The elephant in the room (VAT Rules Jan 2015)

AnthonySmith

petris said: In other words, nothing has changed for non-EU businesses and those concerned either shouldn't be or are already out of compliance.

How could you possibly have reached that conclusion from reading that?

trewq

@petris said:
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.

Yep, that's how I read it too.

trewq

@AnthonySmith said:
How could you possibly have reached that conclusion from reading that?

From a non-EU business perspective nothing has changed. That can also be backed up by the link @INIZ posted earlier. I expect many business are not in compliance as this just seems like the most inefficient way of collecting tax...

AnthonySmith

trewq said: Yep, that's how I read it too.

ok... re-reading for sanity.

AnthonySmith

right.... however your missing the point, as of 2015 the rule is mandatory in terms of collection for selling to the EU B2C base.

The reason it says no change is because previously none EU companies were not required to have a VAT number to sell within the EU, now they are as of Jan 2015 meaning you are responsible for collecting and paying that tax.

Please... read this bit again rather that looking at the pictures guys:

First and the most important fact: 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.

We have already presented some of the upcoming VAT changes to eservices (and also telecom and broadcasting services) previously. Today’s article is prepared especially for those of our readers that wish to receive a short and clear answer to the following question:

What changes with the new VAT rules for eservices?

The most important change happens to ebusinesses located within the EU that are selling their eservices to B2C clients, which are also located in the EU (please note: B2C clients include beside private consumers also various non-VAT registered business, governmental organizations and other legal persons – follow this link for more info on what eservices are and who B2C clients are).

The new VAT rules abolish the distinction between EU and Non-EU companies providing their eservices to EU B2C customers.

0xdragon

Well how in the hell is someone going to be able to start up a business to sell to the EU without spending a crap tonne on compliance? Urgh!!

AnthonySmith

And... here is the relevent part from the link @INIZ posted:

aglodek

@AnthonySmith said: 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.

Be that as it may, no matter EU legislators' wishful thinking, they and their legislation have no jurisdiction over non-EU persons without an EU presence UNLESS there is a bilateral treaty between EU and another jurisdiction (e.g. US) to this effect.

US legislators found a way to enforce provisions of the PATRIOT Act internationally on the world's banking system by making it obligatory for any foreign bank, doing or planning on doing transactions with any US-based bank, to set up an office in the US. Hence, said banks are liable under the PATRIOT Act because of their PRESENCE in the US! Failing this, provisions of said PATRIOT Act don't apply to them. Same thing holds true with respect to EU's latest brand of wishful thinking regulations. To be on the safe side, you may want to reconsider accepting payments through UK-based SKRILL for one, as this may be construed to constitute an EU presence.

This said, under said regulations, EU authorities may pursue non-EU persons through measures that are, under international law, essentially extralegal (same thing as illegal, but executed by a nation-state), e.g. institute some kind of blacklist, attempt to close such entities' Paypal accounts, block server IP address, etc. Sure, maybe in some kind of antiterrorist operation, but highly unlikely with respect to non-compliance with an extrajurisdictional piece of legislation. Especially so if you are based in a high profile, well regarded jurisdiction like Hong Kong

trewq

@AnthonySmith said:
And... here is the relevent part from the link INIZ posted:

And that is currently, correct? Or am I just having a special moment?

AnthonySmith

trewq said: And that is currently, correct? Or am I just having a special moment?

Not until January 2015

Oliver

Wow the EU really is a place of infinite wisdom. I just emailed my accountants to ask if this really affects my Australian business (with clients in almost every EU state)...

mpkossen

@sumo said:
Its tragically funny. When the EU was formed, it was supposed to be more cohesion with the thought that ultimately, it would be a USE (United States of Europe). It's turning out to be more a UNE (United Nations of Europe).

Yes, exactly. This is like one giant move against collaboration and towards segregation. The EU should be making things easier rather than harder.

cncking2000 said: Netherlands 19 21 percent

Temporary measure, the 21%, for the past few years. I'm just assuming they're not going to be changing it back.

trewq said: Why should a business not covered under the jurisdiction of the country the client is in have to go through all this?

Because they are doing business in said country, simple as that. That doesn't mean I agree with it, but that is the case.

mikeyur said: My whole sig wasn't bold, just 2 words at the beginning, with 3 links. I was in the guidelines like I thought.

