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EU digital VAT effective 01Jan15

Discussion in 'Picture Framing Business Issues' started by Rick Bergeron - CPF, Dec 24, 2014.

  1. Larry Peterson

    Larry Peterson PFG, Picture Framing God


    So if that is for an Irish company, what is it for me? Let's say I sell 1000 euros of physical stuff to Irish customers. Do I register and pay VAT?
     
  2. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    I do not know EU law but from the little I do understand (and I have read just about every article related to the digital VAT law that is currently available), one country cannot change the law for the entire EU. Nor can one country decide to implement the law differently within their borders than is being implemented within the EU.

    Also, the minimum threshold goes out the window with the implementation of this EU digital law. I have read quite a bit of discussion where UK businesses who currently are beneath the minimum threshold for physical goods will loose that threshold if they deliver digital goods because the law specifically states that there is 0 minimum threshold for digital goods. That statement would apply to Ireland if Ireland is part of the EU.
     
  3. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    Larry

    You are getting the wrong end if the stick...

    The trade agreement the usa wants with europe will get rid of most of the trading issues you encounter in the past...once the trade agreement is fully implemented ....trading with europe will be for all intent an purpose will be the same as trading with one of the us states. ...the principal difference will be that you will just need to understand the vat requirements. ...just as you need to understand the sales tax requirements in the usa...

    Effectively what is going on is that the usa and europe is moving twords a single trading zone....to do this the tax laws have to be in alignment. ..just as income taxes between the two zones are now in alignment.....and social welfare payments such a pension payment are aligned. ..
     
  4. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    No Larry, that would not be true. Physical goods require a customs form and/or StandardCommercialInvoice to be attached to the shipment and the Irish customer will be required to pay import duty PLUS vat before the package will be delivered. The customer is responsible for proper VAT even if the shipper errs in the declaration.

    According to the EU digital law, the EU believes that it has the statutory power to compel you to register, determine place of residence using 2 different databases, dynamically change the price displayed on your website so that the price includes all VAT, collect the VAT and remit payments on a regular basis. All while keeping records of each individual transaction proving the 2 database points for an audit period of 10 years.
     
  5. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    Dermot,
    There are NO sales tax laws which currently span or apply when a product is delivered across state borders. Arizona will be the exception on 01Jan15.
    So is is NOT the same as you try to claim.

    I think you are confusing "Import Duty" requirements and "Sales Tax/VAT" requirements. Comparing apples and oranges the way I understand it.

    Pre-NAFTA, we paid Import Duty on items shipped to us from Canada. Now, we pay no Import Duty. That seems to be similar to the arrangement which you are describing and nothing to do with VAT or Sales Tax.
     
  6. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    Yep correct. ...tax laws for all intent and purpose in the EU are the same for every country. ...however each country within reason can set there own tax rates....that is why you have different vat rates and income tax rates across Europe. ..

    and yes the zero rate for digital sales will apply to all EU countries. ..

    Ireland are going to be the big loser for vat on digital media. ...Ireland is the biggest seller of software in Europe. ...we used to get all the vat we collect for sales to other EU countries. ...this changes from 2015 when we will have to send the vat collected to the goods receiving country less some sort of handling charges for having collected the vat in the first place...
     
  7. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    As I understand it one of the obstacle to a full trade agreement with the us and europe is that the us are dragging there heels about having a transboundary states tax regulations in the us states similar to the transboundary tax laws that are in place in Europe. ...

    it will only be time before what amazon are doing is adapted by other companies and eventually by government in the usa...
     
  8. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    I don't think we will see sales tax regulations across USA tax jurisdictional boundaries in our lifetime. Requiring a seller to be able to calculate the exact tax rate of over 5000 tax jurisdictions at any moment in time is technically feasible but not likely. AND to have that functionality across every possible selling platform even less likely.

    Yes, Amazon, Google, Apple, Dell, etc have IT staffs to worry about that and also tax audits and to figure out the loopholes.

    In a way, I'm almost surprised that those same big players haven't hired an army of low paid individuals somewhere in the world to manually email the digital products instead of supplying them automatically. That would suffice to not collect or pay any EU VAT.
     
