Over a month ago I wrote a post detailing the Horrible Implications of the EU VAT Place of Supply Change, and over the last few days the issue seems to have properly picked up interest from communities of micro-businesses. This post is not to debate the ruling, I personally think it a terrible move for small businesses and am frustrated that HMRC did not advertise it more widely. That said, as a business we have to comply with all kinds of things and so this post is just to try and state what complying with the change means.
I am not a VAT expert, however I have experience in running a VAT Registered business, dealing with the current EC Sales returns and am registered for MOSS. The HMRC and European documentation tends to assume businesses are VAT Registered and have some basis for understanding of things such as “place of supply”. This is not the case for many micro-businesses. I continue to collect links and information over on my EU VAT GitHub site, make a pull request or just email me new stuff that you find and I’ll keep it up to date as a resource.
What are the digital products and services that fall under this change?
The ruling covers downloads of digital products and services that are provided electronically, such as:
- ebooks
- music downloads
- knitting and craft patterns
- downloadable software
- Software as a Service
- webhosting services
- Downloads of training course videos
Things that don’t fall under this are services that you provide in person. As an example if you have a service where you design an ebook cover for a customer, that would not fall under the these rules as you are providing a unique, hands-on service to the customer. If you sold template ebook covers that customers could buy, download and edit themselves that would fall under the ruling.
The same is true for training. If you deliver training via video where you are live on air at the same time as your customer, delivering the training that is still taxed in the same way as now. If you sell videos of you delivering training then that would be liable for VAT at the customer’s rate.
It’s not so much the digital part that matters, both examples above are “digital services” it’s the hands-off part that changes the place of supply from where the supplier is to where the customer is.
This is B2B only, if I only sell to business customers can I avoid it?
Yes, on paper. No in practice it seems. The only sure way to identify a business customer is via their VAT number. The existing VAT rules (and this doesn’t change) allow an EU business selling to an EU business in another member state to sell a product without adding VAT. The seller then records the payment and submits it with their EC Sales List. The purchaser then accounts for the VAT due in their own VAT Return under the Reverse Charge rules. The “place of supply” in this case is always where the customer is, but because the seller doesn’t need to charge the VAT we don’t run into these issues – we just have to validate the customer VAT number to prove they have one and are not in the same member state as us.
Many small businesses and freelancers are not VAT registered and so will generally need to be treated as a consumer for tax purposes.
See section 1.3 Determining the status of your customer
I am a UK business selling ebooks, not currently registered for VAT. What are my options?
- Stop selling your books to EU countries other than the UK
- Sell via a distributor who deals with the VAT and pays you a royalty
- Register for VAT in every EC Country you sell to
- Register for VAT in the UK, and VATMOSS
I thought that as long as I was below the minimum threshold for VAT, I didn’t need to charge VAT.
The UK benefits from a very high minimum threshold before you are forced to register. So this was the case when the place of supply for digital services was the UK.
However there is no minimum threshold for payments to another EU country, so when the place of supply changes to where the consumer is you are liable for their VAT even if you sell a single 1.99 ebook or knitting pattern.
This has led to this situation where people nowhere near the VAT threshold, in fact people who may not even be earning enough to pay income tax, could be forced into VAT Registration.
What is the MOSS?
Currently if you are VAT registered you charge VAT on these products at your own country rate. So for the UK 20%. You then send a VAT return which details how much VAT you have collected, deducting any VAT you are claiming back and pay HMRC the VAT owed. After Jan 1 you need to do this individually for each country you have made sales in.
The Mini One Stop Shop is a service that allows you to avoid registering for VAT in every country. You charge the correct amount of VAT for each sale and then report it in your MOSS return, and pay the VAT due. The MOSS then distributes the VAT correctly to each country.
You need to register for VAT in order to use the MOSS to pay the EU VAT that is due. This is why small businesses are being forced into registration.
Which companies can I sell through who can act as an intermediary?
If your products are sold via a company who essentially sell the product for you and whose name appears on the invoice that is sent to the customer, this can protect you from registering for VAT. In that case the company making the sale deals with the VAT liability. This may be the simplest way of dealing with the issue for people with a low number of sales that fall under this ruling.
