This is one of the biggest problem of the EU. We have the Euro but we don't have a fiscal uniformity.
The result is that companies relocate where taxes are lower so the native companies struggle to stay alive.
According to HMRC (the UK's tax collection dept), there are some strange rules and exceptions being hastily made up:
UK VAT tax exemption levels (currently £81,000 turnover in last 12 months) are now void for digital products. Even if your turnover is only £1, you now have to be VAT registered.
If you sell a PDF online to someone who lives in the EU, you have to charge VAT at that EU country's rate for ebooks (which can range from 3% to 25% depending on which country), but ONLY if you automatically send it to them. If you have a manual system, e.g. you send it as an email attachment, it is exempt from these new rules.
A great example of lawmakers being about 20 years behind technology, and how when a disruptive technology starts to really threaten the old system, we get badly-written, hastily put together laws and absolute messes like this :(
Seriously, how will they enforce this?
If I sell an ebook via Gumroad or Stripe to a user from the UK, what's stopping me from not giving a fuck?
Will they lock down international credit card purchases from companies that are not VAT registered? Does the infrastructure for this exists?
Will I be sued for tax evasion in the UK and be charged if I ever travel there? Or is Stripe getting sued?
What a freaking stupid law, all in the name of stopping Amazon and locking online commerce to their own country, effectively nuking the benefits provided by the internet to people in the EU.
The only explanation I can come up with for this law is that they've calculated that they can make money off bigger companies, and they don't care at all about smaller businesses struggling to comply.
In any case, a good reason not to base your business in the EU if you can avoid it.
Sacha - Apparently it applies to all global businesses who sell to EU member states, not just those physically located in the EU :(
I expect non-EU businesses will simply ignore the regulation though?
That's what most non-EU businesses have been doing since 1 July 2003 when the EU first brought in VAT rules for digital goods and services:
I've come across a few US-based companies who charge me VAT (I'm in the UK), e.g. O'Reilly Media do for subscribing to their Safari Books service.
This article takes a realistic look at the implications of ignoring the new law:
I'm non-EU and I stopped selling to EU. Came across few others who did the same.
The VAT is a consumption tax and is always included in the purchasing price (thus supported by the buyer). It makes perfect sense that this would be according to the buyers country and not the other way around. People are just pissed that they have to work a bit extra to implement this, and if your business dies because of this than you must have a terrible balance sheet.
Also, for websites like joomlapolis, maybe think before you try to launch a revolution. "kills ecommerce", lol
People are just pissed that they have to work a bit extra to implement this,
Perhaps you don’t realise how much that “a bit extra” actually involves. It will be prohibitively expensive and/or technically impractical for many small and microbusinesses to comply with the new rules as things stand today, and of course those new rules are now in effect.
You can read more about the issues at http://euvataction.org.
and if your business dies because of this than you must have a terrible balance sheet.
There are potentially hundreds of thousands of very small (“micro”) businesses out there that are just selling a niche digital product for a small fee on-line, yet now have to comply with the same tax collection and reporting obligations as multinational corporations. These aren’t SMEs with a dozen employees and six-figure turnovers. They’re local bands who make a bit of side money selling their music as digital downloads, or hobbyists who support their web site by selling an e-book PDF, and that kind of thing.
Of course, it’s also a huge burden on those slightly larger SMEs as well. Suddenly they have all kinds of new obligations that come from 28 different EU states’ inconsistent interpretations of the rules, and people following this issue have already identified several areas where it will be difficult or outright impossible for a lot of on-line vendors to comply with the new rules without also violating existing laws about consumer rights, data protection, and so on.
If you don’t think this kills e-commerce, at least at a small scale, try #vatmess on Twitter and look how many small businesses are no longer offering their digitial products at all or at least across EU borders as a direct result.
What does this have to do with design?
While the implementation might not be appropriate, this new law makes perfect sense to me: I live in "X" country so I should be paying taxes according to the country I live in, and those taxes should go to my country, given the fact that I bought the product there and I want my country to grow richer.
I understand it's a lot of work and the law is not as clear as it should be but from a consumer point of view, I don't want my taxes to go to Ireland just because it's cheaper for the company.
The EU should provide some sort of SDK for online shopping, something simple to use and that can detect the location and apply the appropriate VAT percentage, that would help all businesses to comply with the law.
I expect this law to be ignored by small to medium sellers.
How does this regulation affect no-EU business exactly? If we don't follow this regulation, how the EU gov reach the non-EU based business? Anyway, I mainly use paypal for checkout purpose on my website. By this regulation, so it's now safer to use 3rd party service such as 2checkout.com to process the checkout?
For anyone who doesn't have the resources to build the solution for this or fuck up their checkout process by requesting extra information, check out this service which integrates into Stripe and detects it all automatically.
That works nicely when you only have to deal with 28 different standard VAT rates.
When you consider the number of exceptions (like books and magazines), which have a different set of 28 VAT rates, it gets way more complicated.
Throw-in unusual categories like "private tuition" (0% VAT in the UK if you don't have any employees except yourself) - which a one-to-one video or mentoring course could possibly fall under and you've got the potential for completely screwing up how much your customers should be paying :(
What... the... hell...
Projekktor has stopped selling their video player because of this stupid law.