Changes to EU VAT laws: Small TS devs may go out of business

[AndiS]

Most EU countries have some rules regarding a threshold for VAT. If you stay below that, you don't pay VAT. I can't speak for all EU countries, but the cases I know are straightforward, you register nowhere and stay below the threshold.

So I am not so sure what the accounting difficulty would be to sell at 0% to Germany, while charging 0% in the UK.

Compare this handy page, under "Must all businesses register for VAT?". "In most EU countries, there is a scheme to help small businesses, under which firms whose sales of VAT-liable goods/services fall below a certain annual limit may be exempt from VAT. These limits (‘thresholds') vary from country to country. In some countries, there is no limit and businesses must register as soon as they make any taxable sales."

This page has a link to a PDF with VAT limits, showing only three countries with no such limit and low 5-figure limits for the others. So basically, even if you go by the legislation of the country where your customer resides, there is no VAT unless you sell a lot. In the later case, you certainly exceed the UK limit and pay VAT there anyway, EU or no.

[Easilyconfused]

Most EU countries have some rules regarding a threshold for VAT. If you stay below that, you don't pay VAT. I can't speak for all EU countries, but the cases I know are straightforward, you register nowhere and stay below the threshold.

That was the case Andi but it all changes on 1st January.

The changes are complex and as with most things tax related the average person needs expert guidance. I speak from experience since I was nailed by the HMRC for unpaid tax when my previous employer made a mistake with my company car tax and despite stopping the tax from my salary failed to complete the correct paperwork resulting in an underpayment that took 4 years to sort out and a lot of unpleasant letters from HMRC to me.

UKTS are addressing the matter as the Site Admin stated but anyone else selling within the EU needs to address the issue themselves.

[smarty2]

There was a discussion about this topic on R4's you and yours programme yesterday (12th), you can listen to it here. http://www.bbc.co.uk/programmes/b04tlyrr

From what I can make out the upshot is originally you would have to register with all 27 member states! But the HMRC has a one stop solution whereby you can register with them and all the foreign VAT will be distributed by them on your behalf. Still, there is a petition being gathered to discuss this in parliament and see if the government can intervene on behalf of small businesses.

[PeterPeddlesden]

Thanks for the link smarty2.

[AndiS]

At the risk of sounding pro-EU, I must say that the MOSS was EU's idea and it is implemented in all countries, albeit under varying acronyms, mirroring the local language. And the semantic differentiation between registering for MOSS and registering for VAT was handled in a more relaxed way in other countries.

Almost all countries promote small enterprises by introducing some threshold for VAT. The bad news is that they deny this privilege to foreigners and ECJ ruled that such gross inequality in the market place would be ok as it saves administration cost.

This problem, existing for quite a while is amplified by the new regulation about electronic services, because before the change, exporting a service to a customer was seen as a non-export, so to say. You taxed VAT at the supplier, so if the supplier is below VAT threshold, there is no tax.

Someone will have calculated that the total of electronic service consumption in EU delivered from the US - tax free - excels the EU exports of electronic services. So changing the rule means more money in EU treasuries.

Now that sales to consumers are affected, you see the unfairness more clearly. If a German small business below VAT threshold in both countries sells to a small UK business below VAT threshold, the invoice must state that VAT obligation is delegated to the buyer under the Reverse Charge scheme. This means that the UK small business must calculate UK VAT for that invoice and pay it to HMRC despite being below VAT threshold. This is to mimic buying from a UK business that is above VAT threshold. In such a case, VAT would be paid by the buyer, too. So the small German enterprise is as unattractive in the UK market place as a big company, but cannot deduct VAT for its own acquisitions. This has been the case for years. Now, the application of this is expanded to electronically delivered services to consumers.

[MFMPorter]

But there is not only to report positive, but also negative. 1 January 2015 enters a new sales tax law in force, - in a nutshell - stipulates that for digital goods subject to a sales tax and must be discharged in the country where the buyer has his permanent residence. So far I have made ​​use of the German "small traders" who has saved me the discharge of sales tax, no matter where a customer came. The new law is undermined, however, and I also have to raise VAT, which is then discharged into the EU country of the respective Buyer.

This is from rw-0381 blog. It seems they are going to have to charge more from 1.1.15. There is also a note in red about this on the home page of rw-0381 shop website.

David W.

[nineercharlie]

Is setting up a server in the Cayman Islands an option?

[Alicatt]

But there is not only to report positive, but also negative. 1 January 2015 enters a new sales tax law in force, - in a nutshell - stipulates that for digital goods subject to a sales tax and must be discharged in the country where the buyer has his permanent residence. So far I have made ​​use of the German "small traders" who has saved me the discharge of sales tax, no matter where a customer came. The new law is undermined, however, and I also have to raise VAT, which is then discharged into the EU country of the respective Buyer.

This is from rw-0381 blog. It seems they are going to have to charge more from 1.1.15. There is also a note in red about this on the home page of rw-0381 shop website.

David W.

Now that brings forth an interesting question, I spend some to a lot of time in Belgium but my permanent residence is in Scotland. If I buy goods online in Belgium then I have to pay and you have to charge the VAT at the current UK rate? How are you going to ensure that you are charging as per my country of residence rather than that of the IP address of the country I am in at that particular moment?