I am creating a list of companies who operate in this way. I’m not using any of these personally so am adding them as people confirm to me that they do become the seller of the product and deal with the VAT liability.
I am already VAT Registered, what do I need to do?
You need to register for the MOSS unless you are very keen to register for VAT in all EU Countries. You can do this via your existing online HMRC account. Once registered you will be required to submit your first return in April 2015, this will cover Jan 1 – Mar 31 2015, so you need to keep all the required records from Jan 1.
You need to ensure that the systems you use for taking payment for your product can identify the location of the customer and charge the correct amount of VAT. You can read how I am implementing this for Perch here.
I am not VAT Registered but thinking about it. What are the implications of being registered?
You can voluntarily register for VAT even if you are below the threshold. If you do this then you will need to submit VAT Returns and potentially EC Sales lists. You will also need to charge VAT on all of your sales, including to UK customers.
If the majority of your sales are to VAT registered business customers then registering for VAT doesn’t make you more expensive in real terms. VAT registered companies pay the VAT and claim it back in their VAT Return. Claiming back VAT is the real benefit of being VAT registered for small businesses. For example if I purchase a computer at £1,000 inc. VAT, I can claim back £200 in my next VAT return.
If the majority of your sales are to consumers of very small businesses who are not VAT registered then you either become more expensive by adding 20% VAT in the UK on top of your charge OR you take a cut in profit by paying that VAT yourself.
Once VAT Registered you need to make sure you send correct VAT invoices to your customers so they can claim back the VAT.
It is a lot easier to be VAT registered now than it used to be, I deal with my VAT returns and EC Sales Lists through Xero, and it really is just a case of checking that everything looks correct and submitting the data every quarter. You are likely to need to help of an accountant however to make sure your record keeping is all correct.
If you are considering doing this I would suggest starting the process now in order that you are all set up when the new rules come into force in January.
I am or will be VAT registered and sell via PayPal/Stripe etc. how do I prove the customer location and decide what VAT to charge?
If you are selling directly through Stripe, PayPal or another payment provider that does not handle invoicing and VAT for you, then the simplest option may be to use a third party service that hooks into your existing processes and does this part of the job. Example services are:
Or you could move to a full e-commerce solution that is able to handle the VAT requirements.
I am or will be VAT Registered and sell via a shopping cart system, but am not a developer, how do I ensure I am charging the right VAT?
You are in the hands of the provider that you are using. If they have not released information about how they will comply with the new rules from Jan 1, you should contact them and ask. If you get a response do let me know. I will add links to the GitHub site to help anyone needing to find an alternate provider.
I’ve written a post for Selz.com a hosted solution for selling digital and physical products, this details some of the possibilities for people in this situation.
Do I need to register as a data controller?
The rules state that you have to collect proof of customer location in two different ways and store this data for 10 years. The data you have to collect is personally identifiable information and therefore might make you liable to register as a data controller
I’ve seen reliable sources state this is not true, along with other sources that say it is. It would be good if the ICO could state whether the additional data collection requirements for the new VAT rules would make registration necessary.
I am a business outside of the EU, what do I do about this?
Businesses outside of the EU should have been charging VAT to EU customers and paying the VAT due for some time now however this has not been enforced. There have been suggestions that this ruling will now be more strictly enforced.
You can register for MOSS as a non-Union company by choosing a country to register in. If you are an English speaker then Ireland or the UK would probably make sense as the documentation would at least be comprehensible.
You would then need to follow the same rules as an EU based business in terms of charging the correct amount of VAT to EU residents and paying the VAT due via MOSS.
Spot any issues with the above?
Post a comment and let me know. I’m trying to be as clear as possible as lack of clarity is a huge issue here. Once you decide which route you want to go down you need to fully understand what you need to do over and above my brief notes, hopefully this will help point people in the right direction though.
39 Comments
One solution I have decided to work with is to stop supplying digitally to the EU (but continue to the UK & outside the EU). Instead, to my EU customers, I will be sending a pdf on a physical CD in the post to them. This, I believe, under the VAT regulations classifies as a physical, not digital product and therefore I’m still allowed the VAT threshold. My EU customers get a small postage charge (probably less than the VAT would have been) and my UK customers don’t have to stomach a 20% price increase.
