My Vat-Moss experience so far

Discussions
#42

Hey Jessica,

this is an elaborate non-answer. You’re not saying anything except that you have lawyers and talk to them - which is something we already knew/assumed.

Let’s assume I am based in Germany and want to sell an ebook through Gumroad.

We are interested in the point of view of your lawyers - especially on these questions:

  • What is a “supplier”?
  • How does it differ from “seller”(the author)?
  • Does this mean the author sells the book to you and you re-sell it?
  • If not, why are you allowed to handle VAT for the seller? You’re basically a combination of Western Union and Fedex in that case - and I don’t think Gumroad is allowed to handle VAT on my behalf in either capacity

Don’t get me wrong: I’m super happy/impressed that you will handle that VAT mess for sellers. I’m just not clear how this works from a legal perspective and would really like to understand it.

Cheers,
Christoph

#43

Hi! Sorry if the answer was ambiguous. There’s a lot going on and we also don’t want to bore you!

To be clear, the EU defines a supplier, not us. To them, the supplier is the one “supplying” the digital good to the consumer. So, that’s us.

That means that your other point is correct (all of them, actually!) — we are allowed to handle VAT for these reasons. And we’re glad, because that means we can take the responsibility completely off your plate.

#44

Jessica, I think that also means that you are the ‘vendor’ so you have to comply with consumer rights:
http://ec.europa.eu/justice/consumer-marketing/rights-contracts/directive/index_en.htm

Is that so?

David.

#45

I understand for 2016 there are some plans to change VAT MOSS.
Does anyone have more information about this changes? Is something good?

I think this post revive would help. If not, let me know.

#46

I do not remember I’ve got a call from FastSpring. There was some email interaction, if I remember right – explaining what I’m doing and such.

#47

I understand for 2016 there are some plans to change VAT MOSS.

Plans by whom? The EU? What are the nature of the changes? Do you have a source?

#48

Source: http://europa.eu/rapid/press-release_IP-16-1022_en.htm

The European Commission has presented an Action Plan setting out ways to reboot the current EU VAT system to make it simpler, more fraud-proof and business-friendly.

The current VAT rules urgently need to be updated so they can better support the Single Market, facilitate cross-border trade and keep pace with today’s digital and mobile economy.

The ‘VAT gap’, which is the difference between the expected VAT revenue and VAT actually collected in Member States, was almost €170 billion in 2013. Cross-border fraud itself is estimated to be responsible for a VAT revenue loss of around €50 billion a year in the European Union. At the same time, the current VAT system remains fragmented and creates significant administrative burdens, especially for SMEs and online companies.

The Action Plan sets out a pathway to modernise the current EU VAT rules, including:

  •    key principles for a future single European VAT system;

  •    short term measures to tackle VAT fraud;

  •    update the framework for VAT rates and set out options to grant Member States greater flexibility in setting them;

  •    plans to simplify VAT rules for e-commerce in the context of the Digital Single Market (DSM) Strategy and for a comprehensive VAT package to   make life easier for SMEs.
#49

As I recall there was some discussion about how it had a much bigger impact on the smaller companies around Europe than they expected (I suspect more “realised”). There was talk about simplifying it, possibly having a minimum threshold like we do here in the UK but I’m not aware of any outcome from those discussions, and I’ve carried on with my MOSS reporting without change.

#50

Thanks for the info.

I’ve spent a few years working inside an EU organisation (the ECB). Based on my experience there, I’d suggest:

a) don’t expect this Action Plan to be complete any time soon. Think years rather than months.

b) any outcome is just as likely to result in a more complicated set of rules, despite the attempt to make easier rules.

Nevertheless let’s hope for the best.

