New EU VAT rules for Digital Content. Are you all ready??? You had BETTER BE! This is important
 

Good Morning! I wasn't sure if this had been posted, or whether people realized, but I'm not on here as often as I used to be.

I thought that people should know that these new rules begin in January, and apply to content also.

Those non EU based businesses who have EU traffic are going to have to take note, and get set up with systems to start charging appropriate VAT.

It's ugly, but true. Read for yourself:

(in trying to cut and paste, the page loses formatting, so I suggest you visit the link)

Telecommunications, broadcasting & electronic services - European commission


Current rules
Supplies into or from the EU

Type of service transaction


VAT payable in ("place of supply")

Telecoms/broadcast/electronic services from:

outside the EU to a customer in the EU or
inside the EU to a customer outside the EU



Country where customer belongs (has their main business or fixed premises, their permanent address or usually lives).

In some cases, subject to a 'use and enjoyment' override



The effects of this are as follows:

EU BUSINESSES supplying to:

Business or consumer outside the EU


Usually no EU VAT charged.

[Articles 44 and 59 VAT Directive]

But if the service is effectively used & enjoyed in an EU country, that country
can decide to levy VAT.

[Article 59a VAT Directive].

Example

A Hungarian company sells an anti-virus program to be downloaded through its website to businesses or private individuals in Australia.

There is no charge to Hungarian or other EU VAT on this service.

NON-EU BUSINESSES supplying to:

1. Business in the EU


No VAT charged.

Customer must account for the tax (reverse-charge mechanism).

[Article 44 VAT Directive]

2. Consumer in the EU - telecoms or broadcasting services


Must charge VAT in the EU country where the service is effectively used and enjoyed.

[Article 59b VAT Directive]

Example

A person living in Barcelona pays a US company for access to American TV channels. The US company must charge the customer Spanish VAT.

Example

A French customer of a Swiss telecoms operator using their mobile phone in France will be charged French VAT.

When using their phone while on holiday in Greece, the customer will be charged Greek VAT on the calls made from Greece.

3. Consumer in the EU - electronic services


Must charge VAT in the EU country where that consumer belongs (is registered, has their permanent address or usually lives)

[Article 58 VAT Directive]

Example

A private person living in Sweden uses a Japanese online library. The Japanese supplier must charge Swedish VAT.



One-time VAT registration ("mini one-stop shop" ? MOSS)

Non-EU firms supplying electronic services to consumers in the EU, can make use of a simplified procedure which allows them only to register for VAT in 1 EU country, regardless of how many other EU countries they are supplying.

That country collects and distributes the VAT on behalf of all the other countries ? charged at the applicable national rate depending where the customer belongs.

Rules for this scheme

The scheme does not currently apply to telecommunications or broadcasting services.


Supplies between EU countries

Type of service transaction


VAT payable in ("place of supply")

Telecoms/broadcast/electronic services supplied within the EU


B2B ? EU country where the customer belongs

B2C ? EU country where the supplier belongs

For an EU business, this means that:

when supplying a business in another EU country, they must not charge VAT; the customer must account for the tax under the reverse-charge mechanism
[Article 44 VAT Directive]
when supplying a consumer in the EU, they must charge VAT in the EU country where the business is based, no matter where the customer belongs
[Article 45 VAT Directive]


New rules from 2015

From 1 January 2015, telecommunications, broadcasting and electronic services will

always be taxed in the country where the customer belongs*

? regardless of whether the customer is a business or consumer

? regardless of whether the supplier based in the EU or outside

* For a business (taxable person) = either the country where it is registered or the country where it has fixed premises receiving the service.

* For a consumer (non-taxable person) = the country where they are registered, have their permanent address or usually live.

For the definition of ?electronic services? see the Explanatory Notes below, in particular under points 1.3; 2.3.3; and 2.4.3.



The effects of this are as follows:

EU BUSINESSES supplying:

1. Business in another EU country


No VAT charged.

Customer must account for the tax (reverse-charge mechanism).

2. Consumer in another EU country


Must charge VAT in the EU country where the customer belongs (not where the business is based).