  9. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

  10. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    Rick...

    I import quite a bit of product from the usa...

    For example I have a pallet of goods on the way to me from the usa at present. ...when it arrives I will have to pay import duty and VAT on it...


    The calculation is goods $$ converted to €€ plus shipping for landed cost ireland duty is paid on this total with the irish rate of 23% on the landed cost....unlike when I get product from another eu country because I am registered for vat i don't have to pay vat on transboundary eu purchases...however when my usa order arrives iwill have to pay the vat up front...

    When the us / European trade agreement is fully in place and god only knows when that will happen. ..orders from the us to me will be treated as orders are treated at present from other EU countries. ..
     
  11. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    Don't discount it in our life time. ..

    there is such a huge need for countries to collect more tax....tax changes are going to come hot and fast in the next 20 years and the usa is not immune from the need for more tax....wait till the baby boomers get to vote on more tax or no more pension ....what do you think will happen !!!
     
  12. Larry Peterson

    Larry Peterson PFG, Picture Framing God

    Even if it does happen, there will be thresholds to protect small business. In the now extinct Marketplace Fairness Act of 2013, the threshold was $1,000,000.
     
  13. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    that is all well and good assumption. NAFTA didn't relieve any sales/use tax requirements, though it did relieve import duty.

    i wouldn't expect any EU agreement to be different.

    it would be much easier for the EU to implement a 'use' tax for all purchases and place the responsibility upon the consumer within their own tax jurisdiction. much easier to prosecute too.
     
  14. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    we do have a user tax.... it is called vat :cry:

    In Europe for consumers the price charged must include vat...

    For b2b the price is generally displayed as the cost pre vat....for vat registered businesses vat is a bookkeeping exercise you offset vat on purchases against vat on sales. ...
     
  15. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest


    Why is it extinct !!
     
  16. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    sales tax is charged at the point of sale within tax jurisdictions. use tax is due on any/all items that escape sales tax charges. ie: online purchases from outside the vat jurisdictions.... but is the responsibility of the consumer to declare & pay. ie: digital goods.

    much easier for governments to collect from residents than to attempt collection across the pond. & less expensive to collect.
     
  17. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    The original idea of vat was that it would be a simple catch all tax...

    23% in ireland covers sales and user tax....and possibly a few others. ..

    I can recall when we had something in ireland pre vat days which was a bit like the us sales tax....it was hard and costly to administer. ...and was open to leakage and abuse. ...
     
  18. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    In any case the ship gas sailed on the digital tax issue. ...with the billions involved this is one tax that will be implemented fully. ..

    It is academic talking now about what should or should not have been done. ...the mainstream digital industry is behind it.....they have suffered huge losses by businesses who are not tax compliant in that sector. ...
     
  19. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    as will we... comply with the alternate delivery method for not collecting vat, but raising the price to EU customers to pay for the code development & labor required to manually deliver.

    it would not surprise me to see concessions in the final hours like was done for the cookie law.
     
  20. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

  21. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    Hmmmmm

    there is no revenue in the cookie requirements. ....I am not sure it is a good comparison. ..
     
  22. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    ok if costs need to rise to be compliant what is wrong with that !!!

    I get very nervous when I hear that old potato about cost rises been rolled out....in my book it is a very lame excuse for avoiding running a business in a compliant manner....
     
  23. Larry Peterson

    Larry Peterson PFG, Picture Framing God

    Its extinct because it never passed congress.
     
  24. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    it had similarly difficult technological compliance issues for microbusinesses.
     
  25. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    so i should just absorb software development costs i incur so that i can comply with the section that specifies how to implement the changes. i would think that would be considered following the rules in a compliant manner. it is not proper to charge customers not within the EU for expenses not related to their purchases.
     
  26. John Ranes II CPF GCF

    John Ranes II CPF GCF SGF, Supreme Grumble Framer

    This has been an interesting read, despite some of the emotions of pride involved. I have an interest as I sell physical goods to consumers B2C as does Rick and our International sales have always been increasing every year. The obstacles that we do or may have to deal with are always of interest.