2 Likes
#51

As a business not based in Europe but a person who quite likes going there without being arrested I find myself caring about this VAT crap a lot more than I am naturally inclined to. I am thoroughly familiar with GST in Australia, I’m living that dream. I have no overwhelming compulsion to file a MOSS VAT return, thankyouverymuch. So, I think VAT-riddled sales in the EU and UK (or whatever it becomes) is perhaps a prime candidate for outsourcing. I did some homework. Here are my notes. Sorry if they are a bit disjointed - so am I.

These services live the VAT nightmare for you and offer various other things that are handy for selling apps and software-support subscriptions and some have a few bonus things like Dunning management, cart abandonment. I looked at a lot of alternatives, most of them leave the VAT reporting and paying up to you. Thanks for nothing, I can do that with Quaderno and Stripe. Actually, that solves an AUS GST thing too.

FastSpring

  • Until recently, was my first choice because they had lots of recommendations and an extensive API.
  • Then they OMFG’d their pricing. USD 199 / month for API access (Hello, Zapier?) and Subscription management.
  • Yeah Nah
  • I have had a rather lengthy email conversation with FastSpring and they have been quite responsive. They want to know predicted volumes so they can work out a rate. Anyone got a crystal ball they can run the numbers on for me? Spending a lot of time in this manner rather defeats the purpose of outsourcing it in the first place.
  • As a complete aside, this Mixergy interview with Dan Engel, the (now departed) founder of FastSpring is interesting.

Paddle

  • A relative newcomer but I like the look of it.
  • They got funded again last year so that’s a vote of confidence
  • It’s like Gumroad but with more for software sellers and support subscriptions. It feels more B2B to me whereas Gumroad feels more B2C.
  • ​Paddle is ​5% + 50 cents, that’s reasonable. I’d cop forex (GBP- AUD) on top of that, perhaps twice (EUR - GBP - AUD) depending on my base currency (which you can change).
  • they handle VAT
  • and even NZ GST, South Africa and Russia
  • They can base your account in Euros or GBP … or USD but that wouldn’t make any sense to me. Yeah, VAT with USD doesn’t do me much good in AUS, I wouldn’t get to keep much of that after is has been thoroughly forexed.
  • They also handle subscriptions well with pre-charge emails etc…
  • Paddle subscriptions don’t require you to become a member of Paddle. Gumroad does.
  • Paddle have an API & SDKs. No native Zapier app but they have webhooks so you’re sorted.

Gumroad

Avangate

For the non EU VAT things there’s easy stuff I can do like WP Simple Pay with a geo-redirect plugin to drop Stripe payment links on my WordPress site. I’ll just make a a Zapier zap to send them a proper invoice from Xero if the one from Stripe isn’t good enough. I can do GST invoices in Australia with that too, as well as other currencies.

Avangate looks like the most powerful option, Paddle looks like the most sensible option. Still, I have never used any of these services. Have you?

Feedback please…

  • Other services I missed - and why you suggest them.
  • Your experience / recommendations.
  • am I overreacting, is something like Quaderno & doing quarterly VAT MOSS returns a better idea?

I wonder how many people in the outside-EU world are collecting VAT and just keeping it? Ah, yeah nah, did I mention my aversion to be arrested?

6 Likes
#52

Those who know me know I have a thing for spreadsheets (cue Alan Partidge - “That’s saaad”). So I made one to compare come EU VAT compliance costings. I thought you may find it useful so here it is.

  1. Copy the whole sheet and save it as your own.
  2. Enter some sensible data in the yellow cells
  3. Note the relationship between the different services changes depending on price, volume etc.
  4. keep in mind I am in Australia and have added forex losses for that. You should adjust accordingly.

If you see any problems please let me know and I’ll update it.

I hope you find it useful, if not a little enlightening on the real costs of SAAS. I did. Whoa.

Hey @polimorfico - you should get onto this sort of comparison, it’s a real eye-opener.