3. Business or consumer outside the EU


No EU VAT charged.

But if the service is effectively used & enjoyed in an EU country, that country
can decide to levy VAT.



NON-EU BUSINESSES supplying:

1. Business in the EU


No VAT charged.

Customer must account for the tax (reverse-charge mechanism).

2. Consumer in the EU (telecoms, broadcasting or electronic services)


Must charge VAT in the EU country where the customer belongs.


Report on feasibility of new rules 2015

The European Commission published a reportpdf(301 kB) Choose translations of the previous link to the Council on the feasibility of applying the new VAT rules for telecom, broadcasting and electronic services as of January 2015. The report describes the action taken in the last six years to prepare the implementation of the new rules, ensure legal certainty and facilitate business compliance.


The Explanatory Notes for 2015

The Explanatory notespdf Choose translations of the previous link have been prepared in order to provide a better understanding of the EU legislation relating to the place of supply of telecommunications, broadcasting and electronic services.

These notes are not legally binding and only provide practical and informal guidance about how EU law should be understood and applied on the basis of the views of the Commission's Directorate General for Taxation and Customs Union.

It is the product of collaborative work between the Directorate General for Taxation and Customs Union, Member States and businesses.

These notes are a work in progress: it is not a final product, but it reflects the state of play at a certain point in time in accordance with the knowledge and experience available. Over time, it is expected that additional elements may be needed.



In 2015 the one-time registration scheme (mini one-stop shop) will be:

extended to telecommunications and broadcasting and
made available to EU businesses too

One Stop Shop guidelines for 2015

A practical guidepdf(171 kB) Choose translations of the previous link has been prepared in order to provide a better understanding of EU legislation relating to the mini One Stop Shop, as well as of the functional and technical specifications of the special schemes, as adopted by the Standing Committee on Administrative Cooperation (SCAC). This guide is complemented by additional guidelinespdf(46 kB) Choose translations of the previous link (available in all EU official languages, Russian, Chinese -and Japanese) on the audit of the mini One Stop Shop and IT-informationzip(349 kB) related to a suggested standard audit file for MOSS (mentioned in the additional guidelines under d)).

This guide and the additional guidelines on the audit of the mini One Stop Shop are not legally binding and only provide practical and informal guidance about how EU law and EU specifications are to be applied on the basis of the views of the Commission's Directorate General for Taxation and Customs Union.

These guidelines are the result of collaborative work between the Directorate General for Taxation and Customs Union and Member States.

These guides are work in progress: it is not a final product, but it reflects the state of play at a certain point in time in accordance with the knowledge and experience available. Over time, it is expected that additional elements may be needed.


Information on selected national VAT rules

A report has been prepared, which is complemented by instructions for usepdf(31 kB).

Comments on the information available in this document can be sent to [email protected]. Please be aware that they will also be forwarded to the Commission's contractor participating in the study on the Mini One-Stop Shop.


National contact points for 2015 EU VAT changes

See the list of contact pointspdf(381 kB) provided by Member States for the 2015 EU VAT changes.

Disclaimer:
Member States have designated contact points with a view to the 2015 changes. These points are set up only to facilitate the contact with national administrations on matters relating to the 2015 changes. Such contact will not automatically bring a solution for potential cases of double taxation.

The designated contact points should only be used for that purpose and other VAT questions will be disregarded by Member States.







:2 cents:

These rules are so fucking lame.

Ah! The joys of large central governments!




:helpme




.

I saw a thread about this topic 1-2 months back, but couldn't find it.. so yes there were some talks, not sure what was the conclusion :)

Thats going to go over like a lead balloon.

Doesn't matter how it goes over. It starts in January and compliance is mandatory.







.

this should not be treated lightly - ask AFF

we just finished a VAT audit in our favor but without a good tax accountant, this could have ended very ugly

Old news to me, this has been a topic of discussion for a while.

The extraterritorial law, compliance and enforcement is of question.

If you are selling B2C in the EU from outside the EU you need to charge the right VAT rate.