Just a thought that may work for those others in the same situation (I know currently my webshop provider – Volusion – CANNOT cope with the proposed changes, and I also use Stripe for card payments, so would have to use yet another third party – all of which cuts into the minute profits I already make).
Re data controller registration: the first couple of comments on this article suggest that this may not be necessary, as the data will be core to your business admin, http://idea15.wordpress.com/2014/11/24/how-vatmoss-is-the-end-of-small-enterprise-in-britain-and-how-we-can-change-it/ – sorry can’t find a direct link to the comments.
I’m not a business owner (and not likely to be now…), but having going through the self-assessment on the ICO website, I don’t think people will be legally required register – I’ve tried answering in a few different ways as though I were a small business, and I get the reply that I don’t have register although I can choose to. Would be interested to hear from anyone who is a business own and might answer differently.
But even so, the information requirements really haven’t been thought through – how many people selling the occasional ebook know anything about the data protection act? They’re going to have to now, but it’s one more administrative burden that they really don’t need.
Rachel – another thought..
I already watermark each purchase individually with my buyer’s email & address to protect against copyright theft. No customer gets exactly the same chart as another because of this “personalisation” which I’ve been doing for months anyway.
I’m wondering (but assuming it’s not) whether this might classify as a “hands on” element and move it from the automatic issue into one that includes a service element. Or perhaps the chart itself would still be VATable?
It’s not easy to work through all the implications!
(especially when HMRC themselves say such confusing things as “email communications with attachments” are not digital products.
Again, my interpretation (and that of the HMRC helpline) is that this only says I don’t need to register if (for instance) I send a photo to my mum by email. If it was a digital product she’d paid for, it would still count.
Is that your interpretation too?
Sarah
If this actually goes through I will have to shut profane.co down as I have a few subscribers from all EU member states. There is no way that I am registering for VAT and absolutely no way I am filing 26 VAT returns 4 times a year – each one is unlikely to amount to more than €30 or so for each country, maybe Germany has a few more subscribers but that’s it. This decision means that many older people in the EU (and beyond) will suffer debilitating falls. If just one of these older people breaks a hip that’s £80,000 in rehabilitation costs – not to mention the effect it would have on their quality of life. In fact, 50% of all hip fracture patients end up dead or in full time care within 6 months. So, for a few Euros VAT the EU will have a much bigger healthcare bill next year and probably kill a fair number of older people unnecessarily. Retarded and absolutely brutal!
There is a legitimate way around this draconian VAT rule coming into effect from 1st January 2015 for UK micro businesses selling certain digital products. The key is to follow the rules to the letter. If the EU wants to play dirty with small businesses, then we can too (but legally).
I am planning to implement the following rules for sales of a digital product that I provide (so what works for me may not necessarily be applicable to you), but it shows there is a way of staying in business and avoiding a dreadful amount of red tape and additional costs.
I currently sell a digital product as a very small sideline and therefore sales levels fall way below the current UK threshold for VAT. So I intend to separate out customers into 3 groups:
1. Sales to UK based customers – Sell via Paypal in the usual way. No vat will be applicable and no registration with VATMOSS is applicable.
2. Sales to customers outside of the EU – Sell via Paypal in the usual way. No vat will be applicable and no registration with VATMOSS is applicable.
3. Sales to EU customers (except UK) – 2 possible options:
a) Buy a physical book from me so No VAT will be applicable and no registration with VATMOSS is applicable. Customers will also gain immediate access to FREE digital products which come with the physical purchase, which will include a free copy of the ebook.
b) EU customers can purchase the digital product from a 3rd party, such as ebay.
This will be a little cumbersome, it means that the checkout process will not be a simple as it has been, but it legally avoids having to register for VAT and with VATMOSS. It still means that all other relevant laws relating to income tax, etc will still apply.
Further to my earlier post above, should have pointed out that I am actually an accountant, but no longer practising as one. You might want to run your own ideas or workaround with your own accountant just to make sure everything is ok if you really do not want to register for VAT and VATMOSS.