Your signature is fine. @GoodHosting should just learn to find the Flag button.

@Oliver said:
Wow the EU really is a place of infinite wisdom. I just emailed my accountants to ask if this really affects my Australian business (with clients in almost every EU state)...

It's sad, isn't it?

ztec

Ugh this is just horrible. Fcking EU...

sandro

Wait, that site says that currently non-EU businesses charge VAT to the customer's country. So no change. What? I'm from Europe and I was never charged for my local VAT for US VPS's. How come?

AnthonySmith

sandro said: How come?

Until now it was:

1) Not imposed

2) Not applicable to B2C sales only B2B

ztec

Fuck Fuck fuck fuck fuck fuckFUCK

sandro

AnthonySmith said: Until now it was:

1) Not imposed

2) Not applicable to B2C sales only B2B

What does it mean it wasn't imposed? It's either a rule or not.

perennate

I keep hearing the US/Canada/etc "signed on" to this, but that doesn't make sense, in order to do anything that would really concern people/companies in foreign countries, each country would need to pass legislation or treaty saying how they would extradite people for tax evasion or let arbitrary authorities from EU enter the country and kidnap people. They certainly haven't done that.

So in the end, >95% of small Internet-based businesses based outside the EU are going to ignore this. EU wants to send US list of one million names who are conducting tax evasion? Who cares.

I haven't heard of any change in Paypal policies either, but even if they do then all it would lead to is more people using Bitcoin and such.

Edit: also discussion in http://www.webhostingtalk.com/showthread.php?t=576264 also indicates that US providers were already required to charge VAT as of 2006 rules.

AnthonySmith

perennate said: I keep hearing the US/Canada/etc "signed on" to this, but that doesn't make sense, in order to do anything that would really concern people/companies in foreign countries, each country would need to pass legislation or treaty saying how they would extradite people for tax evasion or let arbitrary authorities from EU enter the country and kidnap people. They certainly haven't done that.

So in the end, >95% of small Internet-based businesses based outside the EU are going to ignore this. EU wants to send US list of one million names who are conducting tax evasion? Who cares.

I haven't heard of any change in Paypal policies either, but even if they do then all it would lead to is more people using Bitcoin and such.

Edit: also discussion in http://www.webhostingtalk.com/showthread.php?t=576264 also indicates that US providers were already required to charge VAT as of 2006 rules.

You know, I honestly hope you are 100% correct, no one bothers to comply and no action is taken so the whole thing gets scrapped.

I very much doubt this will happen though.

sandro

@AnthonySmith can you explain I was never charged for VAT when buying outside the EU and now I will? I don't see anything online that says it wasn't mandatory befor and from Jan 2015 now it is. In fact every site says that the part hasn't changed and B2C was included.

apollo15

How about companies in the USA selling to companies in EU who do have VAT number from that EU country. Then VAT will still be zero right?

AnthonySmith

@sandro said:
AnthonySmith can you explain I was never charged for VAT when buying outside the EU and now I will? I don't see anything online that says it wasn't mandatory befor and from Jan 2015 now it is. In fact every site says that the part hasn't changed and B2C was included.

Sure, because pre January 2015 the place of sale rules are different.

Lets say you are French, you buy from USA, the place of sale is considered USA any there for no VAT is charged, right now companies have a choice you can consider the place of sale to be France and voluntarily collect and pay the VAT for France but only a few do this (hostgator for example).

Post January 2015 the place of sale absolutely without question would be considered France so if you want to do business in France you have to comply with the sales laws of that country, as it is digital goods you much collect the VAT on this at the applicable rate for that place i.e. France.

If you are an american and you decide to open up a shop in France as a branch of your american store e.g. tools and stuff, you cant just say... well I wont charge VAT to customers because my company is american, you are operating within France so you are required to comply, the only difference now is they consider the operating location on digital sales to be the end users location, previously that was not required.

I know I started this topic and I am starting to feel like I am the one imposing the new rules haha, please keep in mind I think it is a fucking disgraceful decision.

AnthonySmith

apollo15 said: How about companies in the USA selling to companies in EU who do have VAT number from that EU country. Then VAT will still be zero right?

