The main reason for this change, which was agreed in 2008 and came into effect on the 1st of January 2015, is to stop companies like Amazon, Apple, Google and other large companies from enjoying low taxes as they base their digital services arm in Luxembourg. For ebooks, they enjoy a low 3% sales tax. A very nice loophole for these large corporations but it has rightly so been closed.
The knock on effect is that small business and retailers have to deal with this new EU VAT change too where VAT needs to be calculated at the customers location rather than the sellers location. Once they do this, they then need to report it to their respective government. This adds a lot of administrative burden on small sellers that are barely making any sales.
The most important thing that the EU could have done which they didn't do is to have a threshold so that small business and individuals aren't affected. Recently, Japan introduced a similar change but maintained a threshold to protect small businesses: http://www.vatlive.com/asia-pacific/japan-consumption-tax-fo...
The EU VAT change is an unnecessary burden for small business and individuals which is why we handle VAT completely for our customers.
Wouldn't a clever idea be to let the payment procesor handle the taxes? so you hand over to google/amazon/apple to do your payment, and give them a tax free price, and they apply the tax for the buyers location, and compile a monthly invoice for you?
In EU you have to advertise the price with the tax already included. So even if somebody else is handling the tax rates for you, you have to advertise the correct price on your website depending on where the buyer is.
Yeah, but I assume Amazon lets you either keep the price the same and Amazon then sends you a bill or you let Amazon increase the price and take the VAT directly from the sale.
well. you can also do it the other way around and charge the same price but the VAT component changes.
-e.g. 5€ gross price will result in different net prices depending on the buyers location. hence slight differences in the margin for you
That's easy to work around, just set the total price to the maximum for all possible rates. It does mean that you're pocketing more revenue from countries with lower sales tax rates, but makes it simpler to manage in the front end.
The calculation to make is will you lose in terms of total profit by charging people in Luxembourg 24% more than you would otherwise (3% sales tax vs 27% VAT in Hungary)?
But you probably don't have to show that level of detail until the payment stage, by which time hopefully you do have enough information to determine it.
In contrast, consumer protection laws in various EU states require that the price shown is the full tax-inclusive price throughout, even if it's in big numbers right there on your home page.
The above is what Amazon does and I believe they allow authors the option to add or exclude VAT from their price. Amazon handle VAT completely.
The problem is that lots of people don't use Amazon/Google/Apple and they sell direct. They have to implement the necessary code changes to detect and calculate VAT correctly. On top of this, you have to register for VAT MOSS (UK) and then report and pay VAT to HMRC (UK). This is a lot of hassle and believe it or not, small businesses have been closing because of this.
For us, we had to change our terms of service so that authors and content creators gave us a licence to sell their work so that we can become the supplier and therefore the legal burden is on us to calculate, report and pay VAT to HMRC.
Some of the digital purchase platforms will do this for you. Bare paypal won't on its own. Also "buyer's location" is unnecessarily complicated to determine and prove.
What's more bizarre is this only affects "automated" systems. If you say "paypal me £5 and I'll send you a comic", you're fine.
> "buyer's location" is unnecessarily complicated to determine and prove.
My only way of guessing this is by country of delivery? For instance, I'm living in the UK, but if I pay by using my Irish credit card, should I be charged using Irish or UK vat?
One of the big practical difficulties with the whole EU VAT mess is that different EU tax authorities can and do interpret the same rules in different ways. For example, in the UK, HMRC seem to have stated relatively clearly that incorporating this kind of manual step currently puts the transaction outside of the scope of the new rules, but I've seen reports that other states aren't accepting this. Even if you go via your home state's One Stop Shop service, you're still now subject to audit and potentially penalisation by any of the other tax authorities if they don't like your numbers.
Of course, the send-it-by-email strategy also only applies if you're talking about a one-off "digital download" style transaction. That seems to include a lot of tiny microbusinesses, but it's no use for people doing, say, X-as-a-service or library/subscription style web sites who happen to have a small number of customers from other nations in the EU.
Lots of use cases. For example, I use Stackoverflow a lot and I need to paste code rather than faff around with pastebin. I can see myself using this to get a gist URL in one click.
