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Depends on the jurisdiction and bilateral tax agreements in force there. HK companies (and their directors) are not automatically bound by foreign regulations. Thanks for bringing this to my attention. Like I said, this needs looking into.
Any US businesses not paying VAT as of now are liable. VAT collection/remittance has been a requirement for out of EU businesses for a while. It's shocking that this is new news to a couple of US hosting companies here. The real thing here is, Hong Kong or anywhere isn't going to help. It's a requirement of doing business with EU customers, regardless of where you are located.
From http://www.deloitte.com/assets/Dcom-UnitedStates/Local Assets/Documents/Tax/us_Tax_VAT_POV_2011Sept_100711.pdf
The EU rules require businesses located outside of the EU providing electronically supplied services to EU consumers to register, collect, and remit VAT to the “Member State” in which the consumers are resident. For example, consumers in the United Kingdom should be charged 20 percent VAT, in the Netherlands 19 percent, in Belgium 21 percent, and so on. Most Member States do not impose a registration threshold below which businesses are not required to register; therefore, a single sale of an electronic book into the EU may create a registration liability on a U.S. business. Such a liability may exist even if the business uses a third party to distribute its products.
....
Alternatively, a U.S. company may consider establishing an EU subsidiary or branch through which sales to customers residing in the EU may be routed. Until Jan. 1, 2015, an EU business providing electronically supplied services to EU individuals is only liable to account for VAT in its own Member State — as opposed to having to account for VAT in every Member State, as required for a non-EU entity. For example, common practice for businesses supplying such services to the EU in significant numbers is to operate from an establishment in Luxembourg, which has one of the lowest standard VAT rates in the EU at 15 percent. As a result, sales to all customers in the EU will be subject to VAT at 15 percent instead of the various rates between 15 percent and 25 percent depending on
where the customer resides.
well put @cncking2000 so essentially for those offering services or digital goods, if you want to do business with the EU regardless of your own location VAT registration is mandatory in about 65 days from now.
What a fucking nightmare,
Would be interested to hear from some of the USA hosts here and how they intend to deal with this.
Keep in mind that if you are suspected of fraud or none compliance while they cannot seize your none EU bank account, they can seize your paypal account as it is registered within the EU.
Personally I am really ******* angry about how completely ridiculous this is.
The flip side is if you are in the EU and lease dedicated servers from the USA or pretty much anywhere else, expect the price to rise unless you yourself are VAT registered.
@AnthonySmith - As I understand it, and this was published in 2011, is that all companies doing business in EU that are not located there, are required to collect VAT at this very moment, and have been required to for a while.
Prior to 2015, as a non-EU company, to be legal, one could be VAT registered anywhere (Luxembourg), and it would work as if you were an EU business, charging VAT at your registered locales rate, as it was legit.
Now, Non-EU companies are required to register with ALL EU member nations, and those other two I can't think. Switzerland and something. In addition to that, all EU companies must do the same thing.
I call on WHMCS and others to manage adding the correct taxes for EU orders. EU companies can then dive into reports to see how much they owe where, in accordance to the members policies on reporting and paying VAT. US and other companies can accomplish the same thing.
It is really not all that difficult to send a report with a check. Most EU countries (hopefully) cannot track outside sales, and really, most don't bother to harass you, as they have absolutely no jurisdiction. Besides being the legal and proper thing, your doing them a favor. Hostgater's compliance is simply a matter of their size and volume of money and sales internationally. Microsoft is physically located in nearly every country of the globe. Everybody knows Amazon, Ebay, Etc.. No offense to anyone here, but we probably have about 1% of Amazons audience, and thus, lack the worlds eyeball on our "tax evasion"
As it stands here, I pay taxes quarterly to City, State, and Federal agencies. The IRS has been a pain, wanting Annual, then monthly, then quarterly, then monthly, then quarterly reports. They send me a letter essentially saying "Do this, this way, or you know, we are the IRS." I just give in. I pay VAT to the few countries in EU that I have clients in, and they want a quarterly report of sales and revenue, for each one. No questions on their end at all. No demands. I just feel better following the laws as required, so I pay up.
Dang Finland and its 24% VAT.
See, I feel like this is ridiculous. Why should a business not covered under the jurisdiction of the country the client is in have to go through all this? I understand the time spent managing taxes is just the cost of doing business but it all seems so poorly thought out.
Is a system in place when you can just register your business details and enter reports based on transactions and pay via MasterCard/Visa? That would be easy and almost no hassle.
If this starts getting enforced seriously for companies outside of the EU/UK, expect people to start opening "anonymous" hosting companies that only accept BitPay. I'm not even kidding either, as it'd be better than putting up with this absolute nightmare.
This will be enforced much heavier on companies offering services WITHIN the EU/UK by the way, so providers with EU/UK locations had better watch out first; they are the first companies who could easiest be "made example of".
Sweden has 25%
I did speak to Anthony about this earlier and did a check with the Swedish "Skatteverket" and since all companies in Sweden already has to handle taxes when doing business with private entities this isn't that much of a change if you register a MOSS "account".
The difference is that your Swedish business reports the amount of sales for each country and Skatteverket takes care of sending the tax money to each country.
Every company in Sweden has a tax account where you pay your taxes to and then get back the difference at the end of the financial year.
Bottom line is that this will hit harder on the people/companys/countries where the business regulations have been "slack" on the business owners.
I'm in now way taking a stab on anyone here, just saying that some countries/companys will get off easier then others.
I think one of the key things here is that paypal transaction info is made available to all revenue services already so while you can decide not to comply they can decide to close your account without notice.
This does seem to have made things a lot more complicated for little gain.
I don't want to pay tax to non-Canadian companies, and I don't want to collect tax from non-Canadian customers. That would be such a fucking nightmare. Stop fucking up the world's financial system, Europe... uggh.
