandatory... @Clouvider did highlight a few interesting points, mainly billing B2C for webhosting etc, for their local VAT rate.
Our accountant is portuguese, and his english is probably limited, but he knows it all for sure.
That's called mini balcão in Portugal, I wasn't even aware that thing was called mini balcão here... And we're probably registered, dunno. But, I'll speak to our accountant about this, to make sure we do it right.
Anyway: https://m1ss.portaldasfinancas.gov.pt/oQueE.action
Meaning: This regime is not mandatory, applies to passive subjects established in the Community (EU), but not to consume member (EMC), and passive subjects that aren't established in the Community (EU), as long as they do telecommunication services, radio or television and electronic services, to people that aren't passive subjects, established or domiciliary in the Community (EU.
This is just a way to simplify it, which obviously interests us, but it's not mandatory. I'll have a talk with our accountant to clarify a few things. We never had to issue invoices to B2C in EU, only B2B, and for that VAT doesn't apply. Does apply for B2C according to their local tax, this is what I need to double check with the accountant.
BTW, thank you @Clouvider / @Falzo and all others, this does raise some concerns I need to address with the accountant. While we never needed to bill B2C in EU, we do need to make sure we do it right if we need to.
They could actually have direct business in those areas too. Large companies tend to incorporate and hire in more than one place, which is a better reason to comply with VAT than simply assuming (as a US-only entity) that it is in their best interest despite having no legal obligation. Those larger companies, when they do incorporate or hire in those other countries, gain such a legal obligation.
Corporations almost definitely do not choose to pay taxes where they are not legally obligated to do so, out of any kind of foresight or otherwise. The big names have legal entities there.
Gentlemen,
Predictably there is a lot of inaccuracy in this thread thus far, so I will attempt to cite primary sources as much as possible FYI
U.S. states generally do not charge sales tax on electronic services. The EU does.
No - the commerce clause is a line in the U.S. constitution that says this
States and local governments, and even special things like school districts and business improvement zones, are allowed to levy taxes.
No - all businesses globally are obligated to collect and remit VAT on consumers in the EU.
What is confusing you is that someone in this thread posted a link to taxamo.com, which is some random business that posted information tailored for U.S. businesses so they would show up higher on Google. You really need to read the European Commission's summary of how telecommunications, broadcasting & electronic services are taxed.
although the original motivation was to go after the giant US companies Apple, Google, Amazon, Microsoft, and the like -- which I can understand -- why penalize all US companies in this way? In my view, it would make more sense to set a financial bar so that small US companies working below that bar could be spared.
No - the original motivation was to tax services consumed on the Internet for the traditional reason of raising revenue.
The EU adopted rules to 1) preserve member states' right to set their own VAT rates while 2) preventing natural concentration of online services in low VAT countries like Luxembourg and Germany.
Thus, VAT rates are assessed based on where the consumer lives. And the MOSS scheme makes it easier for suppliers to comply.
There is nothing in the law that singles out and punishes specific businesses. Everybody is theoretically treated the same. However, it is not practical for the EU enforce the law on every business globally, especially if such business doesn't have anything to confiscate in Europe.
If a tax treaty does exist one day, you will certainly be remitting the taxes you are obligated to collect, whether it requires the Feds raiding you or not.
The way enforcement might play out in the future is that the EU directs local telecoms and ISPs to block traffic of non-remitting entities. Some governments (e.g., India) already do this for piracy sites. Europe isn't that right-wing yet.
One major impetus of forming the EU was to give Europe collective bargaining power with larger economies like the United States and (now) China. The UK also doesn't want to pay into the EU system either. But the EU is responding in kind by blocking them from the EU single market.
They are partnered up with a company based in NL and all their servers and infrastructure could be confiscated. 'Nuff said. Clearly they think it's worth it. You can read their FAQ about it.
