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EU digital VAT effective 01Jan15

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
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...
Read the list above of the individually acceptable means.
Address w/postal code only counts as 1

That requirement has nothing to do with USA. That list is for EU seller's to use for address verification compliance.
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
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
With that example, use of IP address as one verification method would fail to match a "ShipTo" address. Thus requiring a seller to obtain a validated, matching address using one of the other methods. All this prior to delivering the digital goods being offered for sale.

if it becomes a major issue i can see web hosts and companies like choppily for example offering to handle it
The rule becomes effective in 4 days and I have yet to see a software package commercially available to EU sellers that can satisfy the address verification by automated means. AND how many different ecommerce platforms are in-use by EU sellers.
 
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Dermot Cox-Kearns

Guest
the billing address of the customer....courier companies use this every day....there a many software packages that are available covering this.

the Internet Protocol (IP) address of the device used by the customer....is this not how cokies tracking works.......this is not a strong area with me...

customer’s bank details..... IBAN or SWIFT / BACS codes cover this...

the country code of SIM card used by the customer.....Each country has codes 087, 086, 085, 083 are the irish sim card codes...

the location of the customer’s fixed land line through which the service is supplied.....Again each country has a code 353 is ireland. ...I am not fully sure how this works but this coding is the second oldest location coding in the world next to country codes.

other commercially relevant information (for example, product coding information which electronically links the sale to a particular jurisdiction)......this is catch all speak. ...which could cover anything providing it is legal.
 
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Dermot Cox-Kearns

Guest
I am dropping out of this thread. ..

It is starting to go around the block to much...

Interesting topic but nothing to get over heated about....

Most of the debate has been academic for the most part....for the type of business I run and I suspect the type of business other posters run.
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
Most of the debate has been academic for the most part....for the type of business I run and I suspect the type of business other posters run.
Most of the debate has been around assuming that physical goods VAT requirements are identical to digital goods VAT requirements which go into effect 01Jan15.

It is quite clear that the requirements are much different if one would take a bit of time to read the references for digital goods.
============================================
After January 1st you will need to have two, non-conflicting pieces of evidence as to your customers location. For web sales this probably means collecting IP address and billing address.
You will not be able to allow a customer to buy an ebook, software or a subscription to your SaaS without first asking for the full address and potentially other information to identify them. The explanatory notes state that:
“Article 23 states that when establishing the place where the customer belongs, the supplier should base himself on factual information provided by the customer and that he should verify it by normal commercial measures such as those relating to identity or payments checks” – 9.5.4 How much detail does the supplier need when verifying the evidence (link to ec.europa.eu document)

If the customers IP address and billing address conflict you are going to have to halt the purchase unless you can gather some other proof of location. As yet I don’t know if the self certification option will be allowed. If it is, at the very least you are going to have to throw up a screen asking the user to confirm where they will “use and enjoy” the product. However note that,
“… it should be borne in mind that the items of evidence have to be different and should not duplicate each other. For instance, when a customer gives a billing address and later confirms that same address through self-certification, that can only be taken to constitute a single item of evidence. The same is the case when the customer gives his bank details which in turn refer to an unique payment mechanism or are confirmed by the service provider, or when an IP address and the geolocation point to one and the same location. In those cases the supplier can only be seen to have one item of evidence.” 9.5.5
[h=3]You will not be able to use PayPal Add to Cart buttons, a simple “Pay with Stripe” form for purchase of digital products[/h] These simple options for payment of digital products won’t give you the ability to confirm customer location prior to purchase.
The Explanatory Notes (9.5.1 5) do suggest that if you payment provider shares billing address information with the seller prior to purchase (e.g. in a pre-Auth scenario or perhaps if you verify a card prior to a trial) that could count as one of the forms of proof, under “commercially relevant information”. However you can’t take advantage of that in a simple payment scenario.
In terms of checkout flow you also potentially have to halt the purchase process to gather additional information if these sources conflict. This is going to require systems that are aware of this.
 
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Dermot Cox-Kearns

Guest
That deals with income tax, not VAT
Oh gosh. .