    Dermot, you may be correct in that government is always looking for ways to increase taxes for whatever reasons, but you seem to sometimes miss the point that they may develop very unrealistic ways to achieve their goals.

    As Rick pointed out, sometimes the KISS principle applies more than ever in these situations. When one requires extreme software and financial output to be compliant for a smaller business these has the potential of driving those businesses out of that market, so that only the Amazon.com's exist. Not a good situation.

    I will be clicking and reading some more of these links that have been shared, but to Rick's point, I agree that it is easier for the local tax authorities to enforce and collect the necessary customs duty, and taxes from the recipient. I realize that your business in Ireland is VAT registered, but I am curious about the following scenario...

    If a consumer in Ireland orders goods from Germany, I will assume that they will pay VAT if the item is over €22 but what about customs duty? Now...what if that German made product is shipped to the consumer in Ireland from the U.S.? Does the customer still pay the duty? Again I assume that they will still pay the VAT?

    John
     
  27. John Ranes II CPF GCF

    John Ranes II CPF GCF SGF, Supreme Grumble Framer

    This has been an interesting read, despite some of the emotions of pride involved.

    I have an interest as I sell physical goods to consumers B2C as does Rick and our International sales have always been increasing every year. (Larry...we use USPS primarily for International sales with good success.) The obstacles that we do or may have to deal with are always of interest.

    Dermot, you may be correct in that government is always looking for ways to increase taxes for whatever reasons, but you seem to sometimes miss the point that they may develop very unrealistic ways to achieve their goals.

    As Rick pointed out, sometimes the KISS principle applies more than ever in these situations. When one requires extreme software and financial output to be compliant for a smaller business these has the potential of driving those businesses out of that market, so that only the Amazon.com's exist. Not a good situation.

    I will be clicking and reading some more of these links that have been shared, but to Rick's point, I agree that it is easier for the local tax authorities to enforce and collect the necessary customs duty, and taxes from the recipient. I realize that your business in Ireland is VAT registered, but I am curious about the following scenario...

    If a consumer in Ireland orders goods from Germany, I will assume that they will pay VAT if the item is over €22 but what about customs duty? Now...what if that German made product is shipped to the consumer in Ireland from the U.S.? Does the customer still pay the duty? Again I assume that they will still pay the VAT?

    John
     
  28. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    Shipping within the eu countries have no duty....it is a common trading area...

    the us wants the us and europe to become a single trading area .....sort of like an expanded eu area...

    I am b2b so I am not fully up to date with consumer vat....however as far as I understand up to now if a german uk etc business shipped to a consumer within the eu the rate of vat was the shipping country rate...however I understand that from 2015 it is the receiving country rate of vat that must be charged...
     
  29. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    KISS is going out the window when it comes to tax collection. ..

    This is an interview with the out going tax collector in Ireland. ..note her reference to more complex ways of collecting tax...

    Also note her other roll as chair of the international customs organisations. ....this body is possible the strongest most powerful business body in the world...this is one of the organisation my wife has interacted with over the last 17 years...

    http://www.irishtimes.com/business/...r-how-tax-changes-will-affect-firms-1.2048952
     
  30. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    I said nothing about absorbing. ...

    It will be just an other business cost which if you are running you business correctly you will try to recover as you would try to recover any other business cost.

    If you wish to do business with the eu way would you not wish to be compliant with eu law.....after all the us has laws that I must be compliant with when I supply my us customer. ..
     
  31. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    BTW any half baked business already have reasonable software for collecting tax....to claim that adding a function to deal with vat for the eu is going to be near impossible is trying to reach it a bit....
     
  32. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    John

    The €22 for Ireland is for goods from non eu countries. ..

    VAT is charged on the total within the eu....there is no threshold. .....
     
  33. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    BTW the vat regulations for B2C and B2B within the eu are dealt with differently. ..

    As are the vat regulations within country and transboundary with countries within Europe. ..

    As I have said once you understand vat it is an exceptionally simple tax....as are many of the other tax requirements in Europe. ...

    In particular ireland has attracted a huge number of us businesses to locate in ireland for there European customers. ...business tax requirements particularly in Ireland are extremely simple....
     
