Important for ALL Sellers !!
 

Hello all,

Are you operating an International shop selling downloadable products and you're dealing with clients from EU Zone? If yes, be aware that from 1st January 2015, according to new EU resolutions for electronics sales you must collect EU VAT from clients living in EU countries (EU zone) without a valid VAT id. Doesn't matters if you're a US (or any non EU country) business. If you deal with EU clients you must collect EU VAT.

Read the official announcement
http://ec.europa.eu/taxation_customs....htm#new_rules

Also a post for rules modification from an Australian marketplace selling scripts/templates
https://help.market.envato.com/hc/en...EU-VAT-Changes

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The main change is that now the VAT is calculating not depending on the Seller's country but depending on the country where the customer belongs

When I did this post I've some doubts that maybe have misunderstood the new rules as my English is not in that high level, especially when it comes to legal rules.

But now I'm sure. I host my sites at Hostgator which is an US company and they started even from now to collect EU VAT. I had to provide them my VAT id to exclude me from collection.

TBH I don't see how they are going to be able to enforce this on people living in the USA.

Yeah its likely that will not happen.

I mean think about it:

Currently each individual EU country enforces the law themselves, via tax audits.

VAT is an ‘end-user-tax’ so EU companies get to reduce any VAT they have paid, which is why their book-keeping has all the information tax authorities need.

Consumers don’t keep books on their VAT purchases. Consumers do get tax reductions from certain goods, so they’ll save the receipts and send them to tax authorities. Most of those are physical goods like work clothing, but there are also some goods that could be digital, e.g. work literature.

However, there are small businesses which aren’t registered for VAT yet. They may keep books already, yet they are categorized as a consumer by this law. As a rule, if an EU company cannot provide you a VAT code, they are a consumer. Yet they’ll keep books, save all receipts and are a target to tax audits.

There’s also a separate enforcement system. You must register as a VAT payer in each of the countries where you have consumer sales. Another option is to register to VAT on eServices (VOES) system in one EU country. VOES is a similar system than MOSS (UK), but for non-EU businesses. Each country has their own system, but it’s enough to register just in one country.

When you are registered, the authorities can then follow up that you send the reports and payments on a regular interval.

But if you aren’t registered, there’s very little enforcement.

To really enforce the law in the US, EU would need help from the US tax authorities. At the moment US tax authorities show little interest in enforcing this – moving wealth from US to EU isn’t in their best interest.

So I just do not see how they will enforce this on a US based small company that is providing software such as vBulletin addons for sale.

If I really wanted to get around it, I could just sell my users credits, that they can use on the site to do various things, such as a usergroup title markup, increased PM space etc. But they also could use these credits to purchase downloads. So I am really not charging them actual money for downloads.

Exactly! And you could charge a subscription fee for them to pay to get access but they are not paying for an item directly.

Well there is a logic explanation for this. It's COMPETITION. They focus to prevent EU customers to buy from outside EU rather to collect VAT.

Let me give a real example. I'm locating in Greece and I want to rent a dedicated server for Web host. For the example purposes I found 2 companies offering the exact same features on the exact same price. eg $200/mo.

The first company is locating in UK so I've to pay $200 + 23% EU-EL Vat = $246/mo. The other company is locating is USA so as I don't have to pay VAT the total cost is $200/mo. This is the problem. This is why they count it as: Unfair competition for EU Companies.

The reason that they focus only in electronic delivery products and not in tangible is because tangible products are going throught the customs control when they come from non EU countries and the clients has to pay Tax instead Vat but in most cases this is the same. Actually sometimes Tax is higher than Vat.

@ozzy47
As for your comment " TBH I don't see how they are going to be able to enforce this on people living in the USA".

They'll do something very easy. They'll blacklist your domain from all European ISP. This mean that nobody from Europe will be able to access your site. That's why Microsoft and Google are paying any penalty that EU law assigns to them.

So if you don't mind if your site is not accessible from Europe then there is no reason to worry.

Last comment. I've search a lot to find how the companies will deliver the VAT that they'll collect and I find nothing. That's why I'm saying that they don't focus on collecting VAT but rather to prevent Europeans to buy from outside EU just as a way to avoid pay VAT. In simple words if you collect VAT you'll become more rich as you'll only collect without to deliver it :) :)

@HM666
"And you could charge a subscription fee for them to pay to get access but they are not paying for an item directly"

It also includes services, subscriptions etc. In general mean includes anything non tangible.

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Just found an article dated Dec 24th, 2014, so 3 days ago. Among the others it says:
"The change was made because EU wants to get more money from transactions for American companies – or to force them to move more operations to EU to get VAT reductions."

http://www.happybootstrapper.com/201...u-vat-changes/

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Well, you can try Googling and you'll find so many articles/questions for this issue. Try:
what happen if i do not collect eu vat for electronic sales

It's not affecting me at all, as I don't sell anything to anyone. All my mods are provided for free, and are free of any silly branding in the footer. :)

Its makes absolutely NO sense for them to try and collect taxes from a country they are not in!!! That is ludicrous! There is no way they can enforce it outside of the EU. Yeah, ok they maybe able to black list web site URL's but then I'm sure if that happens quite enough they will get sued.

Even if they block an IP there are ways around it. And how are they going to make someone who sells on to say ebay charge the extra I know they won't make me do it