I never said it was about vat...

it is about tax treaties the us have with other countries. ..

you said the us would never collect tax for another country...

this is what I mean....about this thread going around the block...
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
Software to do any one of the list IS readily available.
Software to compare any 2 of that list until there is a match does not exist for commercially available ecommerce applications. (that I have found)
Please provide specific examples of available software or consider everything half-baked

IP address: doesn't matter if you agree. It is one of the acceptable verification by the EU digital VAT
bank details: not readily offered/provided by customer as a condition for purchase

the billing address of the customer....courier companies use this every day....there a many software packages that are available covering this.

the Internet Protocol (IP) address of the device used by the customer....is this not how cokies tracking works.......this is not a strong area with me...

customer’s bank details..... IBAN or SWIFT / BACS codes cover this...

the country code of SIM card used by the customer.....Each country has codes 087, 086, 085, 083 are the irish sim card codes...

the location of the customer’s fixed land line through which the service is supplied.....Again each country has a code 353 is ireland. ...I am not fully sure how this works but this coding is the second oldest location coding in the world next to country codes.

other commercially relevant information (for example, product coding information which electronically links the sale to a particular jurisdiction)......this is catch all speak. ...which could cover anything providing it is legal.
 

Larry Peterson

PFG, Picture Framing God
Oh gosh. .

I never said it was about vat...

it is about tax treaties the us have with other countries. ..

you said the us would never collect tax for another country...

this is what I mean....about this thread going around the block...
For income tax, the US government does not collect the tax. You pay it directly to the foreign body. The only way the US is involved is for any credits you may claim on your US income tax.

This whole thread has been about VAT and you suddenly throw income tax into the mix.
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
This whole thread has been about VAT and you suddenly throw income tax into the mix.
Minor correction Larry,

This thread was started about EU DIGITAL VAT and morphed into VAT for physical goods assuming prior knowledge on physical goods VAT applied to the digital goods VAT which becomes effective 01Jan15.
 
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Dermot Cox-Kearns

Guest
I really don't know what you are on about...

I fully understand you are talking digital sales...

All the eu are doing is setting some transaction at zero for vat....and putting a few clear guidelines around the transaction. ...

Let me make it very clear the vat laws are not changing. ...all that is changing is some products are now within the vat regulations. ...if they were ever legally outside the regulations. ..

At this time of year ....every year the eu tweek the vat regulations a bit...all that has happened this year is that a grey area of vat has been updated. ...in the past on line sellers of digital media should have paid vat.....but did they all pay it....I guess the answer is no....the eu have now spelled it out in no uncertain words. ....pay your vat or suffer the consequences. ..
 
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Dermot Cox-Kearns

Guest
Physical goods or digital goods...it makes no difference. ..under vat requirements. .as I have said many times vat is a very simple tax...perhaps it is so simple you are just not getting it...

The digital requirement for vat was always there...however all that has been done for 2015 is that the regulations have been up dated to close off some loop holes that unscrupulous businesses were exploring. ..
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
pay your vat or suffer the consequences. ..
Another example of not understanding the digital VAT rules that go into effect. I have read quite a few articles over the past month to get what I consider a pretty good understanding of the rules. Much of what you say contradicts the explanation of the rules. When asked for details, you tend to wander off topic. I bet you haven't read Hannah's bananas yet.

It is not pay your VAT. It is follow the rules. The rules specify the requirements for not collecting or paying digital VAT. Following those rules for not collecting or paying digital VAT does not make for a criminal act as you have suggested more than once.

The VAT rates may be the same for physical or digital. No argument there. The required methods to determine, document and collect do differ significantly and are not easily automated for digital goods.
 
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Dermot Cox-Kearns

Guest
For income tax, the US government does not collect the tax. You pay it directly to the foreign body. The only way the US is involved is for any credits you may claim on your US income tax.

This whole thread has been about VAT and you suddenly throw income tax into the mix.
kinda hard to answer that Larry. ..tax is tax regardless of what type of tax it is...
 
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Dermot Cox-Kearns

Guest
OK that is me done......as I said this thread is just going around the block.....

If you think you will be seriously effect by these new vat requirements. ..and you don't understand them I suggest you go to a good tax accountant professional who has export experience.
 
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Dermot Cox-Kearns

Guest
Hannah's no I have not read it...

Is it an official eu publication !!

I only follow the official guidelines put out by the irish revenue or eu when it comes to tax matters.

Oh gosh...I had a quick look Rick....it is some sort of blog....Oh my gosh this whole thread was started based on a blog article. ...what a waste of my time. ..
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
OK that is me done......as I said this thread is just going around the block.....