  34. Larry Peterson

    Larry Peterson PFG, Picture Framing God

    Then I guess that most of us don't even get to be qualified as half baked. You address us as though you expect us to bankroll huge software obligations without going bankrupt.

    And when someone points this out, you shrug it off. Most of us are MomNPop operations, not huge monolithic corporations that can afford thousands and tens of thousands of software dollars to participate in your markets. You shrug off the complexities of your market and suggest that it is all simple. If so, many of us on this side of the pond must be simpletons.
     
  35. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    From what i understand from 2015 for vat within the eu all I need to is charge the required vat for the eu country I ship to...then report this on my 4 monthly (I am on a 4 month cycle for vat, this various depending on the business and how compliant a business is for taxes in ireland) vat returns. ..the actual transmission of funds from country to country will be done by the revenue (read tax) bodies in each eu country. ...individual businesses will only deal with the tax body in there own country. ...I would guess the same will happen when the us starts to collect vat on shipping to Europe. ..
     
  36. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    I am not dismissing anything. ..however I am familiar enough with software to know that adding a tax band for vat will cost next to nothing. ....in fact most account software has this already built in.
     
  37. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    Dermot,
    You do not appear to understand the requirements for determining the location for which VAT is due for digital goods. I suggest reading my link to Hannah's bananas for a lighthearted explanation/analogy of those requirements. There is quite a bit of software functionality required to comply with that. It is more than just accepting a customer's "SHIP TO" address.

    I am not talking about business accounting software which BTW I do not consider Quickbooks half baked but it cannot fulfill the requirements.
    I am talking about the website software that determines the buyer's address (per EU requirements for delivering digital goods.)
    I am talking about the website software that performs the necessary actions to present the proper sales price which includes VAT to the customer once the valid address is determined.
    I am talking about the processes required to archive the address validation requirements for 10 years.
    I am talking about the manual processes required IF/WHEN the first 2 address verifications to not agree.

    Until now, no ecommerce software had any reason to remotely consider those demanding, technical requirements.
    Add the number of ecommerce software packages available which will have varying technical requirements for proper coding.
    Add the payment processors who do not currently provide and have indicated they have no desire to provide address information due to EU privacy laws already in place. You would not want the payment processor to willingly commit a criminal offense of violating privacy law, would you?
     
  38. Larry Peterson

    Larry Peterson PFG, Picture Framing God

    Never happen. Not now, not ever, never. The US government will never get involved in the collection of taxes for the EU

    We happened to be founded when we rose against taxation tyrannies from your next door neighbor. The day any US politician suggest that we start collecting taxes for Europe is the day that that's politician's career is over.

    You can talk all you want about the new EU regulations that are unenforceable here. I look on with interest the first time the EU takes someone to court for this. Maybe the giants will collect and pay. The little guys, no way.
     
  39. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    What I am taking offence at is the trending in this thread that it should be ok for business in the us to ship to Europe without having respect for eu laws...

    It comes across to me as "I want my cake and to eat it also"....we will take money from the eu....but don't ask us to contribute anything. ..


    The choice is simple be compliant with eu tax laws and do as much business as you wish with europe or stay out of that market.....it is a very simple business decision.
     
  40. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    You might want to take a refresher in Digital VAT compliance. VATMOSS which is intended to simplify matters sounds to be as convoluted as the logistics of the digital VAT.

    This thread had nothing, repeat nothing, to do with any shipment of physical goods to the EU. The VAT process for the value of those goods is already in place AND VAT is collected by the receiving country prior to delivery.
     
  41. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    Larry the us already collect some taxes for Europe and most other countries around the world....there are tax agreement for various things with most countries around the world.....this vat agreement is just the newest one to hit the table...

    I have shares in us $ with a us broker house....my taxes due when tax is due are collected in the us submitted to the us tax people and eventually get submitted to the tax people in ireland.

    There are tax arrangements with ireland which is part of the EU. ...for many things.....income tax, capital gains tax, corporate tax (irish companies employ more people in the us than us companies employ in Ireland) to name just a few...

    There is also agreements on social welfare payments such as pensions. ..Ireland and Portugal have a huge number of retired US people....