I think it is dreadful that so many people have written on various forums that the draconian new VAT rules will force them out of business. That’s what we get by being part of the wonderful unelected EU superstate, I guess, but that’s another debate for another time.
I would strongly suggest that those people who are thinking of calling it a day with their micro online/e-sales businesses to take a deep breath and think about whether there is a solution for them and their specific product. At least talk to your accountant if you have one to see if they have some creative suggestions to help you. Having to register for VAT can indeed be a small business killer, not least because your product prices would have to increase by an immediate 20% for all customers. It would remove a key advantage of your product over those of large companies.
Further to my own personal VAT avoidance plan that I outlined above (NOTE: avoidance, not evasion!), I would add the following suggestions to others who are currently below the VAT registration threshold and expect to stay below that threshold.
Separate out your customer base into three segments:
1. UK customer sales –
For UK customers, VAT is not applicable as long as you are below the current threshold of 81,000 of turnover. So the issue VAT being applied after 1 Jan does not apply here (unless you voluntarily register).
2. EU sales (excluding the UK) –
This is the problem one. From 1 Jan you can assume that there is a ZERO threshold for VAT for all sales in the EU except the UK. So what is necessary here is to see how you can deal with these specific sales. One simple one is to stop all sales to any customer in the EU. However, selling your product through 3rd parties such as Amazon, Ebay, etc is a realistic and easy (but not necessarily cheap) way of avoiding the VAT/VATMOSS registration issue. Selling and then physically posting a digital product on hardware (CD) and offering a free digital back up to download is a legitimate way of dealing with the VAT issue, since the sale is deemed to take place in the UK, not in the consumer’s country.
3. Non EU sales –
Again, as long as your total annual sales level falls below the VAT threshold, the VAT issue does not apply, so you can continue to sell outside of the EU as you currently do so.
Always keep an eye on the UK VAT threshold so you do not exceed it otherwise you will have to register for VAT in any case.
Always keep proper accounting records so in the unlikely event you were asked to show your records to HMRC, you would be ok.
On the issue of verifying where a customer comes from during the sale process, this may prove tricky, but the test of reasonableness should apply here. For each customer sales segment, I plan to insert a field on the sales page requiring confirmation of their residence (eg, “I confirm that I am a resident of the EU, excluding the UK”) using a simple check-box. Also it will be important to obtain the address of each customer as further evidence of where the sale is deemed to have taken place. If you use Paypal for your sales process you have the option to require the customer to enter their full address details in the checkout process. Of course this info will be essential if you are going to physically send your digital products to consumers in the EU.
I run a number of websites for independent bands and musicians. They don’t have the cash to lash out on changing their entire music download operation to comply – having already gone on average £15k into the red just to record and release an album, the compliance work for downloads would wipe out the entire profit on projected lifetime sales of both physical and download products. Understandably, there’s a lot of anger about this.
You said “As an example if you have a service where you design an ebook cover for a customer, that would not fall under the these rules as you are providing a unique, hands-on service to the customer.”
So, if the artist sells a personalised product and gives away the download with it, the transaction would appear to be exempt under the rules.
What defines a personalised product? Since it is simple to insert details captured in the transaction into a personalised letter or downloadable gift card, would that be good enough? We’re not talking about the purchaser completing a template, we’re talking about using data they supply to create a personalised download.
Second, if a personalised product is ordered to qualify for a free download, who will know whether a personlaised hands-on product has in fact been delivered? The customer, yes. No-one else gets proof. How soon must the product be delivered or collected? This seems to offer a loophole.
The market for my ebooks is primarily the UK and the US, although I do a few EU sales. I’d now like to stop selling to the EU as the bureaucracy isn’t worth it. But how do I identify an EU buyer? Is it sufficient to say: “If you’re from the EU, you can’t buy this.” Or do I need to put in place a sophisticated IP tracking scheme to prevent people from the EU seeing the checkout page?
@David Travis
You need two separate pieces of proof that your customers are UK based. You can say “I can’t sell to you if you’re from the EU” on your site, but you still need to verify that all your customers are actually UK based.