If you think you will be seriously effect by these new vat requirements. ..and you don't understand them I suggest you go to a good tax accountant professional who has export experience.
I think you have that backwards. I do understand them because I have read the digital VAT rules.

Regardless. Please help me by stepping through this real world example.

Calculate the VAT required


I want to purchase a digital download of Dermot’s PDF on how to debate VAT calculations from your website in Ireland. Filename Dermot.pdf

I add the PDF to the cart. assume value = 100 euro
I proceed to checkout.
I enter my home shipping address in France.
I enter my payment information.
How much do I pay?
When can I download?

Oh, BTW, I am currently online in Spain on vacation using a temporary cellphone that was purchased in London.

What sales tax do you calculate based on that information?
Tell me how to do that automatically so that the purchase can be completed properly according to the 01Jan15 rules.
Can’t do it automatically, then tell me how to calculate the VAT manually.
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
Hannah's no I have not read it...

Is it an official eu publication !!

I only follow the official guidelines put out by the irish revenue or eu when it comes to tax matters.

Oh gosh...I had a quick look Rick....it is some sort of blog....Oh my gosh this whole thread was started based on a blog article. ...what a waste of my time. ..
No Dermot. I have said that it was a lighthearted explanation of the digital VAT requirements. IF you had read any other article regarding the digital VAT requirements, you would know that the requirements are pretty much inline with the analogy.

But I'm not the one who made a reply before reading the original post.

http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/telecom/explanatory_notes_2015_en.pdf
 

Larry Peterson

PFG, Picture Framing God
Physical goods or digital goods...it makes no difference. ..under vat requirements. .as I have said many times vat is a very simple tax...perhaps it is so simple you are just not getting it...
One of the reasons we "might not get it" is that we don't pay taxes to multiple state and local authorities; just one. You are used to paying taxes to every country in the EU.

We are used to paying taxes to just a single state. If an internet sales tax is ever enacted, it will be a major clusterfrack for all involved. Here is just one article on what it might involve: http://www.pcworld.com/article/2049412/study-internet-sales-tax-software-will-be-costly-to-implement.html. There are zillions of others. It will be even worse if all the local taxing authorities get their grubby little hands into the mess. You can have taxing at the state, county, local, school district, public transis, special district and others. There isn't any redily available count of the number of districts but this article (http://www.washingtonpost.com/blogs/fact-checker/post/mcconnells-claim-that-there-are-nearly-10000-tax-codes-nationwide/2013/04/26/a6b3bef4-aeaa-11e2-a986-eec837b1888b_blog.html ) suggest that it might be between 7600 and 14500.

Whenever this might go forward, they will have to deal with the 1992 Supreme Court ruling that stated that "This rule is based on a 1992 Supreme Court ruling in which the justices ruled that states cannot require mail-order businesses, and by extension, online retailers to collect sales tax unless they have a physical presence in the state." I don't know what they will do to keep the Supreme Court from voiding any such law.

Implementing this will be a bigger mess than the Health Care Plan. Luckily all the failed proposals have set a $1,000,0000 threshold for this. So if it does pass, I won't have to collect or pay it (unless business greatly increases next year), except for PA. That would actually give any (some?, most?,all?) of us a competitive advantage of art.com, et all.
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
Yes vat fraud is treated as a criminal act..

This is what happened to one clever irish guy who felt the vat laws did not apply to his business. ..

http://www.thejournal.ie/man-given-six-year-sentence-for-garlic-tax-scam-379395-Mar2012/
I've never suggested for anyone to commit fraud. I did state that the rules provide a specific path which exempts vat calculation and collection on digital goods. My logic tells me that anyone knowledgeable in the specifics of the digital VAT rules would know about that path.
 
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Dermot Cox-Kearns

Guest
Larry I don't deal with every eu country for vat...all my vat requirements are dealt with by the irish revenue. ..

Non eu businesses can opt to register in only one eu country and do all there vat needs for the eu through that countries revenue body.
 
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Dermot Cox-Kearns

Guest
I've never suggested for anyone to commit fraud. I did state that the rules provide a specific path which exempts vat calculation and collection on digital goods. My logic tells me that anyone knowledgeable in the specifics of the digital VAT rules would know about that path.

I figured that Rick :)

But just a warning non compliance with any tax of any kind in ireland or the rest of Europe is treated as criminal. ..all be it with a very light hand... :)

Remember also in law in ireland and I would guess it is the same in the rest of Europe and the US....ignorance is no excuse. ...
 
