View Full Version : How are you handling VAT ?
Ok I know I know... cross posting between forums....yes I posted this exact message on WHT as well....but..... sigh...it's the first time I've ever done a dupe across forums so let this be my freebie ;)
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Radio or television broadcasting services solely broadcast over the Internet or a similar electronic network?
Electronically supplied services, i.e. Website supply, web-hosting or distance maintenance of programs and equipment?
Software and software updates?
Electronic images, text, information or databases?
Music, films, games and webcasting of events?
Distance teaching of an automated nature?
The above services are covered by the E-Business Directive according to http://www.pwcebiztoolkit.com/
Does anyone have good definitive sources on the issue? Where are we suppose to 'sign up', how do we keep up with the 16 (I think) different VAT percentages for the various countries on that end? Where do we send the check? etc...
It's easy to find UK accountants taking advantage of new US business potentials but I'm having a more difficult time finding information from the source that wants to mandate the VAT on US businesses.
What are the consequences of a US Business not charging VAT? etc etc...
Has anyone made any headway in the area? The law goes into affect July 1st -- What are you doing, if anything, to deal with it? Especially those of you in the US?
Deb, what law are you referring to?
Among many, many, many other articles...I think this one gives one of the best summaries...
http://www.internetnews.com/ec-news/article.php/2194111
Wow, I feel as if I have been in a cave for the better part of the last year since I had no idea about this. Fortunately (for me) it only applies to soft goods... we don't do much hosting abroad.
I own an e-commerce business that ships many products to the UK and Europe. I was starting to sweat for a minute...
That is going to have a huge impact on US and other companies that sell services such as web hosting to the UK and Europe. I don't know how they plan to enforce it though... being in another country and operating a website, it's not as if you are physically conducting business in their country. What would they do to someone who did not charge VAT?
dynamicnet
06-21-03, 03:46 PM
Greetings:
There is an old saying ==> Taxation without representation.
Remember, the Boston Tea Party.
Thank you.
Actually you are in luck
To pay the vat taxes you have to sell over 59k in european services.
If you dont hit that number then you are fine.
interactive
06-22-03, 08:48 AM
59K per year? Or total? Bunch of bull crap, I run an E-Commerce site and target Europe. What are they going to do come over here and arrest me?
Its per year and I am not sure what the penalties are. Depends on the country I would say.
interactive
06-22-03, 10:07 AM
Theoriticly (sp?) could say the EU fine me as a US citizen because I didn't pay their unjust tax?
They could, I think it would be a fine through the federal govt. as we have treaties and laws with these countries. I am not sure though that is just a guess.
I know about year ago one company who was defrauding europe customers got hit hard by the us. He did some probation and has to post a 100k security bond if he does business in europe.
Originally posted by Marc:
Actually you are in luck
To pay the vat taxes you have to sell over 59k in european services.
If you dont hit that number then you are fine. This appears to be a widespread misconception... I also, after reviewing the information I was able to find thought there was a threshold but that seems to be for EU based businesses rather than NON-EU based...
I contacted 'the source' and asked...
This was their response
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Dear Sir
Thank you for your e-mail about VAT and electronic services.
From 1 July 2003, the normal rules require businesses based outside the EU
that supply electronic services to EU consumers to register, submit
declarations and account for VAT in most countries where its customers live.
However, an optional special accounting scheme aims to provide such
businesses with a simplified system as an alternative to these rules.
Accordingly, the scheme enables such businesses to register, submit
declarations and pay EU VAT (at the rate due in the customer's country) in
the single EU country of the business's choice. There is no threshold for
registration under the scheme, but we expect businesses to find the new
system considerably less burdensome than following the normal rules. Further
details can be found at:
http://163.171.52.105:8016/forms/notices/info0703.htm
I hope this clarifies the position.
Marcus Jones
H M Customs & Excise
E-Commerce Team
1/W, New Kings Beam House
22 Upper Ground
London SE1 9PJ
Tel:+44(0)207-865-5596
-----
Originally posted by interactive:
59K per year? Or total? Bunch of bull crap, I run an E-Commerce site and target Europe. What are they going to do come over here and arrest me?
Those UK Mafia people don't play!
I'm not able to connect to the link in that message Deb...
I have read so many things about this online. One thing I know for sure is no one knows for sure what to do. :)
From my understanding there are certain thresholds and unless you meet those, then there really isn't anything to worry about. Unless of course you are a Verio or Interland. I do not think it is $59,000/yr as that is a low number.
I really do not see how the EU can enforce this anyway. They really can't sue us. Or if they do, how do they enforce judgement?
Just to clarify.. I contacted the EU "rule keepers" directly and as noted above there is no threshold for Non-EU companies. No minimums at all. As far as they are concerned the rule is... If you complete ANY SALES to any non-business entity in the EU then owe the VAT.... Those thresholds are for businesses IN the EU but none were set for businesses not in the EU...
Living Media
07-01-03, 05:58 AM
Here's a FAQ about EU VAT issues (http://www.europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=MEMO/03/142|0|RAPID&lg=EN&display=).
The list of "more information" links does not have a link for the US. Is that just for Europe?? This is very confusing... I haven't read anything definate at all on this. I'd like to see an article on how it will affect a US business owner.
UH-Simon
07-02-03, 01:43 PM
My understanding of this was that US business that actually have physical entities in an EU country would have to charge VAT. It all started when Freeserver (a big UK ISP) took AOL to court because AOL never charged their UK customers VAT due to them claiming that AOL is a US company. This was seen as an unfair advantage. AOL do have offices in the UK and therefore should charge VAT. If you're a US based web host and you don't have an office in the EU then why would you submit taxes to that country? That's effectively the EU forcing you to abide by their laws. Sounds silly to me.