1 Like
#53

Interesting spreadsheet! I’d add a couple of points:

  • Stripe forex fee is 2%, I think.
  • Using one of the payment options that acts of “seller of record” is more expensive, but it makes your work life much simpler. For example, with FastSpring I receive one monthly payment, that needs only one line in my bookkeeping software. It is hard to emphasize enough just how much simpler that made running my business than today where I use a home-grown solution built on Stripe.
1 Like
#54

Thanks Steve

I did Stripe’s forex at 2% - it’s in B17:B20. There’s a link to Stripe’s page on forex in the note @ B17.

You can nominate weekly or monthly payouts in Stripe too. I also plan on keeping the volumes away from my Xero books and just accounting for them in batches. I’ll apportion the batched income against the different product in one line each. Or maybe not, since something like Quaderno or Fastspring already has reports for that. Otherwise I just need a line for a second tax account for EU VAT, NZ GST. It’s not much harder than my quarterly GST return.

It’s the forex and double-forex that really kills me, money-wise. Stripe has a maximum of one forex at about 2% whereas I can easily get hit twice with hosted solutions based in a first-world currency.

I looked at Quaderno’s blog, registering for VAT & filing a return doesn’t look too difficult if you have all the numbers to type in. I’d
happily burn that hour for times per year to save literally thousands of dollars. Bonus: I get to earn interest on the VAT while I hold it. :smile: Bonus: I get to pay forex on it when I pay it. :frowning:

I have had worse experiences with bookkeeping: https://icanhazdot.net/2009/07/04/what-i-want-from-accounting-software/ & https://icanhazdot.net/2008/09/19/million-dollar-idea-quickbooks-myob-for-humans/

Bonus: Quaderno goes AUS GST too, and NZ GST. I also like how it makes proper invoices so my Xero books won’t get too crowded - I’d hate to individually reconcile all those sales I’m going to have! I hope.

I also like that you can drop a payment button on a WordPress site with ease.

I just heard from Quaderno that they are now supporting multiple Stripe & PayPal accounts on the same Quaderno account.

Yeah, this just got a bit gushy, I know but I think Quaderno is probably the best solution for me. It may not be as lucrative for others unaccustomed to accounting for GST / VAT, don’t get beaten up by forex costs because South Pacific Peso, and don’t make their own web sites and don’t want to use Zapier.

Just fixed some errors on the spreadsheet… for the info of anyone who may have copy-pasted it.

2 Likes
#55

Wow!! Thanks for the comparison, Ewen. I always knew that those middleman apps were quite expensive in the long term but now it’s much clearer with your spreadsheet.

1 Like
#56

So the rest of the world has joined the party. Here’s a good roundup: https://www.taxamo.com/support/regions_supported/ Spoiler: there are 11 regions listed. Unrelated: it’s a shame Taxamo haven’t learned the value of a pricing page.

Well, perhaps offloading the responsibility of the fiddly ones to a SAAS service is a good idea to avoid spending most of your money and your life doing tax returns. You could cherry-pick the regions that are cost-effective to handle yourself and hand off the regions that are too cumbersome to contemplate a SAAS that acts as the designated supplier (seller of record, whatever the term is) the like FastSpring, Gumroad or Paddle.

There seems to be some interesting differences in the way some of these handle sales taxes.

I wonder what happens if / when they get busted for not paying tax? Who cops that bill?

This is getting silly.

My highlighting but that’s a highlight, alright.

I hadn’t looked at FastSpring for a while, I didn’t know their new system does on-site popup checkouts.

@SteveMcLeod do you still use FastSpring? I am still leaning towards them for non EU & non AUS transactions and Quaderno for both EU & AUS. Well, that’s my latest whim. It would suck to run more than one CRM / Subscription management system.

#57

Yes, I still use FastSpring on a small scale, as a backup to our home-coded system. I’ve got a lot to write on this topic, way too much for a discussion thread that’s already very long!

In a nutshell, if you are just getting started with a billable product or service, I recommend choosing an option that is quick and easy for you. Don’t waste time implementing a full payment processing system in order to save a few percent per sale. If your product takes off, you can change later to a home-coded system. Until then, any time you spend designing and coding a payment processing is time you are not spending on the core functionality of your product.

