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EU’s New VAT Rules Could Create a Mess for Startups

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Re: EU’s New VAT Rules Could Create a Mess for Startups

#31

Post by Igglyboo »

mahouse wrote: post #23
wbond wrote: post #16

As someone who sells digital software licenses, this is quite an baffling situation to experience. Currently, I live in Massachusetts, which does not require collecting sales tax on digital goods. According to these new laws, even though I live in the USA, and don't collect any address information for my customers, I now need to: 1. Collect address and IP address information 2. Register with a MOSS somewhere in the E…

> I'm almost considering shutting down sales to EU customers. Then someone will launch a business that will do the same you do, but complying with regulations. Taxes must be collected; without taxes, the welfare state collapses. You should know that, to be able to sell something in a market, you must understand its regulations first, and respect the decisions the citizens have taken (in this case, regarding taxes) th…

He's not shutting down because of taxes, he's shutting down because the burden of collecting taxes is too high and solely on the business owner.

Re: EU’s New VAT Rules Could Create a Mess for Startups

#32

Post by MistahKoala »

I'm unfamiliar with the nuances of sales tax rules in relation to the Crown dependencies (IoM; Channel Islands), but would one way around this be for sole traders and micro enterprises (or even SMEs, if they wish) to incorporate their trading entity in one of the Crown dependencies, allowing them to disregard this messy requirement?

Re: EU’s New VAT Rules Could Create a Mess for Startups

#33

Post by wbond »

mahouse wrote: post #23
wbond wrote: post #16

As someone who sells digital software licenses, this is quite an baffling situation to experience. Currently, I live in Massachusetts, which does not require collecting sales tax on digital goods. According to these new laws, even though I live in the USA, and don't collect any address information for my customers, I now need to: 1. Collect address and IP address information 2. Register with a MOSS somewhere in the E…

> I'm almost considering shutting down sales to EU customers. Then someone will launch a business that will do the same you do, but complying with regulations. Taxes must be collected; without taxes, the welfare state collapses. You should know that, to be able to sell something in a market, you must understand its regulations first, and respect the decisions the citizens have taken (in this case, regarding taxes) th…

The issue is that I am now subject to collecting taxes for a country that I have nothing to do with. I have never set foot in an EU country, I don't choose to sell to EU customers, they just come to my US-based website and pay in USD. I comply with all of my local tax laws. I can be involved with my local government and affect change. I can't do that in the EU.

The way this is all written, I'll actually have to do work to BLOCK customers from the EU, or face legal issues. It seem more reasonable to require that the people who LIVE in the EU deal with their own local taxes.

Can you imagine having to keep track of tax laws of 195 countries? I'm sure a company like Amazon can deal with that no problem, but self-employed people developing software, music or ebooks are basically screwed and now need to waste a ton of their time trying to figure out exactly how to jump through the ever-changing hoops.

Re: EU’s New VAT Rules Could Create a Mess for Startups

#34

Post by mootothemax »

shedside wrote: post #25
pjc50 wrote: post #22

Earlier quoted context omitted.

Someone will correct me if I'm wrong, but this only applies if you're selling from within the EU.

I’m afraid it looks like you’re wrong. https://twitter.com/HMRCgovuk/status/537214398855913472 (see the green box at the very bottom of the flowchart)

I’m afraid it looks like you’re wrong

Yes and no.

Yes the EU authorities would love for the entire world to collect VAT from its citizens.

No because the EU has absolutely no way to enforce this worldwide.

However, the big fun is coming on Thursday, when the EU is due to rule over Google and politely requesting that Google splits off search from the rest of its business.

I believe this decision will be indicative of how crazy the EU lawmakers might be prepared to go.

For example, if they try and enforce splitting up Google, maybe they'd have the sheer bloody-mindedness to try and enforce blocking sales from EU cards to e.g. non-registered US sellers?

Re: EU’s New VAT Rules Could Create a Mess for Startups

#35

Post by AhtiK »

bartkappenburg wrote: post #28

Luckily we've found this: "Super simple (static) web service to grab VAT rates for all EU Member States, in preparation of the new 2015 VAT regulation." See: https://github.com/modmore/euvatrates.com We've used this (for http://www.voyando.com ) to change our software (ie. replaced a static VAT-variable for EU countries to a dynamic one based on what customers filled in during sign up). It was no more than 4 hours of…

The suggested http://euvatrates.com/rates.json and pretty much any EU taxation document uses country code "EL" for Greece while ISO standard and most geolocation APIs use "GR".