Some providers like your money more than others. I didn't get it either. I am expecting to pay the final price, it should be transparent with everything calculated within it. I don't like to see "it's 5$ but on checkout when we calculate everything it's 7$" I want to see a little honesty "it's 7$ to begin with, on checkout you pay 7$, 5 of them for the product and 2 for vat".
There's a worthwhile note to add to that: Required under EU law. Unenforceable on anyone not within the jurisdiction of EU law (for which I would say a tax treaty is an expansion of said jurisdiction, even if limited).
Based on what precedent do you suggest that the United States would punish it's own economy so powerfully as to allow a foreign entity to come in and collect sweeping amounts of taxes from US-only entities in obligation to foreign laws prior to the existence of said treaty? Have you seen a case in which something similar has occurred?
A secondary point to that, do you follow every law of every country? If yes, how do you deal with cases where the laws of one country contradict another (often morality/religion)? If no, why do you feel you are not obligated to follow the laws of every country? Then, continuing on the idea that the answer is no, how does your reason for not feeling obligated to follow the laws of every other country not contradict your position that one should follow this one voluntarily in fear of circumstances that are without precedent?
If I'm misunderstanding your position there, apologies. If you're merely saying that should a tax treaty one day exist I would certainly be expected to collect such taxes from the time that it went into effect, certainly that would be true. Although still heavily without precedent that such a thing would occur, I would suggest.
I suspect they'll go first to customers. The customers they would go after will probably be businesses, granted, so as to make a statement and maximize effectiveness of the effort. Much like a standard economic nationalism approach with imports, tax the importer. This will incentivize dealing with companies that are compliant with the tax laws, whether voluntarily or by legal obligation. Very old approach with many historic precedents, especially for the methods of trade we generally think of when we refer to importing (ships, planes, trucks crossing borders, etc). No tax treaty required, but a hit to their own economies because many small businesses in the US would simply opt to pull out rather than comply. Not just for the lack of legal obligation, but due to the increased operational costs required to comply with it not being justified by their volume of business in the regions.
@jarland
The issue here is not nationalism or something like that, albeit I am sure some would like to abuse the system in that regard, but avoiding taxless economy, tax avoidance and international sales without duties.
If I am exporting a good or service to the US, I am entitled to deduct ALL VAT I paid to make that good or service, therefore I make it cheaper and, combined with the fact US does not charge any tax on it either, will give me an advantage over the US sellers which have to pay local sales taxes or other duties (I am not familiar with US tax systems).
The same goes with US, selling to EU customers without VAT is also a competitive advantage on the local market, this should not happen, there is no level playfield for the people which play the system.
Even more, crooks can setup companies claiming to do export, buy products on the local market, say they shipped them to US (electronic services) and deduct the VAT, when their customers are actually within EU, so, they "recover" VAT illegally.
This problem is very complex and it's implications are reaching far and wide, there is no easy solution, even a tax treaty with US will unlikely solve all problems, or the majority of them, but will probably lead to taxing the majority of the trade.
As the electronic commerce will grow, the potential taxation for it will become more and more appealing and, eventually, even US will become interested in having a piece of the pie.
For EU, though, losing UK is losing a big bargaining chip against US as the majority of US buyers of EU products buy UK electronic services.
It does - because WHMCS EU VAT module contacts the VIES database - the VIES database is a simple proxy towards each member state - so it's the member state's job to have a database that validates correctly.
According to the reverse charge mechanism in place - if the number is valid in the VIES database you're good according to the mechanism.
The danish member state DB tends to screw up from time to time - so even invalid numbers will be seen as valid (danish VAT system is a bit.. odd), since our company registration number is also our VAT number, but your company can turn "VAT registered" on and off with a click of a button.. But as long as the VIES DB at the time of ordering said it was valid, then you can in fact do the reverse charge for a service for B2B.
B2C still have to be charged VAT at the member state they purchase from - also according to portuguese law.
