EU VAT Changes Jan 1st – The Problems And My Solution…

UPDATE: Jan 23rd, 2015:

1) JVZoo (Fabulous!)
Of all the selling platforms out there JVZoo’s response to the EU VAT rules has been the most innovative and in my opinion it provides the most complete solution.

As a product vendor you can:

a) Block Countries
This is “Solution 4” in my original blog post below. Particularly useful for UK vendors who sell only a tiny amount into other EU countries – by switching off these sales you don’t have to register for MOSS and you can bypass all of the associated admin work.

[A potential issue here are the anti-discrimination laws in the EU. As I understand it (I am not a lawyer and could be wrong) an EU based business can’t refuse digital sales to customers in other EU countries without a valid reason. I’ve yet to see examples of “valid” reasons or “non-valid” reasons, or indeed any qualified clarification on this – if you have any ideas please do leave a comment!]

…or if you do wish to sell into the EU…

b) Choose to charge VAT or not (obviously switch this on to be compliant with the Jan 1st rules!)

c) If you enable VAT, whether to charge by vendors country or, to be compliant with the rules, customers country.

d) Allow customers to manually override their country (e.g., live in UK but buying in France)

e) Download full reports of transactions by country which can be uploaded into your MOSS account.

In my view this is a brilliant set up and definitely good news: If you want to sell into the EU then it makes the bureaucracy much less time consuming. But if you’d prefer to bypass the admin work altogether then you can simply opt out by switching off all sales to EU countries.

2) WarriorPlus (Disappointing!)
I queried what WarriorPlus are planning to do in response to the rules and they implied that they have no plans to change, at least in the short term.

Essentially if you want to use WarriorPlus to sell into the EU then you need to set up individual tax rates inside PayPal. This is a manual process and of course puts the entire burden on each vendor.

I also asked about a country blocking feature which they said they would consider but again, no firm plans on this to my knowledge.

So in contrast to JVZoo a disappointing response from WarriorPlus I would say.

3) Clickbank (Already Compliant!)
As mentioned in the post below Clickbank has always charged the correct sales tax for every region in the world.

Since they effectively sell your product for you (unlike PayPal, WarriorPlus, JVZoo etc) the responsibility lies with them not you.

So literally nothing changes when it comes to the Jan 1 st EU VAT rules and happy days if, like me, you use Clickbank a lot in your business!

4) UK Government Flow Chart
The UK government have published a handy flow chart to clarify the VAT rules. Here’s a link to it (opens in new window).

ORIGINAL BLOG POST IS BELOW – Ideal for getting up to speed if you’re not yet clear on all this stuff!
———————–

This post is most applicable to those of us who live in the EU and especially the UK.

I am not a qualified accountant so this is not advice, only my opinion and nothing more 🙂

So, what is happening?

Currently, if a business sells a digital product (ebook, membership site subscription, software etc) VAT (i.e., sales tax) is charged based upon the country where the business is located.

This has led to a lot of tax avoidance by larger companies.

For example, corporations like Apple, Amazon, Microsoft and many others have previously located their EU businesses in Luxembourg where VAT on eBooks is 3%.

This rate has applied to sales in ANY country in the EU. Even though the rates in most of those countries are higher.

To clamp down on this the EU are, from Jan 1st, changing the rules so VAT is charged based upon the buyer’s location.

So continuing with Luxembourg as the example:

Currently: Luxembourg registered business sells to a UK customer. VAT is 3% (Luxembourg’s “Super Reduced Rate”)

From Jan 1st: Luxembourg registered business sells to a UK customer. VAT charged will be 20% (UK’s rate)

It’s certainly a big shake up with Luxembourg set to lose 70% of its VAT revenue while the UK is set to gain £300 million ($480 million) per year!

What’s the problem for small online businesses?

The problem is a large admin burden and that there are no minimum thresholds for sales into other countries.

If you sell 1 eBook into France then you’ll need to pay French VAT on that.

Sell another copy into Germany and you’ll need to pay German VAT on it.

