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The Horrible Implications of the EU VAT “Place of Supply” Change

rachelandrew.co.uk

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Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#11

Post by hermitcrab »

tehwalrus wrote: post #9
corford wrote: post #6

Am I correct in thinking that everything carries on as before if you're a UK based Ltd, VAT registered and the only sales you make to EC based clients are to entities with a VAT number? Basically, the place of supply remains the UK and you report EC sales in your quarterly EC sales list as before?

I'm not sure - if you are selling "software as a service" or any other hands-off digital product to (VAT-registered or not) companies in another EU country, then I think you must bill them at their local VAT rate and (possibly) pay that rate to their government's tax collectors (assuming you're above their country's VAT-registered threshold.) I may have read it wrong, though, I'm not an accountant.

If they are a VAT registered business, the place of supply remains that of the vendor. This hasn't changed. ( So you don't charge them VAT under EU reverse charge.)

Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#12

Post by hermitcrab »

rachelandrew wrote: post #5
Shivetya wrote: post #4

Is this being done to remove competitive advantage some enjoy by being from lower tax countries or is this more of aligning sales of digital product with physical?

My understanding is it is to remove the loophole of companies being based in a country where VAT is lower then selling to consumers - where they need to charge VAT - and the total cost is lower.

Also countries want to collect the VAT on digital purchases their citizens make. That is understandable, I suppose. The implications looks like a potential nightmare for small businesses though.

Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#13

Post by theallan »

hermitcrab wrote: post #11
tehwalrus wrote: post #9

Earlier quoted context omitted.

I'm not sure - if you are selling "software as a service" or any other hands-off digital product to (VAT-registered or not) companies in another EU country, then I think you must bill them at their local VAT rate and (possibly) pay that rate to their government's tax collectors (assuming you're above their country's VAT-registered threshold.) I may have read it wrong, though, I'm not an accountant.

If they are a VAT registered business, the place of supply remains that of the vendor. This hasn't changed. ( So you don't charge them VAT under EU reverse charge.)

Are you sure about that? My understand of it was that the place of supply depends on what is being sold and not on the VAT registration status of either party. Digital goods would have the place of supply defined by where the customer is. Services have it defined by where the seller is.

If both you and the customer are VAT registered, then you can zero rate the VAT, but the rate (if it were applied) could be different (based on what you are selling).

Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#14

Post by twobits »

The author's solution seems to be "Let’s crowdsource this".

I think this is a bandage. Trying to address one problem, while ignoring the root cause. How about, "thank you very much, please put me in jail, I don't care anymore"? (While you bailout TBTF banks once again?)

"Governments" are the thugs that protect the big economic interests. The big economic interests, pay the protection money, "bribes", "donations". It's symbiotic. You, me, we, are the slaves.

The bribes, are a lot for the few politicians, they are happy and rich, and nothing, compared to be able to go on having slaves, happy and big profits, for the big economic interests.

You, you try to "crowdsource" "solutions" about the fact that your chains got heavier.

Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#15

Post by throwaway41597 »

Disclaimer: I don't know much about all this either

So a side effect seems that some companies which used to be exempted from collecting VAT will now kind of have to, thereby either raising prices or taking a cut of about 16.7% [1] in their revenues. Because you'd have to be crazy not to opt into the "mini one-stop shop" (who would want to register in every EU country?), so you register for collecting VAT although your revenue is low enough to qualify for exemption in your own country and the customer's.

That's even harder to swallow for companies delivering electronic services, as having a VAT number is not a huge money saver (paying VAT on web hosting isn't a huge burden).

Which countries lack VAT exemption? If there aren't many, it could be okay not to take customers from them.

[1] 1 - 1/1.2 = 0.167 as the average VAT is 20% in the EU

Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#16

Post by rachelandrew »

throwaway41597 wrote: post #15

Disclaimer: I don't know much about all this either So a side effect seems that some companies which used to be exempted from collecting VAT will now kind of have to, thereby either raising prices or taking a cut of about 16.7% [1] in their revenues. Because you'd have to be crazy not to opt into the "mini one-stop shop" (who would want to register in every EU country?), so you register for collecting VAT although yo…

A commenter on my post notes that it isn't just countries with a low threshold it's ALL other countries. That you are non-resident in. So essentially if you want to sell to the EU you have to register for MOSS and therefore have to be VAT registered.

It's crap. I hope I'm wrong or that something can be done to exempt small enterprises.

Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#17

Post by rachelandrew »

twobits wrote: post #14

The author's solution seems to be "Let’s crowdsource this". I think this is a bandage. Trying to address one problem, while ignoring the root cause. How about, "thank you very much, please put me in jail, I don't care anymore"? (While you bailout TBTF banks once again?) "Governments" are the thugs that protect the big economic interests. The big economic interests, pay the protection money, "bribes", "donations". It'…

Well, good luck with that approach.

I'll continue to try and help out other small indie firms run their businesses and support their families.

It's not a solution, I don't have a solution, I'm just trying to help.

If anyone has any experience in lobbying the government to look into this sort of stuff, I'd love to hear about it. My experience as a business owner since 2001 however has been that they do not care a tiny bit about our kind of business, unless they can find a way to fine us for something. Fines that could cripple a small business but would just be seen as a cost of doing business for a larger one.

Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#18

Post by throwaway41597 »

rachelandrew wrote: post #16
throwaway41597 wrote: post #15

Disclaimer: I don't know much about all this either So a side effect seems that some companies which used to be exempted from collecting VAT will now kind of have to, thereby either raising prices or taking a cut of about 16.7% [1] in their revenues. Because you'd have to be crazy not to opt into the "mini one-stop shop" (who would want to register in every EU country?), so you register for collecting VAT although yo…

A commenter on my post notes that it isn't just countries with a low threshold it's ALL other countries. That you are non-resident in. So essentially if you want to sell to the EU you have to register for MOSS and therefore have to be VAT registered. It's crap. I hope I'm wrong or that something can be done to exempt small enterprises.

Okay, it makes sense that you would have to register with every country to get an exemption.

The only hope is that this causes so much work to tax offices that they add a procedure to get the exemption in every country.

I'm not holding my breath as it seems VAT has only been increasing in its rate and span of subjected products :(

Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#19

Post by yangmeyer »

rachelandrew wrote: post #5
Shivetya wrote: post #4

Is this being done to remove competitive advantage some enjoy by being from lower tax countries or is this more of aligning sales of digital product with physical?

My understanding is it is to remove the loophole of companies being based in a country where VAT is lower then selling to consumers - where they need to charge VAT - and the total cost is lower.

Ole Begemann recently wrote about the changes in the context of selling apps through the App Store: http://oleb.net/blog/2014/07/eu-vat-changes-2015/

Apple sells all apps through its Luxemburg subsidiary, meaning Luxemburg's low 15% VAT rate applied.

On the buyer side, am I right to assume that as a VAT-registered company/freelancer I will be able to deduct VAT paid on apps purchased through the App Store?

Re: The Horrible Implications of the EU VAT “Place of Supply” Change

#20

Post by turbojerry »

This seems very bad, I'm assuming this applies to all customers whether businesses or not, so here are a few potential gotchas I see-

1. You sell to an individual who is not in the country that their payment information is related to and is not delivered to that country, do you charge VAT based on the payment information alone or do you have to physically verify that they are in the country claiming the VAT?

2. Prepaid CC can have false information, how do you determine is it is true so you can charge the right VAT?

3. Fraud, if you sell something to a fraudster, do you have to find out which country the fraudster was in to determine VAT you owe after the fact?

4. What about Bitcoin transactions where no location information is known?

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