US Business Registering for VAT MOSS?

Discussions
#1

Anyone from the US gone down the path of registering with the UK/Ireland/Malta VAT MOSS?

From reading various posts, it appears that anyone in the world selling digital goods to the EU is going to have to deal with VAT now.

In summary, it appears you need to:

  • Capture IP and address of each customer
  • Handle vetting VAT IDs for businesses via VIES and not charging them VAT
  • Calculate the VAT rate for each of the 28 EU member states
  • Submit a payment each quarter to the VAT MOSS you sign up with
  • Generate VAT invoices that are valid in each of the 28 member states

Some of the wrinkles seem to be (using the UK MOSS as an example):

  • The currency conversion from USD to GBP happens from customer to you at the time of purchase, but quarterly from you to the MOSS. This could lead to either paying out more than you collected for VAT, or paying less.
  • Paying the UK government from a US bank account - I have no idea how this works. This could be gross.
  • I havenā€™t found a resource that spells out what you need to have on invoices for them to be VAT compliant in all member states.
  • According to research Iā€™ve done, it seems that the ViES API tends to be rather poor in terms of performance and availability
  • The documentation implies to you have to capture the users IP and address, but they also talk about them being non-contradictory. Do I now have to geo-locate all IPs? If the IP and address donā€™t agree, what do I do?
  • VAT rates change over time, so you have to keep up with them

Obviously there are now companies selling services to deal with some issues for you, such as http://www.taxamo.com/.

Iā€™ve had some discussions with people online over at Hacker News. Some are insisting that US businesses donā€™t need to worry about VAT on eservices, but pretty much everything Iā€™ve seen indicates we definitely do.

Has anyone else dealt with this yet, and do you have any advice?

#2

This stuff is really insane. Amazing how no thought at all is given to how companies smaller than Amazon size will deal with this stuff.

We sell a lot to the EU, so Iā€™m probably going to start digging in but I havenā€™t yet. Iā€™m hoping it all just goes away :slight_smile:

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#3

Heh, that is crazy. Iā€™m kind of curious what they are going to do if it is simply ignored by small US businesses? Extradite you? Are they working with the IRS to track down US citizens and collect EU tax money?

#4

Potential for a nice little SaaS app here I guessā€¦

#5

Yeah, Iā€™m sure there will be a level where itā€™s not worth them coming after you. Still itā€™s nice to just be doing the right thing :). Also, you go to Europe at least once a year so you better watch out!

#6

Iā€™m following this too, as Iā€™m interested in the EU as a secondary market for my app. Iā€™m especially curious whether the ā€œlicense clearinghouseā€ model will take off ā€“ one company sets up shop in the EU, sets up appropriate accounting/tax systems, and then becomes a reseller for US-based companies that donā€™t want the headaches.

#7

Welcome to Europle :smile:
I thought this new EU VAT rules would not apply to Non-EU businesses.

#8

If this is correct, I still donā€™t know how theyā€™ll enforce it. I also see other countries doing the same in retaliation. For example, all EU software companies need to pay GST (5% federal sales tax) if youā€™re doing business in Canada.

@coreysnipes regarding the clearing house, I think FastSpring already does this. If your customer is based in Europe, theyā€™ll handle the VAT.

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#9

If you want someone to take care of some of the regulatory part, but not the collection and quarterly payments, there is Taxamo. If you do 100 transactions a month for $20 each, it will cost you about 2.5% of your sales. This is almost as much as credit card processing. For a point of comparison with other options, it would be ~5.5% of your income for payment processing (assuming 2.9%) plus this VAT stuff. They deal with invoices, VAT rates, tracking evidence, generating a MOSS return, but also provide the ability to detect country, which could allow for dynamically higher prices in the EU to cover the cost of dealing with these regulations.

If you want to fork over 8.9% of your incoming there is FastSpring. I believe this is inclusive of credit card processing, etc. Since they are a reseller, you would have no liability whatsoever.