Welcome to the cluster fuck ...

These kind of issues was curiously one of the biggest absurdities I saw in the organziation of ecommerce to be honest. Everybody who has a little knowledge of(...) easilly understands that there are International Laws regarding commerce. Any solution that does not takes in consideration the particularity of(...) following the paradigm of act/good(associated to one group or not, digital or not)/location of the person/location of the enterprise is naturally one absurdity ...

This does not surprises me, this and the laws that will follow ...

i understand the point behind it - a local business cannot compete when it has to charge VAT while an online shop from outside the EU does not. Therefore it destroys local businesses.

but as usual it turns into a bureaucracy monster

Very little seems to change for europeans...

What is interesting though is for instance:
"A private person living in Sweden uses a Japanese online library. The Japanese supplier must charge Swedish VAT."

So let's say i'm this japanese supplier, and I get a swedish customer. I charge him VAT, and then what? How is a foreign government going to have access to my sales records to prove I owe them any money, and how are they planning to collect on it? EU Laws do not apply outside of the EU.

We have already done some custom work for a few clients, using MPA3, to comply with the new EU VAT rules.

It is pretty complex - and yes, if an EU corp with EU customers (in particular), then this WILL affect you. Spain and France are the toughest on the rules.

That's not entirely correct. When you import something you need to pay VAT on it. For instance if I went and bought say an oculus rift off thier website, i would have to pay duty and polish VAT when it enters the country.

Thats just crazy. :(

Or let's flip it around. The US decides that sales tax must be added to any purchase made outside of the US. I'm based in Poland, and I sell a piece of software to someone in the US.

- My polish tax law does not require me to collect US sales tax
- I have to follow only my own countries tax law, the tax laws of the US don't concern me
- If i don't charge the US sales tax, there are no consequences.

The new law is completely absurd because in my earlier example there is absolutely no reprecussions for the japanese merchant not following EU law. They operate in japan and must operate until japenese laws.

yeah, well, in case customs catches the parcel. but we all know that very often things get sent as "gift" or "no customs value" etc to circumvent that. in the future that would not be possible anymore when VAT is charged directly at the POS

Well yes of course but "legally" should be paying duty and VAT anyways. Either way we are referring to digital content here, not parcels anyways...

That being said, the question still stands - how are they going to enforce this law? They can make it a law all they want but foreign merchants can completely ignore it (especially if this is laws on digital content) because there are no repercussions....

And so it continues...:Oh crap

they have sued AFF based on the previous law already for like 30 or 50 million USD (EUR?)

but yeah, no idea how they are going to enforce it on Joe Smith that runs a Clips4Sale store (actually Clips4Sale would need to handle this) or someone that has a small CCBill site.

And so far CCBill has never been a big help (sorry guys) while for example Paysite Cash (which i use for my shop) gives me a weekly statement of my sales that indicates where VAT applies and where not

Fortunately, there is no change for B2B transactions. I really don't see how they can enforce this on the consumer side though.

Alot of people ina dult don't have business registered though. This one applies to us for instance:


EU BUSINESSES supplying consumer in another EU country
Must charge VAT in the EU country where the customer belongs (not where the business is based).

It used to be we charge our VAT %

It is function of the law of your country.
If you have a fiscal control, it will cost you a lot of money...

I don't think this law affects me.

i had already sent the link to my tax accountant but thanks for pointing this out, there have been rare cases where this applies to us as well

Do you have any link for this? I'm very curious as to on what grounds exactly...

I have it and read it but to save you from reading(as it quite long document)it kind seemed to me how that happened as aff have offices in europe,and possibly even used european billing,so they had audit and they saw how they didnt bothered to pay any vat.So in shortly,they got access to aff sales stats.

search for their "risks" when they (FFN) went public years ago, it was all in there

Yep but apparently as was stated above we have to comply.

Thanks for allowing me to make more money EU.