Just make sure your code doesn't crash because of this :)

"GB" vs "UK" for United Kingdom is another one to pay attention to.

Re: EU’s New VAT Rules Could Create a Mess for Startups

#36

Post by flexie »

Best solution would be to have a common EU VAT-rate applying to all goods and services.

It's going to be terrible situation for tech start ups but it's been bad for everyone for a while who sells across borders in EU. You have to find out what strange box defined by eurocrats that your business fits into (if any). It's not that easy.

I'm a lawyer selling most of my services across borders. Some of my revenue is purely digital (downloads of documents and may be hit by the new rules), some would be characterized as consultancy services. If my client is in another member state and is VAT registered (like most, but not all companies) I don't have to charge VAT. But instead I am left to explain to my client that the mess is now theirs due to the weird chargeback rules (that they only know if they are used to selling B2B or buying from suppliers in other member states). If I sell services to private persons or companies that are not VAT registered, I have to charge the VAT of the country my law firm is in.

If I had given legal advice related to real estate I would be subject to yet other rules.

When I sell to companies outside of the EU it's a different set of rules again.

Most bookkeepers and accountants are very insecure about these rules. If professional accountants are not comfortable advising on the rules, the system is too complicated.

Re: EU’s New VAT Rules Could Create a Mess for Startups

#37

Post by mootothemax »

MistahKoala wrote: post #32

I'm unfamiliar with the nuances of sales tax rules in relation to the Crown dependencies (IoM; Channel Islands), but would one way around this be for sole traders and micro enterprises (or even SMEs, if they wish) to incorporate their trading entity in one of the Crown dependencies, allowing them to disregard this messy requirement?

Would one way around this be for sole traders and micro enterprises (or even SMEs, if they wish) to incorporate their trading entity in one of the Crown dependencies

In theory, the EU requires you to collect VAT from EU citizens regardless of where you yourself are based.

The new rules state that you should charge VAT at the customer's local rate, so being based in a tax haven wouldn't - again, in theory - do you any good.

How on earth they ever intend to enforce any of this against the rest of the world is anyone's guess.

Re: EU’s New VAT Rules Could Create a Mess for Startups

#38

Post by mootothemax »

Is the long-term outcome looking like, one day, twenty years from now, we'll be collecting every last sales tax based on where the customer is right this very second?

It seems a bit unfair for the EU to demand e.g. US-based sites to collect VAT, and there not being anything going in the opposite direction.

Re: EU’s New VAT Rules Could Create a Mess for Startups

#39

Post by MistahKoala »

mahouse wrote: post #23
wbond wrote: post #16

As someone who sells digital software licenses, this is quite an baffling situation to experience. Currently, I live in Massachusetts, which does not require collecting sales tax on digital goods. According to these new laws, even though I live in the USA, and don't collect any address information for my customers, I now need to: 1. Collect address and IP address information 2. Register with a MOSS somewhere in the E…

> I'm almost considering shutting down sales to EU customers. Then someone will launch a business that will do the same you do, but complying with regulations. Taxes must be collected; without taxes, the welfare state collapses. You should know that, to be able to sell something in a market, you must understand its regulations first, and respect the decisions the citizens have taken (in this case, regarding taxes) th…

> respect the decisions the citizens have taken (in this case, regarding taxes) through democratic ways

Except the citizens haven't taken that decision: the unelected European Commission has.

We could probably go down the reductio ad absurdum road of highlighting their appointment by someone who got elected somewhere along the way, but this powerful body is in no way directly accountable to citizens.

Some of the British North American colonials had a popular mantra of "no taxation without representation", which might appeal in this situation.

Re: EU’s New VAT Rules Could Create a Mess for Startups

#40

Post by mahouse »

wbond wrote: post #33
mahouse wrote: post #23

Earlier quoted context omitted.

> I'm almost considering shutting down sales to EU customers. Then someone will launch a business that will do the same you do, but complying with regulations. Taxes must be collected; without taxes, the welfare state collapses. You should know that, to be able to sell something in a market, you must understand its regulations first, and respect the decisions the citizens have taken (in this case, regarding taxes) th…

The issue is that I am now subject to collecting taxes for a country that I have nothing to do with. I have never set foot in an EU country, I don't choose to sell to EU customers, they just come to my US-based website and pay in USD. I comply with all of my local tax laws. I can be involved with my local government and affect change. I can't do that in the EU. The way this is all written, I'll actually have to do wo…

Your tax-free business is then more profitable than the one that complies with the law, which is unfair. Collecting less taxes would have a detrimental effect in the state, too.
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