Feel free to read the directive specific for Portugal: https://ec.europa.eu/taxation_customs/sites/taxation/files/moss_2017_pt_en.pdf
And another note, especially for EU companies - saying that people do not comply to the law is silly - this is LET after all - there's jerks that could end up reporting you and thus getting you fined :')
It's impractical to include VAT in the price because different rates are assessed depending on where the consumer lives.
European companies are 19-27% more expensive than their non-remitting peers in the U.S. when selling inside their own market. How do you think they feel about all this? It's not about punishment, it's about parity. "Equal treatment under the law."
If you don't like being required to collect the tax, you don't have to sell to Europeans. The MOSS scheme makes it very simple for you to comply, if you'd like to stick around in the market. This is no different than when State and local governments make U.S. retailers collect sales tax.
Lucky for you, Europe has very weak enforcement mechanisms for dealing with tax cheats abroad. However, is MXRoute collecting and remitting appropriate VAT to EU member states on services sold to Europeans? Because you have assets in London. If I were @jarland 's customer being hosted there, I would be mildly concerned about this should my email disappear some day in a confiscation orchestrated by Her Majesty's Revenue & Customs service. Don't fuck with Her Majesty.
The supplier of services doesn't collect VAT from EU businesses. The reverse-charge mechanism lets businesses account for the difference between input VAT and output VAT and pay accordingly to avoid double taxation. That's the whole "give me your VAT ID to make it cheaper" thing. So this enforcement idea is not practical.
Thanks, one of your more useful posts. :-)
You're right.
I guess that in my field of vision, I've only seen/experienced examples of US companies complying.
Yes, I know that RamNode have a server presence in NL (I think that this is the extent of the "partnering up"), which is why they decided to comply. I could understand why they were complying, but I personally wasn't so thrilled about it (especially when they started charging me VAT for a service that I had with them in NYC).
Well - the law doesn't state that it's only applicable for services hosted within EU as well.
If it did, the law would become so much more complex to comply with - both for EU and non-EU companies.
What I find weird is the amount of people bitching here because they theoretically should comply to (a very simple) EU law. At same time so many non-US businesses has to comply with US laws - and we don't really complain about it.
If you wanna do business in a country or in a region, then you should also follow the laws in that place you wanna do business.
It seems like people only wanna earn money from a country but not really comply with the "annoying" part of doing business.
To be honest, I always hope it bites people in the ass :-) Because the people that do shit, are the ones that make it worse for everyone else.
Yes, I know.
I was simply acknowledging a personal reaction that I had back in 2015 when I had a service in NYC with RamNode. You can tell me that my personal reaction wasn't appropriate. Now, at the end of 2017, my personal reaction would definitely be much less dramatic.
I can understand why a non-EU company (especially if a big company) would decide to comply with this legislation.
No need now for you to overreact!
Indeed.
VAT within EU is anything but simple. Taxation at the customer's end is another complication, but a necessary one. Actually, I was moaning against it but it makes sense once it is working and MOSS takes care of it, there is no real extra work for us, just the billing panels doing the heavy lifting. We also have VIES to ease things up so, in theory it is very complicated, but in practice, automation all but eliminates the issues.
We have to look at practice :-) There's great software (often free) that solves many "problems" - to be honest, I like MOSS because I put my sales for the countries I sell stuff to - it's a 2 minute task doing the actual declaration for me.
I understand the taxation system fairly well within EU - but as long as I generate a tax report that is valid according to dutch and EU law - then I'm happy - and seen from my perspective, it's simple for the most part - because software takes care of the weird stuff.
I asked for some reasonable basis or precedent on which one could make a reasonable assumption about the kind of treaty the US would enter into, not how European governments feel about it. If we're going to assume that I will be punished later for not complying today, I want legal precedent under United States law that provides a reasonable argument toward that. The evidence of such a precedent is a very important part of assigning validity to that assumption, so much so that the assumption is effectively nullified by the lack of it. At that point it's merely wishful thinking or guessing.
Well see that's the thing, I'm not required to.
