EU’s New VAT Rules Could Create a Mess for Startups • Hacker News Board

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

#41

Post by [deleted] » Tue, Nov 25, 2014, 3:42 PM UTC

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…

[deleted]

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

#42

Post by honzzz » Tue, Nov 25, 2014, 3:49 PM UTC

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…

Maybe I am missing something but how could you be subject to collecting taxes for a country that you have nothing to do with? AFAIK, EU laws apply to EU entities. If you are not EU citizen and do not own any EU-registered company, how could they have jurisdiction over you?

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

#43

Post by MistahKoala » Tue, Nov 25, 2014, 3:50 PM UTC

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…

Whilst I don't know the ins and outs of your business or the implications of non-EU/EEA businesses selling to member state consumers... I'm wondering how such a requirement would be enforceable, given that you are outside the EU? I've yet to see anything that declares a requirement that you must collect VAT - but I have seen HMRC guidance saying that member state businesses selling outside the EU are not affected and don't have to charge/collect VAT, so I'm inclined to believe that it's reciprocal.

A question that occurs for me is how TTIP would affect this situation, though. If TTIP was established, would the EU then require US businesses to collect VAT in the same fashion? Because that would be really sucky for you.

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

#44

Post by tormeh » Tue, Nov 25, 2014, 3:50 PM UTC

mootothemax wrote: post #37

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 an…

Blocking payment from EU accounts to accounts of firms failing to comply, I guess. That's the standard way to act against firms from shady countries. There are generally cooperation agreements if you're from a developed economy.

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

#45

Post by michah » Tue, Nov 25, 2014, 3:52 PM UTC

Actually this is not really new. Since 2003 Businesses outside the EU that sell to private (not business) customers in the EU need to pay VAT to an EU member country.

This is called VAT on e-Services.

Most App Stores (except Google Play) took care of this already but if you did direct sales (e.g. via Paypal, direct payments etc) you need to calculate the tax every quarter and pay it to a member state (which will then distribute it to the other states so that you need to do only one payment).

You can read more on the UK government page:

https://secure.hmce.gov.uk/ecom/voes/welcome.do

The main new thing now is that app stores who had a subsidiary in Luxembourg can no longer funnel it through the lowest VAT country but need to split it up according to the customer country.

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

#46

Post by MistahKoala » Tue, Nov 25, 2014, 3:53 PM UTC

mootothemax wrote: post #37

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 an…

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

Well I'm certainly interested in how they see themselves exercising their power extra-territorially. I'm inclined towards letting them swivel on my middle finger.

HMRC themselves say that VAT isn't chargeable on sales outside of the EU, so doesn't that run contrary to what you're saying about the EU requirement for global VAT collection?

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

#47

Post by MistahKoala » Tue, Nov 25, 2014, 3:54 PM UTC

flexie wrote: post #36

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 purel…

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

That would appear to fulfil a long-term aspiration of the European project.

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

#48

Post by rmc » Tue, Nov 25, 2014, 3:56 PM UTC

mootothemax wrote: post #34

shedside wrote: post #25

Earlier quoted context omitted.

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…

The USA has ordered that big companies be split in the past. It's just the "crazy EU lawmakers".

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

#49

Post by rmc » Tue, Nov 25, 2014, 3:57 PM UTC

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…

You're not in the EU. So EU law doesn't apply to you.

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

#50

Post by rmc » Tue, Nov 25, 2014, 3:58 PM UTC

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…

What legal issues? Will the EU take you to court? Will they direct the (say) UK police force to come to your business and sieze property to pay back debts? This isn't going to happen.