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Dermot Cox-Kearns

Guest
OK
Good luck with you venue into sales in Europe. ...I wish you all the best...
 

Larry Peterson

PFG, Picture Framing God
Larry I don't deal with every eu country for vat...all my vat requirements are dealt with by the irish revenue. ..

Non eu businesses can opt to register in only one eu country and do all there vat needs for the eu through that countries revenue body.
OK so you pay it only to a single body, but how do you calculate and report it for each country?
 
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Dermot Cox-Kearns

Guest
OK so you pay it only to a single body, but how do you calculate and report it for each country?
The revenue in ireland do that for me....I just give them the total vat numbers for each countries sales...


As I have said vat is a very simple tax .....most of the update each year are to make it even more simple. .......even the change to the digital vat is to make it a simple as possible. ..in the case of vat the threshold is zero.
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
€123 euro..

http://www.revenue.ie/en/tax/vat/lea....html#section5

the guidelines from the irish revenue. ..
I did not provide enough information for you to use following the flow chart on page 61 of

http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/telecom/explanatory_notes_2015_en.pdf

which requires 2 items on non-contradictory evidence prior to completing the sale. I thought that EC rules would take precedence should there be a conflict between member verbiage and EC verbiage.
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
You can have taxing at the state, county, local, school district, public transis, special district and others. There isn't any redily available count of the number of districts but this article (http://www.washingtonpost.com/blogs/fact-checker/post/mcconnells-claim-that-there-are-nearly-10000-tax-codes-nationwide/2013/04/26/a6b3bef4-aeaa-11e2-a986-eec837b1888b_blog.html ) suggest that it might be between 7600 and 14500.
Larry, there is actually an avenue where the proper tax calculation can be performed automatically. The Supreme Court did leave states with a way to enforce taxes if they chose different wording. IF a business uses the application which individual states can join, amnesty for any error is granted by the states to any business who utilizes the application.

TaxCloud.net
 
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Dermot Cox-Kearns

Guest
I did not provide enough information for you to use following the flow chart on page 61 of

http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/telecom/explanatory_notes_2015_en.pdf

which requires 2 items on non-contradictory evidence prior to completing the sale. I thought that EC rules would take precedence should there be a conflict between member verbiage and EC verbiage.
I will need a bank transfer from you...in general that is how my customer pay me and in reality it is the only way I will accept online business. ..
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
I will need a bank transfer from you...in general that is how my customer pay me and in reality it is the only way I will accept online business. ..
That would be an exception to the most common way of conducting a typical online business, but

BINGO

by completing the sale in that manner, you have just satisfied the manual intervention clause of the law that relieves you of the burden of collecting VAT. The sale is no longer a automated, digital download sale.
 
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Dermot Cox-Kearns

Guest
OK so you pay it only to a single body, but how do you calculate and report it for each country?
Sales by location report on my invoicing software. ...and in my case about five minutes manual work three times a year..

and from about mid 2015 I will have someone else do that bit of my accounts...
 
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Dermot Cox-Kearns

Guest
That would be an exception to the most common way of conducting a typical online business, but

BINGO

by completing the sale in that manner, you have just satisfied the manual intervention clause of the law that relieves you of the burden of collecting VAT. The sale is no longer a automated, digital download sale.

Not really an exception. ..most businesses in my sector push customers in that direction. ..as do my us suppliers....

big advantage is virtually impossible risk of fraud and it is a very cheap way of moving money around...
 

David N Waldmann

SGF, Supreme Grumble Framer
Sales by location report on my invoicing software. ...and in my case about five minutes manual work three times a year..
You don't seem to understand the orders of magnitude larger than the EU VAT the US Sales Tax system is. It takes me 15-20 minutes every month to do the manual part of reporting sales tax just for my own state of Vermont (population +/-625,000).

There isn't any redily available count of the number of districts but this article (http://www.washingtonpost.com/blogs/fact-checker/post/mcconnells-claim-that-there-are-nearly-10000-tax-codes-nationwide/2013/04/26/a6b3bef4-aeaa-11e2-a986-eec837b1888b_blog.html ) suggest that it might be between 7600 and 14500.
Again, in our little state there are a total of about a dozen different tax locales that have to be separately taxed and recorded. Thankfully, we ARE allowed to just pay one total to the State and they credit the respective individual jurisdictions.