No it is, because those governments actually have legal authority over me.
I'm not a tax cheat in Europe though so that's not relevant. I've never been to Europe. No one in Europe has any legal authority to assign obligation to me that I am legally bound by. That sounds like an attempt to create a moral obligation, but there is no concrete argument for a moral obligation to follow laws that are not enforceable against you. Similarly, you would fail to uphold the precedent of creating such a moral obligation when I began asking you about oppressive laws in other countries that you likely don't follow.
Of course not. I have no business with EU states. These companies that are doing it have entities over there, I do not.
I rent an asset that belongs to a local company there. If their government wants a local business to lose my money, I'll gladly comply. Customers in and around London have more authority over their government than I do, it's up to them how they want to handle it.
You're welcome to be concerned about whatever you like, but that does not in itself create an obligation in someone else. Tomorrow I could be blocked in China, Iran, and Syria because they found out I host customers they don't like. That doesn't mean I'm obligated to please the governments of China, Iran, and Syria just because I might (theoretically) have customers in each of those countries. If that happens, it means their government did that, and they know that's what it means. They know their governments will intervene in their internet activity, they knew that when they made purchases outside of their country.
If citizens of European countries are actually itching to see US companies run out of their countries, then they also know that they are lobbying for future downtime for their email with me. It wouldn't be any kind of surprise to them, they know I don't collect VAT from them. If that is truly important to them, that does create an obligation for them to not purchase from a service like mine. They would know that.
Simply stating that the jurisdiction of US state of Texas or whatever applies, does not mean your customer is not bound by the local laws and the local laws require them to pay VAT on imports and it says that for electronic services that is collected by the seller for his government.
In the contract there are 2 parties and both must comply with the law.
Now, it is an issue for serious lawyers with a lot of practice whether this can apply to you, i.e. the EU customer's jurisdiction extends to you due to the contract you signed, I believe it is not enforceable even if it does, but this is another matter.
In my view, you should do the right thing and comply, but there are no current mechanisms to force you to do it that I am aware of and if there will be future treaties, they will unlikely apply retroactively, and even if they will apply retroactively, I think nobody will bother with your company unless you continue to ignore the (now local) law, so, in practice, you are free to ignore the issue for the time being.
While true, I cannot reasonably be aware and compliant with the laws that my customers are bound to in every country. They should know their obligations to their government and choose how they will resolve that. Perhaps it means not ordering from me, that's certainly fine.
But only one can be held accountable. If you want to share legal accountability with every company you do business with, don't purchase from someone not Incorporated in your country.
Can confirm I am not legally accountable for the tax laws of a foreign nation that I am not Incorporated in, and which does not have a relevant tax treaty.
I am personally opposed to and offended by some laws in some other countries, and thankful to not be bound by them. I'm sure you feel the same way about some laws, probably quite thankful to not be bound by them. To someone out there, it may be in their mind the right thing for me to do to comply with one of those laws in their country, but I would disagree. I would say "You chose me, I did not choose you. I disagree with that law and I am fortunate to not be bound by it. The right thing for you to do, if this is important to you, is not do business with me."
Thank you, will check!
So question is @Jarland.. Are you gonna be GDPR compliant? :-D
Not intentionally at least, though I haven't read everything relating to it. It's not as though I take customer data lightly, so I may accidentally be compliant with various things.
In his view, as long as it is not enforceable on him, it can be ignored. I hope I will never meet in an isolated place people like this, nobody saw, no police, no witness, the law does not matter because I dont like it, it offends me, the cult I serve or I think it does not concern me.
So, if he bans you again and nobody cares, is it still a crime?
It was never a crime, it is his forum, he can do what he wants, just I didnt like the lies he spread about me when I couldnt defend anymore. That is no crime either, the law (rules) while do state name calling and personal attacks are not ok, he can safely ignore them or change when needed.
I'm just amused how you turn a personal slight into a jab every single chance you get. I fear for you in the real world, my friend.