If you make them check “I am from the UK”, that should already be half the proof you need.
Thanks for a very useful article, which I have linked to from my own page on VATMOSS, having decided that I will have to stop selling to Europe, it is just not worth the hassle. See: http://www.knowledge.co.uk/vatmoss
Unfortunately for those of you contemplating making your services unavailable for EU customers outside of the UK, you fall fowl of the EU anti-discrimination laws, due to us having open trade borders. This might not ever catch up with you, but it is a risk nonetheless. I am waiting for full clarity from HMRC, but there do seem to be suggestions that you can register for MOSS and pay VAT on your non-UK sales, but it doesn’t have to impact your UK sales. If so, that would help a lot. http://www.taxamo.com are hosting a webinar with HMRC tomorrow (Tues), so hopefully they will give some clarity on this then.
This is helpful, thanks Rachel. There’s been a swell of anger and frustration at the Envato Marketplaces as the community (not Envato) surfaced the impending VAT mess.
See: <a href=“http://themeforest.net/forums/thread/important-information-for-us-authors/144314”>Important information for US authors</a> and <a href=“http://themeforest.net/forums/thread/authors-vat-and-a-global-marketplace/148034”>Authors, VAT and a Global Marketplace</a>
There’s mass confusion as Envato is backpeddling on who the seller is potentially exposing product makers to years of unpaid or improperly accounted tax. It’s not a hospitable environment to sell in (for other reasons) and many are making an exit to sell independently (myself included).
The VAT mess is another frustrating wrench as it appears US-based sellers are equally liable to collect VAT and establish as a MOSS if they intend to sell to EU customers.
I am wondering about how any of this applies to companies collecting recurring subscription payments.
Are we supposed to obtain the 2 pieces of country information every time the subscription payment goes through? If so, how are we supposed to do that?
Or is it ok that we got the 2 independent pieces of matching country information at point of initial sign up?
Is there any confirmation on this applying to online memberships too?
It is just an excuse to extort more money from the buying public (20% extra per purhase) and give small businesses a complete headache. There has been little or no education to business about this.
It cannot be policed in any form at all, it’s just like the eu cookie law that was introduced a while back, absolutely impossible to police.
I think the hardcopy version solves the main issue, however I would not have a downloadable “back up” copy available at the time of purchase I think that would fall under moss. The back up copy could be sent on a disc but I would not have it downloadable immediately , that would be a grey area.
This isn’t just about large corporations, they will have a loophole already planned for MOSS, this is about making sure no one earns money that the government can’t get their slice from. Again ensuring compliance is impossible. This will have an adverse effect across the EU and is another reason why we need to get out of the EU. By getting out of the EU MOSS would be null and void because it is based on some EU countries having a zero vat threshold hence the need to register regardless of your sales volume.
I would hazard a guess most people will wait a day or 2 to have a cd or dvd sent than pay 20% extra to their government.
What happens if you are a small business which isn’t registered as a company, I’m also not registered as a sole trader and not VAT registered, am I safe from all this until I register as a Limited company? Then I’ll have to abide it? Thanks in advanced.
Let me get this right – you don’t need to register for VAT MOSS if you sell ONLY to the UK (and you are in the UK) AND your revenue is under £81,000……BUT there’s no such thing as “selling only to the UK” as that is a breach of EU anti-discrimination laws, therefore you DO have to register for VAT (and MOSS) even if your revenue is 10 pence per year to 1 person in Devon. Oh, and you also have to register for MOSS even if you live in Timbuktu or Chicago or Melbourne or Tokyo and sell just one e-book to an EU customer. Oh, and there’s more (of course there’s more) – even if you want to sell ONLY to a domestic market, you need to PROVE each sale is domestic – two forms of billing proof of each of your customers – that gateways like PayPal do NOT provide anyway! Then you need to store such information up to 10 years. Have I missed anything?
Rachel BandCamp have now sorted themselves out. They probably belong on your ‘sales and delivery’ list of companies https://bandcamp.com/help/selling#eu-vat-digital
I am thinking of selling sewing patterns online and am wondering if (rather than automatic download) I email the pdf to the buyer after purchase, whether this introduces a “hands on” element to the transaction than exempts me from these rules?