Avangate has about the same pricing (assuming 100 sales at $20) when you are starting out (~8.9%, really 3.99% + $0.99), but if you do over $15k a month, and your product is $20 you will be paying 12.5%. I believe this is inclusive of credit card processing, etc. Since they are a reseller, you would have no liability whatsoever.

I am strongly considering Taxamo. It will be ā‚¬20 a month, plus about $0.25 a transaction to the EU. I may do dynamic pricing for the EU to recover some of my costs.

#10

Fastspring does have a 5.9% + .95/transaction option. For people selling high dollar items that may not be such a horrible deal.

#11

For the example $20 transaction, 5.9% + $0.95 would be about 10.6%. Obviously for higher amounts, the percentage goes down.

Beyond the higher fees, the downside of something like FastSpring or Avangate is that you have some payments going through a one-stop reseller, but some through an existing solution (assuming you donā€™t want to pay more for non-EU customers). Seems like a no-fun integration job and a weird experience for users.

#12

If you selling digital goods my company, SendOwl, deals with charging the correct amount of tax based on where the consumer lives as well as storing the evidence and generating reports for MOSS. Weā€™re flat fee from $9/month

#13

I just learned about this last week, so Iā€™m still in the anger phase. Itā€™s outrageous that thereā€™s no exemption threshold. You sell 1 ebook to someone in the EU and you have to collect and file VAT? Thatā€™s outrageous.

#14

For people considering dealing with the EU VAT requirements yourself, here are a bunch of resources I have found.

B2C MOSS invoice requirements for e-services. In short, many countries donā€™t require that you provide an invoice, for consumers. I believe you still have to provide invoices for businesses, however.

General EU VAT invoice requirements (page 33).

Country-specific VAT invoice rules (usually rules about displaying amounts in local currencies):

Norway has a requirement of collecting and remitting VAT on e-services also, but registration is not required until you hit NOK 50,000 ($7,100 USD) per year. Sources:

Switzerland also has VAT rules for foreign companies. As of 2014-11-12, they published an article stating that if all you provide are services, you are not subject to collect or pay VAT, even if you provide services for more than CHF 100,000 ($103,000 USD).

EU VAT rates can be looked up at http://ec.europa.eu/taxation_customs/tic/public/vatRates/vatrates.html. The Norway VAT rate (25%) is mentioned at http://www.voesnorway.com/About/.

According to HMRC MOSS page, if you use the HMRC MOSS scheme and use the ECB daily exchange rates for calculating amounts on an invoice, then you can used the converted amount for the VAT when paying your quarterly returns.

The HMRC MOSS page indicates that if you are providing e-services and 2 pieces of information are non-contradictory, you can go with that assumption. Two pieces of information include billing address and IP address. From what Iā€™ve seen online, some places just wonā€™t let users without a VAT ID (i.e. non-business user) check out if their billing address and IP geolocation do not match.

For geolocation, Maxmind offers a free geoip database that will resolve to the country level. There is an nginx module, Apache module, PHP composer package, python package and more.

Iā€™ll post any other resources or information I find.

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#15

any chance you can add this stuff to http://rachelandrew.github.io/eu-vat/ ? Probably under Implementation?

Itā€™s been linked up all over the place and I know itā€™s getting a lot of traffic because of the amount coming through to my site from it.

I can add it but if you do itā€™s be marked as your additions on github :slight_smile:

The ā€œproofā€ rules are less simple than you might think however. Take a look at: http://rachelandrew.co.uk/archives/2014/11/30/how-the-eu-vat-rules-make-eu-startups-and-digital-businesses-uncompetitive-in-a-global-market/

Itā€™s very unclear right now. That might be less applicable to businesses out of the EU however.

#16

@rachelandrew I donā€™t have an issue if you link to my comment, or include the info I found with a note of my contribution. Unfortunately Iā€™ve got enough to get done in the next month in terms of getting my new business website launched that will allow me to deal with these and other issues.