Simon, who's the CEO - you or Matt? You both have it under your name's on your signatures :)
thebyp2
07-02-03, 02:10 PM
just to throw my 2p in here.
i don't know a great deal about the entire vat question, and find it very confusing.
in regards to the bit where people were mentioning that they couldn't enforce it, they can.
'europe' can not enforce it, but each state within can. for example, the uk has a nice little treaty which entitles it to levy the same punishments to us citizens as they would recieve had they dodged a normal US tax.
it happens very frequently.
UH-Simon
07-02-03, 02:14 PM
Originally posted by CDHost:
Simon, who's the CEO - you or Matt? You both have it under your name's on your signatures :)
Haha, yes, I think we better change the signatures. Co-owners would be more appropriate.
lol :)
VAT is a very confusing matter and one of which i used to think i had an understanding of until this new law came into effect.
I have got myself a meeting with a new accountant in the next weeks, i hope things will be more clearer to mean easier for me to manage and sell services without having the risk of fines, probation and/or security limit deposits!
Adam,
Please let us know what your accounts opinion on this matter is.
Karen
Sure thing, as soon as i have gotten the understanding from when i meet him, i will let you all know. But until then im afraid i cant help with this :(
KualoJo
07-09-03, 06:24 PM
Deb and others,
This all sounds very messy and confusing indeed. I would hope that UH-Simon is correct in this regard. Providing that you do not have an office or presence in the UK or EU, then you shouldn't as far as I am aware have to pay the VAT. As he pointed out AOL were not paying VAT as they claimed to be a US based company, although they did have offices in the UK. It was kind of sneaky to be honest as they have a very large consumer base in the UK and were exempt from VAT.
However I found this quote:
"Although the tax change does not affect physical goods, such as books or CDs paid for online, the fallout has been enough to cause AOL to move its European offices to Luxembourg, where the tax is cheaper. Amazon has made a similar move."
(Source: http://www.ecommercetimes.com/perl/story/21693.html)
The fact that AOL moved its headquarters from the UK to Luxemburg where tax is cheaper suggests to me that the existance of a physical office is key to whether or not you have to charge VAT.
In effect, selling your hosting services to the EU can be considered an export. As far as UK VAT laws are concerned, a supplier does not have to charge VAT to foreign countries on exports. It's probably similar in the USA I would imagine.
I actually had a lengthy conversation with our accountant the other day and will be contacting my local VAT office to arrange a meeting as we will need to register for VAT very shortly. The big question for us is do we have to pay VAT for our customers in foreign countries, and is webhosting considered as an 'export'. All kind of messy, as it is a virtual service, but very interesting and very complicated all the same.
Anyway, I will let you all know what the VAT office have to say about it all and will also enquire about this new VAT regulation for US providers.
I should imagine that you would be OK provided you have no UK presence.... as you have all pointed out, no EU VAT man is going to be knocking on your doors anytime soon.
Regards,
Jo
The UK is not the EU. Having a presence in any EU nation would cause this issue, hence the move to luxemburg. They are acting as EU companies now, not US companies selling to EU nations, which is what they pretended to be.
Officially this collection would fall under the hague, but I doubt that as well as none of it is very clear. But the issue is not with individual countries but the EU as a whole, which if you have been following the fun of watching nations like Germany and Italy get along, you know it is all a mess. I do not know of one case of the hague treaty being used to collect taxes.
We do not collect it. Never will. They day I talk about how fast someone can throw a baseball in Kilometers is the day I even think about collecting it.
The law had very specific targets, the rest of us are just collateral damage that I do not think the EU cares about.
Chet
Thanks for your help guys, and thanks for that Jo! :)
KualoJo
07-10-03, 12:14 PM
Originally posted by Adam:
Thanks for your help guys, and thanks for that Jo! :)
No probs... doesn't really confirm too much at the moment but lets see how it pans out.
Jo
Doesn't confirm much but its more of a thanks in advance for the help and understanding that you're hopefulyl gonna share with us lol :)
LiftNw8
08-08-03, 07:54 AM
I have been reading about this all over the place and I just can't see them being able to enforce it at all. And if they were to attempt to do so, well I would just drop the customers that I had from the EU. It won't break my bank account, it would not make my EU customers happy but what else is their to do. This is the EU's way of stopping people from their using services outside of the EU.
Kind of like if the US imposing a tarriff on services in the EU, and if they are going to do us that way then we should do them the same.
GordonH
09-13-03, 11:51 AM
Freeserver (a big UK ISP) took AOL to court because AOL never charged their UK customers VAT due to them claiming that AOL is a US company
UH-Matt is sort of correct.
The problem is that there is no UK VAT class for Internet services. Most ISP's are listed as telecommunications suppliers.
Under the place of supply rules for this class its where the call originates that is the jurisdiction.
So if a call originates from the US it is outside the scope of VAT.
When the Internet came along this was then extended based on Ip addresses.
Because AOL is actually a provate network all their Internet side IP addresses are routed to Virginia, hence the zero rating
It was nothing to do witht he country of domicile of the company as such.
If it was then we could all buy our stuff from wallmart and not pay vat (we have a wallmart in our town, used to be called Asda)
It was a strange anomaly and I would have thought the answer was to make companies register under another class.
Gordon
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