If you are wondering what the developers are doing more today in Europe, a good estimate (plus recovery of a hangover) would they try to understand how to implement the new EU VAT rules. If you have a business and you sell digital products or services to people and businesses in the EU countries, the new rules apply to you.
Note to high-tech companies outside the European Union : Although nothing changes for you when selling digital products for EU companies or consumers officially you must charge the rate of the country of the buyer of VAT (since 2003). I do not understand the feeling ready US start-up attention to this, or implemented, because this issue. I have yet to see the first implementation of VAT by a US start-up. I think all companies outside the EU are simply keeping quiet and ignoring the law while selling pleased digital products to the EU. In case you are wondering how you should comply with the tax law, read on.
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Although these rules are a pain and does not make sense for small businesses, do not despair because we have already implemented and explain how you can do the same, and why they changed first.
How to implement the new VAT rules:
From 1 January 2015 all EU companies that sell digital goods online should comply the following new rules:
- if the company sells to EU countries, they will have to charge VAT in the country of the buyer instead of the seller.
- If the party that receives digital goods is a consumer, the company must charge the VAT percentage of the buyer's country
- if the party receiving digital goods is a company (with a valid VAT number) a reverse charge mechanism is in order, understandable English that means that there is a VAT charge from 0 percent.
-. If the party that receives digital goods is a company without a VAT number or an invalid VAT number, the VAT of the buyer's country should be charged
- If the company sells digital products to companies or consumers in their own country, local VAT should be charged
The "definitive" guide to the EU VAT
I asked my friend to do the "definitive guide to the EU VAT for digital products" on a napkin that my writing can not be decrypted. Here is the result:
You can see our implementation at the signing of a TNW Pro account (which you must do of course for only $ 30 per year).
Example 1: The customer is in the same EU country
Note: as you can see, we pre-select the country of the customer based on their IP address, and the charge of the corresponding VAT is added (in this case, 21 percent VAT for the Netherlands).
There is a check box to indicate that you are buying on behalf of a company. In this case, it does not matter if I'm buying as a consumer or a business that payment will TNW (Netherlands) as a buyer in the Netherlands, so that the local VAT is always charged.
Example 2: The customer (consumer) is another European country
Note: Here you see I chose Austria as the country of the buyer. As is different from my IP address tells us, we show a note to confirm your billing country is Austria. Austrian VAT is charged (20%).
Example 3: The client (company) is another European country without valid VAT number
in this case, I tilted the box "I purchase for a company," but I did not complete a valid VAT number. Here the customer could be a business but do not have a valid VAT number, so we need to charge the Austrian VAT (20%).
Example 4: The client (company) is another European country with valid VAT number
here, we check if the VAT number is correct. In this case, the VAT charge is 0% and is not represented.
? What data do you need to store
You must have the following data on your customers:
- they are
- if they are a business or a consumer
- the VAT number (we use this service provided by the European Union to check the VAT in real time)
- the amount charged
- the VAT invoiced
- the percentage of VAT perceived (see jsonvat for different VAT rates by country)
if the country of the buyer differs from the location of the buyer when purchasing (see example below above), you must add an additional check to ensure that the country where they will consume the digital product is correct. This is a pain, but when you look at our implementation, it is quite good at the end.
The bad news
Of course, these changes take time and money to implement, it is probably not something you planned to spend time valuable development. The implementation itself did not take too long (only 5 hours), but looking at the issue and discuss the best way to put it all together took a lot longer (3 people, 2 meetings, a extensive Google search, a café with a tax lawyer and befriended some chatter at the espresso machine). That said, we did all the pre-work for you and now you have a guide, so take advantage of it.
For small businesses, it is even more bad news. The EU has eliminated all tax thresholds. So selling just a small amount abroad means you must register and keep VAT records. Many countries had a policy to exempt small companies with less spin than x, but in most countries, this threshold has been abolished for online businesses.
If you have an ecommerce business and use a standard platform, I recommend you ask them if they are ready / comply with the new rules and point them to this post. If they are not yet implemented a standard solution for this, they must offer something small business with little or they risk losing EU customers.
I hope this post has helped you, let me know in the comments or on social media how you are going to implement.
PS In the EU, they create what is called One Stop VAT shops, so that a company can get their VAT payments back from place to place to seek restitution in all countries where it is sold goods. I saw that there are four years to come, so I enrolled for soft domain names to build onestopvatshops. If you are interested, ping me.
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