Hello, I give my software for free but I am charging email support for it, does this belong to digital services?
Thanks Rachel for putting together this clear and helpful summary. The GitHub page will be a fantastic resource for many solo and micro-businesses whos growth and operation will be imparied by this new regulation.
Bandcamp haven’t sorted themselves out. They still put the onus on bands, where it often makes no sense to be VAT registered? Who does the VAT? The singer? The drummer? Just handing over info doesn’t help.
There is a much better solution for bandcamp that they could easily do if they wanted. By taking control of the download link, the B2B clause kicks in i.e. they become the ‘3rd party store’. That means bands don’t need to register for VAT.
I have only found one payment provider so far that also uses this clause. By giving you the option of letting them provide the download link, they can get you out of registration. They do the VATMOSS.
I bet more payment providers will start offering a ‘download link’ option.
John
Hello, I have checked the links here:
http://rachelandrew.github.io/eu-vat/third-parties.html
(anyway thank you very much for the list)
and saw on some services that they only intermediate the business between customer and seller (e.g. only safe download of the file) but the business happens between customer and seller so in fact this does not help in this situation 🙁
So maybe there needs to be some kind of information that the one who wants to sell the downloadable file will be in no connection with the customer but only with the services which provides the download ???
@Petr the list on the page you mentioned is split between those that act as an intermediary and those that just help collect the information. If you are VAT registered or plan to be then the latter is very helpful indeed.
I live in France but work in English. Before I decide I am not going to continue I have trawled VAT law to find out who in the final stage is liable for VAT payment of goods. It seems that according to many VAT documents The PURCHASER is the end-user and is liable for the VAT. Now that makes it a whole new ball game. So we make every purchaser liable in our terms and conditions and let the very few VAT Compliance Officers deal with the whole of the world in collecting their VAT due. Seems you just have to get everyone to click on the box that says who is liable to pay for the VAT – put it on the end of your Terms and Conditions and make it compulsory – no one reads them anyway. 2 Days to go before I decide if I am going to retire or send copies of my books out on Micro SC cards that most machines have readers for. This would be a large saving over huge DVD’s from France as postal costs are high. The latest Computers no longer have fitted DVD/CD readers as they are regarded as redundant – another large argument.
I only stumbled across this dreadful and appalling matter two weeks ago.
Having just retired from 35 years of self-employment and quarterly VAT returns I had naively hoped that my very small sideline selling eBooks would be trouble free especially because all sales fall well below the VAT threshold.
This draconian diktat from EU Central deprives us all from enjoying the VAT threshold, and is in my view questionable. Furthermore the burden placed on us ‘barely traders’ to comply is outrageous and obviously contrived by time-serving salaried types who have never had to achieve to survive, let alone actually participate in VAT compliance.
The revenue generated by my sales is laughably low and I am too ashamed to declare it publicly! However, if it is was a large business and turning over in excess of the current threshold, then I would willingly comply. As it is not, I refuse to play the EU’s silly games and look forward to the Referendum and shall most definitely exercise my democratic right.
In the interim I have recoded my site to block EU mainland customers from downloading digital material directly and to offer them a physical CD option, although this is not without cost, certainly in time and physical management.
However this is not a forum for me to inflict my moaning as we are all in the same situation!
Could I please ask you to visit http://chn.ge/1xlMSH6 ? This is a link to http://www.change.org and will take you an on-line petition to Vince Cable MP which is gathering momentum. If you are so minded please consider adding your vote and also spread the word to others so the 25,000 signature threshold is passed.
I will tell you what I’m going to do:
Absolutely nothing.
I have 4 digital products, in 2014 I sold 4 products to countries in the EU, totalling 103EUR. (I’m in the UK)
I turnover a few thousand a year – 2013-2014 – £8,287.72 to be precise.
Profit was just under £6k, and I spend enough time compiling receipts and invoices and general admin work as it is. No way am I even going to bother deciphering this rule, worrying about it or even closing up over it.