No, you will just be making what would be considered an illegal sale by not collecting the VAT in the eyes of the EU. i.e. ignorance of the law is not a defense.

perennate

AnthonySmith said: No, you will just be making what would be considered an illegal sale by not collecting the VAT in the eyes of the EU. i.e. ignorance of the law is not a defense.

Sure, but in that case (according to the rules) EU company is responsible for ensuring VAT is paid, US company has no responsibility. US company only has to worry when selling to individuals (B2C not B2B).

It also seems like foreign companies selling digital goods were already required to pay some kind of VAT, whenever or not it previously had to be in customer's country I don't know.

sandro

I see, I didn't know you could choose the point of sale. Check the Europe's site, it doesn't mention this freedom of choice. It just says you have to charge VAT according to customers location. Also check the image posted above, it says no change...so what changed? I get it you said it changed but it didn't! Lol.

I see a lot of trouble for companies like Paypal , they charge you fees based on lux vat...now everything will change.

hostnoob

So what does this mean for customers? Those of us in EU will pay tax even if buying from an American company?

apollo15

@AnthonySmith said:
No, you will just be making what would be considered an illegal sale by not collecting the VAT in the eyes of the EU. i.e. ignorance of the law is not a defense.

How so? It's B2B, not B2C. Even now you don't have to pay VAT if you have valid VAT number and buying from EU company. There is no VAT in B2B dealings where both parties have VAT number at this time.

According to.... http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm#new_rules

"NON-EU BUSINESSES supplying:
1. Business in the EU"
-> "No VAT charged.
Customer must account for the tax (reverse-charge mechanism)."

How wht the last phase means? "Customer must account for the tax (reverse-charge mechanism)."

AnthonySmith

apollo15 said: How so? It's B2B, not B2C.

I was talking about B2C

hostnoob said: So what does this mean for customers? Those of us in EU will pay tax even if buying from an American company?

Yes.

perennate said: US company has no responsibility

You keep saying that but that is not the way the EU see's it, again I hope no one complies but like I said don't be surprised if your paypal account gets seized.

aglodek

@AnthonySmith said: @apollo15 No, you will just be making what would be considered an illegal sale by not collecting the VAT in the eyes of the EU. i.e. ignorance of the law is not a defense.

Correct - ignorance of the law is not a defense, but ONLY if said law applies to you in your jurisdiction (country). This is possible ONLY if there is an ADDITIONAL - call it "bridging element" - in the form of a bilateral treaty between the EU and your jurisdiction empowering said EU laws in your country. Otherwise, "in the eyes of the EU" has no authority whatsoever to impose EU laws on you in your own country! Let your EU custmers worry about compliance with EU laws and paying their taxes, as they should.

Two exceptions:

(1) you are an expat EU citizen (like me) living in another country - you are still bound by the laws of your country of citizenship (and EU, too). However, this applies to any business you transact personally, not to any locally registered legal entity (e.g. limited company).

(2) your business has a "presence" in the EU. BTW, this doesn't have to be an office or warehouse filled with goods. This is a gray area, but an EU bank account or SKRILL account can be construed as a "presence".

Practically all EU states' tax authorities are scraping the bottom of the barrel, under immense pressure from duly elected politicians, totally out of their minds and going bonkers with this offshore taxation offensive! Check if there is any treaty signed (or in the works) between any EU state or the EU Commission and your country stipulating compliance with this EU regulation. Otherwise, ignore this crap for what it is.

perennate

AnthonySmith said: You keep saying that but that is not the way the EU see's it, again I hope no one complies but like I said don't be surprised if your paypal account gets seized.

What I was saying earlier is about business to customer or whatever, for US business to EU business the EU regulations say EU business would be responsible for paying the VAT AFAIK.

Edit: also most places are pretty clear that as of 2006, non-EU businesses are required to collect VAT for EU customers. Everywhere I see says the only change is for EU businesses, not non-EU ones. (edit2: actually since 2003, not 2006!)

ex: http://www.jiclt.com/index.php/jiclt/article/download/19/18 (published in Journal of International Commercial Law and Technology)

Smaller providers with little or no assets in the EU will simply keep ignoring the Directive, for its provisions are downright unenforceable