I’m no longer an ardent disciple of FastSpring, but they do give you a lot in return for their cut of your sales.

1 Like
Norway, Japan, South Africa want you to collect VAT on sales to their residents
#58

Partner with Taxamo and we will assume the entire liability for VAT and GST on your digital sales. We take responsibility and liability for the end to end processing of the tax element on every foreign sale.

https://www.taxamo.com/features-taxamo/

Spoiler alert: it’s GBP1,495 to set up + 5% per transaction, on top of gateway charges. It looks like they binned their existing API service, I can’t find it on their site.

This is Obviously not aimed at startups, you’d have to be earning well already to justify that, and have your own CRM, automated emails, Dunning etc systems in place. So why would you switch away from Paddle, Gumroad, whatever, when you’re at that stage?

Hey @polimorfico - you should landing page the hell out of that, they just handed their market to you.

The way I think this will pan out of me is very similar to @SteveMcLeod’s story: Start with FastSpring, wait & see if there are any major income leaks that I actually have the resource to plug, plug them. I’d imagine it would be AUS, EU & UK sales so Quaderno would solve that nicely. Everything else stays at Fastspring. I also imagine that will be a very, very long time coming, I would have to replace all of the features and integrations that someone like FastSpring offer. That is no small task.

…or building new products. And that’s the hack.

2 Likes
Norway, Japan, South Africa want you to collect VAT on sales to their residents
#59

Hi,

Can someone please explain how the VAT thing works with Taxamo/Paddle/etc?
I am EU-based.

  1. If I have registered my company (which I am obliged to do because I am getting money without working as a contract employee), and I get payments to my bank account , I am supposed to file VAT returns from that money. But if Taxamo/Paddle pay this for me, I assume they do it never mentioning me. How do tax authorities know that I am paying the VAT through a third company?

  2. Let’s assume that I have registered my company, and selling my products to e.g. Gumroad which is US-based. Then I don’t pay VAT, because I am selling from EU to US. And then Gumroad re-sells my product and pays all the necessary VATs. But since I am constantly selling my products to the US-based company, doesn’t it mean that I have to inform US tax authorities, because my “customer” is always US-based? They have some super complicated nexus-system which brings me to the point where I have to figure this whole nexus thing out instead of VAT…

Please tell me I misunderstand something and it is not that complicated.

#60

Re: 1.
We’re using Paddle — we’re a EU-based company — and also get a monthly payment from them.
To justify that we already paid our EU VAT, we ask Paddle to provide us their reverse-invoice after each payment. Too bad we don’t get that invoice automatically, but well, it works fine for our accountant.

The invoice is basically a list of how many transactions you made in each currency, and how much VAT you owe, minus Paddle’s fees. And the total amount is what you actually get in your account.
To make it clear: we don’t have to pay the VAT afterwards, the invoice just states how much VAT Paddle owes for us.

As a precaution and in addition to this reverse invoice, we also make an export of all the transactions of our sales, where we can see the country of each sale, and the gross + VAT + net amounts. Total of these should match with the totals on the reverse invoice.

#61

Thanks a lot for your answer! It’s really helpful! But if I use Paddle, do I still have to register my company for VAT? I thought that it works so that I will be selling my product to Paddle (which is EU-based company, so it’s B2B transaction between me and Paddle, thus 0% VAT), and then they resell it to the real end customer. So Paddle submits VAT for the sale that they did, from their company’s name. And I sold my product B2B to Paddle, with 0% VAT, so I would assume that I still need to register this in MOSS? Or am I wrong?

And also another question: when I submit my income information to the tax office, do I need to show only what Paddle has paid me (like those monthly payments you get), or all the transactions that have been made to the end customer?

I am sorry if my questions look stupid, I haven’t even registered my company yet, just trying to figure out the tax thing. So I am completely new to this.