When you consider that there are 28 counties in the EU with 75 different VAT rates you can see that this amounts to a lot of red tape and hassle for small businesses!

How to comply:

There are several options here. I’ll explain them and then tell you which I’m going for…

1) Register for VAT in every EU country you do business with
For any small online business this would be completely impractical. Enough said.

2) Use MOSS System
MOSS (Mini One Stop Shop) is a system which means you don’t have to register for VAT in every EU country.

Instead you submit quarterly EU sales reports and payments in the MOSS system. HMRC will then pass this on to the tax authority of each relevant EU country.

Note: In the UK if your turnover is less than £81k then you don’t have to charge VAT to UK customers – only other EU ones where, as we’ve said, no minimum thresholds apply.

Still quite a hassle for a lot of small businesses.

3) Use a selling platform
Using a platform which acts as the seller for you.

Obvious platforms are Amazon, Ebay or Clickbank which are already fully compliant and mean you won’t have to register for anything. They’ll charge the correct VAT and pay it directly for you, so nothing changes compared to how it is right now.

JVZoo, WarriorPlus and other similar systems are not classified as platforms by the legislation – here you’re still classified as the seller so it’s your responsibility.

4) Stop selling to other EU countries
By not selling into other EU countries none of this matters. You won’t have to worry about any of it!

My Solution

I’m going to use a combination of (3) and (4).

I decent chunk of my income comes from Clickbank already. I like it and given these new laws I like it even more.

Also, 90%+ of my sales are into US, UK, Australia and Canada. EU sales accounts for only a fraction of the remainder.

So balancing the loss of EU sales against the hassle of creating, preparing and submitting MOSS reports on a quarterly basis becomes a no brainer.

On a personal level not selling into the EU isn’t an outcome I’d like because I’ve had some lovely customers in the EU and made some great contacts there too – but businesswise it’s extremely difficult not to see it as part of the solution.

The only slight challenge is how to actually stop selling into EU countries.

It would be nice to have an option in PayPal to “switch off” the EU (I believe a similar option is available on a country basis but only for US PayPal accounts).

Alternatively you could use a plugin.

When a visitor clicks they are redirected to checkout (e.g., JVZoo/WarriorPlus/PayPal buy link) unless their IP address is from the EU in which case they get sent through to a page on my site explaining why I’m not selling into the EU (or perhaps just redirect them to this blog post!).

There are several plugins if you search on the WordPress.org site:

https://wordpress.org/plugins/search.php?q=geo+redirect

Or… you could have a custom one created (product idea?).

I had geo-redirect features included in one of my own plugins. There are free IP databases online you can use and hiring a developer on Elance/Odesk should only cost maybe $200-$300 dollars.

This could change yet…

The EU legislation has taken many by surprise including small online businesses and accountants.

The huge social media reaction (Twitter tags: #VATMOSS and #VATMESS) from entrepreneurs has also seen HRMC caught out and issue further clarifications.

So this is definitely a situation in flux.

Whatever happens though, I’m happy as I can be with my own solutions for now and I’m certainly not worried by it.

I’m just lucky that such a small portion of my sales comes from EU countries.

And for anyone reading this who is starting out in online business, don’t let it put you off whatever you do – there are thousands of people all in this boat together. The collective effort will see solutions and a clearer picture emerge.

What do you think? Does the EU care about small online businesses or do they just not understand them? ALL your comments and views are welcome – don’t be scared. The ones expressed in this post are of course, just mine… Cheers, Rob 😉

48 Responses to EU VAT Changes Jan 1st – The Problems And My Solution…

  1. Tony Shepherd December 17, 2014 at 10:36 am #

    I just posted a link to this in my Private Members Group Rob (hope that’s OK with you) because I think it’s a very clear explanation of what’s happening.

    Solution-wise we’re thinking very much in the same way 🙂

    Cheers

    Tony Shepherd

    • Rob December 17, 2014 at 12:28 pm #

      Hi Tony,

      Yes, of course that’s fine and thanks for sharing – if it helps your guys too then that’s great 🙂

      Interesting to hear you are thinking along similar lines in terms of solutions too.