    Ireland also pays until they are 18 what we call children allowance a payment to every child born in ireland even though they may live in another country such as the us now....us friends who have 4 children born in ireland but now living in the us get this allowance. ...


    http://www.citizensinformation.ie/e...s_to_families_and_children/child_benefit.html
     
  42. Larry Peterson

    Larry Peterson PFG, Picture Framing God

    The US Government collects taxes fro its citizens and pays it to other countries?? .........Or some US mega large businesses pay taxes to countries they do business in?

    Show me where the US Government collects taxes from a small business and sends it to another country. And show me the US laws that require it.
     
  43. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    I fully understand. ..the digital vat requirements. ..I will be effected by it...

    All the digital vat did was set the threshold to zero in some cases...

    as for locations presently there are 28 eu countries 29 from January 1 2015....if a business is not able to deal with that number of locations I would questions there ability to be trying to do business with any of the locations. ...
     
  44. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

  45. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    The requirements for validation of an address is a us export requirement which has been in place for year's. ..

    You get two things with an address in Europe a physical address and a postal code / Zip code (postal codes are due in ireland in 2015) the two will meet your validation requirements. ...if they don't agree then it is a us government export issue...

    All this validation is requirements for transboundary shipping. ..

    PayPal has had this or something very similar in place for years as I have found out to my cost on a few occasions when I shipped goods to the us...
     
  46. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    BTW I am not trying to score points with anyone. ..

    In ireland we are a very open economy we export about 75% of what we produce...

    From get go in most people's careers in ireland understanding exporting is critical. ..it is unlikely you could do any sort of reasonable business training in ireland without covering some or all aspects of exporting. ..

    I am very excited about the new VAT requirements. ...once it beds down it will open great opportunity for US businesses .....there is a 600 million population in Europe. ...

    I can fully understand why the us government want to strengthen trading with europe this will mean many more jobs in the us. ......however the only real and sustainable way to get to the European market for small us companies is if the correct tax structure are in place...which is starting with the digital vat requirements. ...more requirements will be needed as the us/eu markets open up....
     
  47. Rick Bergeron - CPF

    Rick Bergeron - CPF SGF, Supreme Grumble Framer

    Again, you do not have a proper understanding of the EU digital VAT address requirements. Again, you continue to quote address schemes for physical goods. PayPal does not do this for digital goods. Have you read Hannah's Bananas?

    Physical address and postal code would only satisfy 1 EU digital VAT address requirement. Here is a list of the address validations which are acceptable. Pick any two. Then tell me how to automate a process which would perform the verification of any 2 of the list. According to you, any half-baked software should be able to perform those verifications.


    • the billing address of the customer
    • the Internet Protocol (IP) address of the device used by the customer
    • customer’s bank details
    • the country code of SIM card used by the customer
    • the location of the customer’s fixed land line through which the service is supplied
    • other commercially relevant information (for example, product coding information which electronically links the sale to a particular jurisdiction)
     
  48. stcstc

    stcstc SGF, Supreme Grumble Framer

    dermot what kind of digital download products do you sell?

    i can understand the principal behind this vat as already said businesses be it big us businesses or mom and pop in wherever. are at present selling digital download products into the eu and the eu are not benefitting. whether they should or not is a whole other matter

    BUT. there are companies already dealing with this stuff, i buy some digital products, and have had rates etc change on the order as you fill in the details

    like rick says though the really hard part is the verifying address, as its very easy to appear to be somewhere else physically when online. for example i use a proxy server to be able to watch the bbc player online, as its blocked in ireland. the proxy makes player think i am in the uk

    i can't imagine there are many people on here that are selling DIGITAL DOWNLOAD products that will be affected

    if it becomes a major issue i can see web hosts and companies like choppily for example offering to handle it
     
  49. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    Rick

    For Europe the physical address and postal code are two separate things. ..

    You did say two were needed...

    the validation of address is an export requirement by the us for the sale of technology products. ...it has been in place for years...
     
  50. Dermot Cox-Kearns

    Dermot Cox-Kearns Guest

    software for environmental monitoring. ..

    I also buy in software services for my business from locations outside ireland. .
     
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