Our software has the ability to do location based sales reporting, but how much is it going to cost me to figure out what those, call it 10,000, locations are (and the tax rates, and keep up with any changes), and enter them in my system? And then I'm going to write one check to the US Collective Tax Authority and they'll sort it out from my 2000 page report?
 

Rick Bergeron - CPF

SGF, Supreme Grumble Framer
how much is it going to cost me to figure out what those, call it 10,000, locations are (and the tax rates, and keep up with any changes), and enter them in my system? And then I'm going to write one check to the US Collective Tax Authority and they'll sort it out from my 2000 page report?
TaxCloud.net

is a national sales tax consolidator that includes amnesty for the seller if there are any mistakes in sales tax calculations.

IF/WHEN we ever get to that point.
 
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Dermot Cox-Kearns

Guest
Thanks David I do understand the difference in the size of the tax codes between the usa and europe. ..

I have had particular reason (more on it in 2015) to look at taxation of all types around the world in the last six months. ...this is based around a growing requirement to do with globally mobile executives and businesses. ..

I have a meeting with PWC lined up for early 2015 to drill the subject further. ..

Also you may not be aware my first wife (RIP) was American. ...I also worked for a usa company at one stage and to this day I have some investment in the usa....I have had my fair share of interaction with the usa tax people.
 
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Dermot Cox-Kearns

Guest
Rick asked.....

Regardless. Please help me by stepping through this real world example.

Calculate the VAT required


I want to purchase a digital download of Dermot’s PDF on how to debate VAT calculations from your website in Ireland. Filename Dermot.pdf

I add the PDF to the cart. assume value = 100 euro
I proceed to checkout.
I enter my home shipping address in France.
I enter my payment information.
How much do I pay?
When can I download?

Oh, BTW, I am currently online in Spain on vacation using a temporary cellphone that was purchased in London.

What sales tax do you calculate based on that information?
Tell me how to do that automatically so that the purchase can be completed properly according to the 01Jan15 rules.

..........

I read a bit more into this normal country of residence is what you should use...for the delivery address ...

However it dose look like because my pdf would be educational it is vat exempt. .....I am not sure if I would have to be a registered education business to gain from the vat exemption on education material.

You may be due a €23 euro refund on what I charged you earlier in the day :)
 

David N Waldmann

SGF, Supreme Grumble Framer
TaxCloud.net

is a national sales tax consolidator that includes amnesty for the seller if there are any mistakes in sales tax calculations.
That's a great concept/system, but you have to use or transition to something that works with it.

95%+ of our orders are by phone (combination of the custom nature of our work and customers needing information/guidance to make decisions), so we don't have any kind of shopping cart setup. Our ERP/POS would have to be customized to interface with it (assuming it can even be done), or we'd have to get a new system that is already set up to work with it.

Since the bulk of our business is as a manufacturer and B2B, most systems designed for that are not well suited for complicated sales taxes and would also most likely need to be customized to work. The other option would be to use two systems - one for manufacturing and one for sale; I've considered it before but would do that only as a last resort.


IF/WHEN we ever get to that point.
I don't see it happening either (not in the foreseeable future, anyways). I was speaking towards the idea of a "free trade zone" between the EU and USA that would require reciprocal tax agreements.

BTW, how do you think the EU would like/handle states like NH and AK that have no sales tax? Hmmm. We might see an increase of companies providing virtual addresses...
 
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Dermot Cox-Kearns

Guest
From the eu website.

Pay VAT in the country where you shop

As a private individual shopping#in the EU, you should only pay VAT once, in the country where you make your purchase.

You can bring home anything you buy in another EU country, without stopping at the border or making a customs declaration. The only condition is that your purchases must be for your own or your family's personal use, and not intended for resale.

Exception for telecommunications, broadcasting and electronic services

From January 1st 2015, VAT on telecommunications, broadcasting and electronic services is charged#in the country where you live#(the country where you are established#, have your permanent address or usually live), and not in the country from where you purchase the service. These rules apply to services supplied both within and from outside the EU.
http://europa.eu/youreurope/citizens/shopping/shopping-abroad/vat/index_en.htm


Hmmmmm interesting the case study about the car going transboundary within the eu.....Ireland has the most expensive prices for cars in Europe. ...I need to explore this a bit for my next car....
 
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