Yup! I agree with you hardheartedly here.
No need for "anonymous" anything. Hard to do any banking that way. However, local (e.g. Chinese or other nationality depending on jurisdiction) nominee shareholders and directors will fit the bill very nicely. I'm already working on adding such "facilities" to our HK company registration offer starting in October.
Agreed. While I can understand and sympathize with the respective governments' urge to fill up their coffers by taxing sales of non-EU companies, there seems to be a marked conflict of interest between EU legislators (elected by EU citizens!) and EU SME's, employing a sizeable number of said EU citizens and generating sizeable taxes. Something is definitely wrong with this picture! Hurrah for the so-called democratic process!
@GoodHosting I'll edit that then. It has been the same for a few months and no complaints so far.
@GoodHosting Nevermind, I'm switching it back, re-read the rules:
re your point
My whole sig wasn't bold, just 2 words at the beginning, with 3 links. I was in the guidelines like I thought.
Not really. If you don't do your VAT duties / evade the VAT your suppliers are liable for the VAT you didn't pay. So the dedicated server provider who sold you the server might be screwed because you didn't pay your taxes.
Yep it really sucks, I see the following happening:
People outside of the EU will simply stop doing business with people inside the EU.
People inside the EU will only do business with people in their own country (if a tax threshold exists) and people outside of the EU.
In January - April 2016 a lot of hosts will vanish overnight as they just got a massive tax bill and fine and got their paypal account closed because they did not think it applied to them, paypal sends reports to the revenue services and it is automated logic to see who took money from where and for what.
The kiddie/summer host thing will slow down a lot due to real life implications.
@AnthonySmith This is so bass-ackwards to me. You shouldn't have to pay sales tax on international digital goods purchases, and I shouldn't have to collect taxes from EU businesses so i can send it back to their government.
I run an internet marketing agency with the majority of our clients in the US (we're in Canada), and we don't need to charge them sales tax. I only charge GST to Canadian businesses in my province, or if they're in another province I deal with their tax rate (5-13%, I think.. I don't know, only do business in BC, Alberta & Ontario).
I have no problem with charging/submitting taxes for businesses within my own country, but for international folks this is just stupid. Hopefully someone stands up to the EU on this and Canada will become a VAT-free tax haven or something - will definitely be good for my biz.
Do you know if these tax collections are actually enforceable if no business interests in the EU is held other than having clients there?
I'm in Australia and it seems ridiculous to charge everyone in AUD, add VAT then convert that to whatever currency they want payment in.
I a solid believer of consumer taxes however it should not be the place of an international business that has no physical presence in the EU to collect taxes for them.
Not going to happen, everyone already agreed to this back in 2006, final plans for objection were published in 2011 and they spent 4 years implementing it.
Every government body in almost every country fully backs this and has for years, sadly they kept it quiet so none of us knew until fairly recently and as someone said, we collectively do not even represent 1% of amazons tax liability and that is the sort of company they are out to gain from.
Probably not yet in Australia but here is what they can do:
1) Seize your paypal account without notice.
2) Petition your countries legal system for company registration to strike you off for failure to comply.
3) prevent you from using any EU based banking system for business.
4) stop you from entering any EU state due to VAT avoidance/Fraud.
It is not as simple as saying, well I am not in the EU so I am not worried, there are further reaching implications, personally I say if you have ZERO ties to the EU in terms of your payment processors, companies you use within the EU etc etc then you are fine to go ahead and 'get away with it'
But remember, companies you rely on may be EU based which could cause problems if they are prevented from doing business with you, WHMCS/SolusVM/OnAPP/PayPal etc etc.
@AnthonySmith This is why I'm registering my business in Panama and moving to Mexico. Stupid governments. This doesn't affect me directly at the moment, but we're speaking with some EU-based businesses..
Will definitely need to rethink pricing/working with EU companies, if we're going to add overhead with stupid international tax management - how many hours of my accountant's time is this going to cost me?
I'm not planning on "getting away with it" I'm going to go talk with someone in the next week to find out my actual obligations.
I doubt however that they can close an Australian PayPal account. We have pretty strict laws regarding that kind of stuff here.
It seems that this whole thing is being blown way out of proportion. It seems like everyone is worried about US companies selling to EU residents, and I haven't been able to find anything stating that US companies would need to collect this. That said, you might be on the hook if you had a presence in the EU (like Amazon, Microsoft, etc.).
Has anyone actually consulted their attorney or tax advisor before jumping to this conclusion?
http://ebiz.pwc.com/2013/01/eu-2015-vat-changes-to-eservices-the-keep-it-simple-edition/
That's a very relevant and informative read.
Can't hosts just do what sz1hosting did and say it's the customers responsibility to declare tax/vat?
From the below it says:
http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm#new_rules
NON-EU BUSINESSES supplying:
Business in the EU
No VAT charged.
Customer must account for the tax (reverse-charge mechanism).
Consumer in the EU (telecoms, broadcasting or electronic services)
Must charge VAT in the EU country where the customer belongs.
the B2B rules are not really the issue, it is your 2nd point that has created the change.
In other words, nothing has changed for non-EU businesses and those concerned either shouldn't be or are already out of compliance.
Thanks for the article.
Yes, Yes and the revenue collections agency.
These rules are mandatory for any kind of ebusiness, no matter where it is established or has a nexus: in EU, US, China, India, Australia, Switzerland. As soon as a company provides eservices to a non VAT registered EU customer (regardless whether the customer is a legal or a natural person) it is bound by these rules, regardless whether it has a “physical” presence, server or agent in the EU. The customer’s location is the only thing that matters.
This is the sort of things that worry me, this general attitude of no one told me so its probably not true or I probably don't need to comply, that is a road directly to ruin.