About Euro Union asking million dollars of unpaid VAT to extra-EU online companies that's a fact and includes AFF, also AFF got FREEZED money in euro bank accounts:

http://www.sec.gov/Archives/edgar/da...281/i11097.htm

"As of December 31, 2010, the total amount of historical uncollected VAT payments was approximately $39.4 million, including approximately $19.5 million in potential penalties and interest. For more information regarding the potential effect that our VAT liability could have on our operations see the section entitled ..."
"For example, in an effort to recover VAT payments it claims it is owed, the German tax authority has attempted unsuccessfully to freeze assets in bank accounts maintained by subsidiaries of Various in Germany, and did freeze ? 610,343 of assets in a bank account in The Netherlands with the cooperation of the Dutch authorities"

Of course it is unlikely that such an effort will be setup by EU tax police for small sites, but they sure will find it worth if the company is big, ex: mindgeek - manwin, anyone remembers why Fabian/Nathaqn it was jailed? Cyprus VAT which is lower, paid for Germany business..., now I am unsure what they think of the Canada's hq VAT accounting...

Regarding VAT audits, we got some from Dutch tax guys (we're NL entity) and passed it with no issue. We paid the correct damn VAT since day 1 so many years ago, simply. I got several informal icq/skype talks across the years with non-EU (i.e. USA) site owners and often they asked me about this "VAT", that they never paid and do not intend to pay ever,... some decided to throw out (remove) any EU biller with EU banking accounts as soon as EU banks/biller or eu accountant managing biller said if they did not paid VAT they could get funds frozen and such scary warnings.

So while for EU businesses and esp. owned by EU citizens, not to pay VAT it is sort of countdown to suicide day (I remember an UK paysite stopped to pay affiliates after got VAT police ask him pay 10 years of unpaid VAT as a fine, suddendly... forgot site name but he wrote in GFY at the time to explain affiliates)... for USA (or especially, Japanese?) small sites, that may be safe enough not to use any EU biller or bank or accountant, and commit the "crime" of not paying VAT in hope not to be noticed, or if noticed, not to be considered worth the targeting. If the business is big, and wishes to do IPO (like AFF), that's not an option to wait for tax people to publicly target you with a mega fine.

Other issue for small sites it is the cost of simply software customisation and accountants... we spend few hundreds a month for just the VAT accounting, in hours of accountant work. Especially now that there's a different VAT per country anyway... for small sites, the cost fo accountant it can be higher than the VAT they account itself :)

It does not matter if you add the % to final invoice, or, let them pay all the same and then "subtract" the % of VAT later. We find easier to add same vat let's say 20% to all bills of guys geotargeted in EU, rather than right vat to right country, then we fix this with accountant later. Or you can keep price "as is" and same eu or usa customer, but simply you know you earn x% less later - to vat police it only matters if you made $X, you paid x% of vat over it. About code that adds vat on geotarget, we have it in some sites.. and... we also found that in some sites the guys who travel found that they got VAT added when in Germany but not when in Turkey, so learned to use a proxy to save VAT from bills!... :)

As someone noticed, while EU billers (vxsbill, paysite-cash etc.) do have VAT statistics in reporting, simplifying the job of accountants... the USA billers (ccbill, epoch, segpay etc.) miss this info, so that the accountant should spend quite lots of hours to divide sales by country, sum them, calculate the %. Then you have to send this money in Eu, I don't even know how this is done, we're in EU and pay to local EU country who then deals with other EU countries, what if you're in USA and want to pay VAT to EU, I assume is not super quick and easy.
On the other hand, most non-eu guys do not want to pay any vat, so it sorts of make sense that USA billers and reporting software do not vare of VAT... esp. the adult soft, because if you're mainstream see microsoft, godaddy and apple, they sure all add VAT and supports it - adult well, that's shady isn't it.

.... or what?

Is the FBI going to kick our door in for not collecting taxes for a foreign government?

^^^^^^ what adultmobile said

Let me add that really I would suggest all of the non-EU billers and nats/mpa3 type of softwares to support VAT reporting (just list of sales per vat countries with % and totals vat per country etc.), just in case someone wished to really pay VAT out there, at least it would make this VAT paying easier and cheaper in terms of accountant costs, for these good guys.