#17

I saw a comment from @rachelandrew on Hacker News that mentioned that UK companies need to present prices for consumers that include VAT. Clearly this does not apply to US businesses.

The other issues that occurred to me last night is that if you use PayPal or credit card processing for payments, you will now have to pay processing fees on the tax, which can be up to 27% of the purchase.

Iā€™m considering doing IP geolocation (at the web server level) on my site and pre-selecting a country dropdown for users. I am thinking I will charge an extra 5-10% for EU locations to cover extra processing fees for taxes and to cover the work in filing, absorbing currency rate fluctuations, etc. When users from the EU view their cart, I will pre-populate a VAT line-item based on the country the user selects. If they enter their credit card info and the country from the billing address doesnā€™t match, I will ask them to self-certify their country of residence.

This seems about as extensive as can be done from a small business. From all of the reading I have done, technically the VAT on e-Services (VoeS) system has been in place since 2003. So if US businesses havenā€™t had issues yet, I canā€™t imagine the EU countries are all of a sudden going to have the resources to start pursuing them. I presuming resources will be used to go after bigger fish.

Technically you should be able to use a userā€™s credit card number to detect the issuing bank, but from what Iā€™ve read, the ABA wonā€™t release the credit card IIN numbers unless you are a member of the financial industry or an organization with an IIN yourself. Iā€™ve reached out to their contact to confirm this.

#19

According to todayā€™s webinar:

[quote]Since 2003 you had to register for the non-union (EU) VAT scheme. If a
business is found to not be complying, then HMRC would go through the
businessā€™s tax authority to reclaim the VAT. This will be enforced more
strongly. It will level the playing field for EU merchants.[/quote]

I bet youā€™re all quaking in your boots.

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#20

This is all a total mess. The rules are not clear and the advice given by HMRC in the UK is contradictory, non-binding, sometimes illegal (they suggested creating two companies, one domestic and one EU to ā€˜avoid complicationsā€™ for example though when they were challenged on this being Tax Evasion, they neither withdrew the advice or commented on it.

It is a total and utter mess. I have picked this up with HMRC and my MP, really on behalf of a few others who are utterly confused - this really affects microbusinesses, not ones that are VAT registered and selling to companies but there is no simple clear advice.

I have beein invited to an HMRC emergency consultation tomorrow morning to discuss. Meanwhile, there is more and more conflicting advice being issued by people, lots of well meaning forums etc being set up to help people through and a ton of advisers and accountants and web developers pitching themselves as the experts to little businesses that canā€™t afford it. People are also spending money redoing their systems to replace them with other systems that still wonā€™t comply with the laws.

I will report back on this after that meeting if there is interest but honestly, be really careful before you act. This seems to be as much of a bonanza for consultants as the Y2K bug. There is no clear information. There is an EU directive that is being implemented and interpreted in different ways by different countries. The UK has really screwed this up in implementation.

One simple example, if your turnover is <Ā£81k in UK, you do not have to be VAT registered. If you sell online and someone wants to buy your digital product in Greece, you have to comply with Greek VAT regulations. The threshold for VAT reg there is Ā£0. Therefore to sell to Greece, you have to be VAT registered in your own country. It is also illegal for you to restrict your trade in another EU country, so in fact if you take the steps that HMRC suggest - check and get proof of country in various ways etc, if you are from Greece, no sale, then you are also acting illegally. If you do sell something in Greece and sign up for VATMOSS, you then have to be VAT registered in UK, complete quarterly tax returns AND charge consumers the VAT (20%) or swallow it yourself.

Joseph Heller and Franz Kafka got together, dropped some acid and started to write the law.

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#21

Definitely update us! Itā€™s good to know we have an inside man :smile:

Yeah, really the mess is the problem. We sell a ton to Europe and would probably jump through some reasonable hoops to collect their taxes, but itā€™s all so convoluted that thereā€™s no where place to go to even understand how to start.