No way I am becoming an unpaid tax collector for other countries apart from my own, and if they do catch up with me chasing a few Euro’s worth of unpaid VAT, I’ll accept the fine and then do something about it.
Until then, they can literally swivel.
I never registered as a business.
I sell my ebooks through a website via Paypal and that gets transferred to an off shore bank account outside of the EU.
Carry on.
I’m a Volusion store owner and sell physical, digital and paperback books (0% VAT).
For over a week I have been exploring a solution, one company said they can do it for $8,000 USD + monthly fee…
Well with the help of my regular Volusion developers; WebEcommercePros they worked at a very simple solution with NO scripting needed. Its all possible within the existing Volusion shopping cart.
Even Volusion don’t know about this… they said they are exploring it…
Here’s the solution:
1. In Volusion shopping cart there is an TAX / VAT area where you can enter the VAT % by country, so as a test for Hungary I entered 27%
2. In the products settings there is a VAT field where you can can the VAT % based on a product. So for all products they were already maked as 20%
3. In the digital product settings, the VAT field should be left BLANK.
That’s it, so simple and resolves the complicated issue.
As a test:
– I added a physical product, checkout out, my country set to UK, 20% VAT charged which is correct. I changed country to Hungary and 20% VAT is charged.
CORRECT!
– I added a digital product to cart, checkout out, my country set to UK, 20% VAT charged which is correct. I changed country to Hungary and 27% VAT is charged!
CORRECT!
I hope this helps you.
Can anyone help me with this:
I provide a free trial download via my website, if they like it they pay though paypal for the activation code which is emailed to them.
Does this work to get around the problem?
Thanks
George, I’m curious as to how your solution handles those countries where there are areas within the country’s boundaries with separate VAT rates for the same product? That seems to be tricky!
Those of you who are running small companies and are NOT VAT registered and are selling mainly to consumers (not B2B) then I would just not charge VAT at all on any transaction. They are not going to do anything if your sales are fairly low.
I have a few businesses myself and for one of them I really don’t care, the buyer can be anywhere – the company is not VAT registered and all the address/details are done at the payment gateway. I don’t even pull that info, just e-mail address and payment accepted or declined. All I see and care about is their e-mail address to send the digital content to.
If however you’re pulling in £30k of sales then I would probably consider complying because then it starts becoming ‘worth it’ for them to do something about you.
I have another business which we have a custom billing system for, and this is a bit of a nightmare to be honest. Until we had time to sort out the code/billing we just stopped selling outside the UK entirely.
I have run a small website hosting company as more of a hobby for many years, however i may have the chance to host a larger school website, Do i need to become VAT Registered, do i also need to register for Data Controller for this? my earnings are far below the threshold for registering for VAT.
I need a little clarification from someone on here please. I am not vat registered. If a VAT registered business sells us products then they cannot charge us VAT as we are not. Thankyou
I’m a uk resident, self employed, and not vat registered.
I offer graphic design for Spain but they are asking me for my EU trading number, that should start GB and be 9 numbers long.
Called the IR but can find an answer, can anyone help?
@PaulM, if a VAT registered business sells you a product then the VAT will be included in the price you pay. As you are not VAT registered you cannot claim the VAT back.
@Paul Siwek – Yes you would need to account for VAT as you are a web hosting services but only if your customers are from the EU (not UK) or you start making more than the current threshold.
Unless you’re doing anything special with their data, you are under no requirement to register, see ico.org.uk for more info.
I’ve a registered limited company in UK and work as an IT service contractor; currently I’m in discussion with a non-EU (African country sierra leone) based organization for a service contract of 1 year to support their work remotely from UK.
I want to know if I need to charge VAT to them as in their country VAT is not in place/required.
This whole thing is beyond stupid, anyway some enterprise consultants found a ‘soft’ solution to this problem that provides indirect sales but completely avoids the red tape in Europe. Their marketplace differentiates between the sales overseas and eu at the micro level to process them differently, it’s for their internal ebook sales worldwide at the moment but are considering allowing third parties, 12.5% was being floated. It’s not optimal but it depends on whether the 25% hike in your prices or 25% drop in profits justifies your time spent with the red tape, we just prefer not dealing with it.