They do for big companies, such as Google:

https://support.google.com/googlepla...er/138000?rd=1

It could be they do for a few unlucky small ones, but this does not hit the news.

Considering there is no such thing as legal jurisdiction anymore apparently, the EU will soon start issuing all US and Canadian drivers tickets for turning right at red lights since that's not allowed anywhere here.

Dont you think google has to do that because they have accounts in europe that could be frozen?

We have no VAT tax treaty or agreement between the EU and the US. I can't see how an American court would decide for the EU against an American company. Where was the lawsuit filed and what has happened thus far? How can an American court compel an American company to comply with an EU tax law?

I'd be happy if they made a deal that included EU countries having to adopt Copyright laws equal to the US Copyright law.

The Internet has created a mountain of issues and lawyers as always are the main benefactors. :Oh crap

Let's say an American paysite owner does not pay his VAT to the EU, he could face criminal charges for tax evasion. Effectively, he would be jailed once he enters the EU. They do have some power to enforce VAT.

Yes,that would happen.And they could even ask for extra-diction.

I tend to agree, webmasters considering to travel in EU often should be more worried about not paying VAT, than who never travels or is planning to travel in EU.

They could garnish your assets in the US and they could arrest you when you travel to the USA if that scenario becomes reality. They have arrested a lot of bank employees just because they were Swiss bankers in 2010.

However, it does not look like the US is going to introduce a sales tax anytime soon.

I am more worried about opening the Pandora?s Box to retaliatory taxation. Other countries may claim tax jurisdiction on EU business' sales of digital goods and services to their citizens. ...

We are a foreign seller from the EU to many countries outside of the EU ...

Well,do you sell to Russia :)

I would think this could also affect non EU businesses that process with Zombaio (if anyone still does....).

Years ago when I had an account with Zombaio, I remember having to put their Swedish address (or something, I can't remember) on my site as partial owner and processor, because they essentially formed a version of my company in their location to get the cheaper rates from Visa/Mastercard. Or something like that, it's been awhile.

But anyway, that would mean that I technically would have an EU business, although it is set up strictly for processing and my "true" business location is in the US.

:1orglaugh:1orglaugh:1orglaugh

Not unless you are a registered company in Sweden or a registered foreign branch office paying taxes in Sweden.

This. And they scan everything, so I doubt you could avoid paying.

If there is not invoice in the package (and no serious online shop will do this for you), the customs may apply rates based on materials the goods are made from. Just saying it is a gift won't save you.

Years ago, when going on holiday to Croatia, we carried a camcorder and we let our customs know we have it with us, they issued a paper confirming the camcorder had been bought before our trip - to avoid having to pay toll for it when getting back home.

You have to pay taxes for gifts as well...

Besides this.. when I ordered a microphone years ago from USA to EU, I believe I paid their VAT and also our local VAT+toll, so being an international customer did not save me from getting charged US local VAT rate.

I don't want to know how much is this going to inflate the rates one have to pay to the accountant... why couldn't they leave the VAT rate of the supplier and not the customer when B2C, this makes for one hell of a mess when calculating...
(secret society of EU accountants made it happen, you know, to make more money lol)

One can always accept purchases without asking for a customers address ....

It is done on IP, and on the country that the customers credit/debit card was issued. Either way they have a location for your customer.

My own acquiring bank (EU) is in the middle of a last minute panic to ensure they have all of their paperwork in place for all of their clients. Under pressure from their central bank they are going through each contract to ensure that the UBO is in no doubt and they can identify the money trail.

Be under no illusions, if you use an EU acquiring bank, and that is most companies in adult, you will not escape this law. You might avoid it for a short period, but your merchant account can be frozen and your funds held. The only way to escape is to have nothing in Europe, and accept the difficulties of non EU merchant accounts. This is ok unless you are actually an EU citizen, as then they will still get you when you actually need to repatriate some of the profits from your efforts.

I see a big future for companies that can set up non EU facilities, as I predict a movement away from all of the Cypriot, Irish, and UK based billing entities.

:2 cents::2 cents::2 cents: