#VATMOSS: EU Tax on Internet Services

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KnightExemplar
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#VATMOSS: EU Tax on Internet Services

Postby KnightExemplar » Mon Feb 09, 2015 8:35 pm UTC

I don't keep up with EU stuff too often, but suddenly VATMOSS was brought to my attention, and it seems like it affects even how US-based businesses work. So... now that I'm informed, I'd like to start a thread to help me figure out what the heck is going on.

http://www.webdesignerdepot.com/2014/12 ... t-vatmoss/

In essence, it seems like if you have a customer pay you from Europe, it is now the responsibility of the business (even a US-based business) to keep track of the VAT taxes that the customer is based in. At least, that is what it looks like on the surface. I'm going to be doing some research on this as time goes on, but a number of questions are immediately brought up (enforceability? Is there any customer-responsibility involved? etc. etc.)
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Tyndmyr
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Re: #VATMOSS: EU Tax on Internet Services

Postby Tyndmyr » Mon Feb 09, 2015 9:15 pm UTC

So, what's the penalty if I don't?

Because I'm probably not going to care.

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Re: #VATMOSS: EU Tax on Internet Services

Postby KnightExemplar » Mon Feb 09, 2015 9:23 pm UTC

Tyndmyr wrote:So, what's the penalty if I don't?

Because I'm probably not going to care.


To be honest, I don't know. For the most part, I agree with your sentiment. But just in case there is some sort of penalty, it feels like its an issue I should be researching.

According to the article:

Businesses who do not comply with VAT legislation can be audited by any member state who believe that they are owed VAT. If you are within the EU then my understanding is that this would be instigated by your tax authority in the first instance.

How likely is it that EU member states will pursue non-registered small businesses from outside of the EU? That’s a question I can’t answer, however these businesses should have been paying VAT on supplies to EU countries since 2003 anyway. How the VAT needs to be paid has changed, but the requirement to pay VAT hasn’t.


It has been EU tax law since 2003 anyway. But Kickstarter, Patreon, and IndieGogo are coming under fire for not complying with VATMOSS right now.
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Tyndmyr
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Re: #VATMOSS: EU Tax on Internet Services

Postby Tyndmyr » Mon Feb 09, 2015 9:32 pm UTC

If "Under fire" is harsh words, then...pssh, whatever. If it ain't a penalty enforced in US legal code(and actually enforced), then it doesn't matter, and we'll all gleefully continue to ignore it.

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Re: #VATMOSS: EU Tax on Internet Services

Postby KnightExemplar » Mon Feb 09, 2015 9:59 pm UTC

Tyndmyr wrote:If "Under fire" is harsh words, then...pssh, whatever. If it ain't a penalty enforced in US legal code(and actually enforced), then it doesn't matter, and we'll all gleefully continue to ignore it.


It does put EU donators and EU kickstarter users at risk of their country's tax codes.

So this may not be an issue for a US-based business. But a European-based business running out of Kickstarter or Patreon seems to be at risk to these new regulations.

EDIT: It also presents a potential business opportunity to any of the Kickstarter-like crowdfunding sites, if they want to start an "European VAT Friendly" Kickstarter site.
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Tyndmyr
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Re: #VATMOSS: EU Tax on Internet Services

Postby Tyndmyr » Mon Feb 09, 2015 10:30 pm UTC

Seems like that would mostly put European businesses at a handicap, all other things being equal. Sure, Patreon/Kickstarter are probably not huge yet on the country level, but there's a lot more room for growth in crowdfunding, shooting themselves in the foot on this seems unwise.

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Zamfir
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Re: #VATMOSS: EU Tax on Internet Services

Postby Zamfir » Mon Feb 09, 2015 11:09 pm UTC

I don't understand what this is doing in N&A.

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Re: #VATMOSS: EU Tax on Internet Services

Postby KnightExemplar » Mon Feb 09, 2015 11:55 pm UTC

Zamfir wrote:I don't understand what this is doing in N&A.


I thought this was a newsworthy event for the most part. There's several sites talking about VATMOSS in general:

* http://techcrunch.com/2014/11/25/eus-ne ... -startups/
* http://rachelandrew.co.uk/archives/2014 ... t-changes/
* http://www.cheryl-morgan.com/?p=20123
* http://www.digitalartsonline.co.uk/news ... ry-6-2015/

I was hoping that there would be perhaps some more discussion on the issue around here. I was made somewhat aware of this issue before and ignored it... but I didn't realize that it technically applies to businesses like Kickstarter / Patreon / etc, which are in the US (but may have EU-based). In any case, it is relatively recent "news", in that these new VAT regulations have kicked into place in Jan 2015.

Its a bit on the "boring" side of news I guess, tax regulations are rarely a fun topic to talk about. But I was hoping this was the right place to discuss.

IE: There was some talk about Sarkeesian in the GamerGate thread, as to her finances on Kickstarter. Any EU "customer" who continue to kickstart her "Tropes against Women" series (ie: her "digital product" was "sold" to a citizen of an EU country)... that means that Sarkeesian is therefore subject to these new VAT Tax regulations.

Other creative works (ebooks, "digital artwork" such as commissioned art, wordpress templates, logos) seem to also be affected by these VAT Taxes. So it does seem that those who wish to follow the letter of the law need to pay attention to these new regulations. I'm still in the process of understanding them though, and was hoping to be enlightened by discussion.
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Zamfir
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Re: #VATMOSS: EU Tax on Internet Services

Postby Zamfir » Tue Feb 10, 2015 11:53 am UTC

OK, I'll trust your judgement on the relevance of this specific change.


I've read a bit through your links, I get the impression that several related issues ended up in one story.

- The change itself, per 2015, in VAT regulations for online services. Sellers used to pay VAT as if they were selling to domestic customers, but this is getting too distortive as the total transaction volume grows.

In the new system, taxes go the country of the buyer. That's more how a VAT is intended to work, but it adds complication. To keep the system workable, they have added an option (MOSS) that businesses can register to pay taxes in one country, even when they sell to all of the EU. The local tax service will deal with the other tax services. Even with this simplifying option, sellers still have to register the countries of their customers.

- A UK-specific side effect. The UK has an exceptionally high revenue threshold for VAT registration, beyond the typical administrative burden threshold used in other countries. It's basically a significant tax break for certain classes of small business. The UK tax service was going to treat MOSS as a registration, which meant that those UK businesses would face a choice between the simplifications of MOSS, or the tax break. This created the vocal protests, and the UK tax service has now changed their decision.

- Americans wondering about VAT. There is no change here, the old system named VOES is just merged with the new MOSS system. Americans wondering about VAT tend to end up on English websites, which pulls them into the UK-specific debate. And as Tyndmyr notes, a small US business has every incentive to understand as little about this as possible. For larger businesses, the smart strategy is to pretend that you don't know anything about it, and benefit from the tax advantage. That won't scale indefinitely. Kickstarter etc. seem to be hitting that scale.


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