      Cheers, Rob

  2. JohnTheJock December 17, 2014 at 10:46 am #

    Thanks Rob.

    I was aware this was happening, but your explanation has thrown some clarity on the subject.

    Clickbank must have had a crystal ball.

    All this is typical of today’s world … nothing is simple anymore!

    • Rob December 17, 2014 at 12:25 pm #

      Hi JohnTheJock,

      Certainly during my time onlines since 2010 Clickbank have always charged sales tax dependent upon the buyers location. I don’t understand completely why but it’s certainly improved their appeal now given the new laws.

      Glad the post helped clarify and good to see you here on the blog 🙂

      Cheers, Rob

  3. Paul December 17, 2014 at 10:59 am #

    Great post Rob, this is the first explanation I have read that makes any sense!
    Another example of EU rules teeling us what to do and not well thought out.
    They should have made apply to business where turnover is above a certain threshold ….. what a bunch of idiots!
    Presume the idea is to stop big business avoiding tax…. but in the process they make life impossible for law abiding citizens.

    • Rob December 17, 2014 at 12:22 pm #

      Hi Paul,

      Yes, the main motivation is to stop tax avoidance for big business. Thanks for your other thoughts and glad the post helped explain what’s going on.

      Cheers, Rob

  4. Rob Wilson December 17, 2014 at 11:02 am #

    Thanks for pointing it out to more people.

    You are right about it being in flux with lots of panic and rumours.

    Clickbank have been managing vat for years and the rules for external to Europe sales have required this since 2005 I believe. Big tick to them.

    Jvzoo are working on a solution to help as are dealguardian.

    Paypal aren’t helping much as they say they don’t have to. But it would have been nice if they did. Adding some functionality to your checkout plugin would work though.

    Re: blocking rest of Europe
    You may fall foul of EU discrimination law.

    Re: other solutions
    Seem to include adding active support through a facebook group as a key feature.

    Fun waiting for the dust to settle

    • Rob December 17, 2014 at 12:20 pm #

      Hi Rob,

      Thanks for the extra info especially on JVZoo and DealGuardian. There’s definitely a “Watch This Space” sign hanging over this issue right now.

      Cheers, Rob

  5. Philippe December 17, 2014 at 11:07 am #

    A a belgian customer of yours, I am upset and chocked by your attitude ! It just make me feel like trashing your trainings and yourself on all forums. You just took the money from me and from now on, bye bye if I want buy other trainings and softwares from you. Wow !
    What a total indecent attitude !

    • Rob December 17, 2014 at 12:11 pm #

      Hi Phillipe,

      Thanks for your feedback and sorry you feel this way.

      I certainly don’t want to reject EU customers or want EU customers to feel rejected. As a previous customer and someone who has experience of my products and service I would have hoped you would understand that.

      The post discusses Clickbank as a solution that I’m already using and that the whole situation is still in flux. Given all this and the detail I’ve given about the choice of not selling into the EU I’m surprised you refer to this as my “indecent attitude” rather than engaging with the business logic.

      Kind regards, Rob

  6. Anne December 17, 2014 at 11:09 am #

    Gives the anti Europe camp yet another reason to leave the EC. Mmm might be the best reason yet!

    NB Thanks for the explanation.

    • Rob December 17, 2014 at 12:12 pm #

      Hi Anne, Thanks for your thoughts and glad the explanation helped 🙂 Cheers, Rob

  7. grace December 17, 2014 at 11:20 am #

    Instead of transferring to Cornwall you could have come to the Channel Islands. NO VAT and no obligation to pay it or register it.
    The obligation will rest on the respective countries to charge it somehow.

    Can’t stress my life worrying about these politicians problems trying to impose what, in effect, a double tax.

    grace

    • Steven Spiller December 17, 2014 at 11:42 am #

      Grace, this is a global thing not just affecting someone from the EU. It does not matter where you are, it is down to the buyers location. If you sell into any EU country from The Channel Islands, USA, China, anywhere, you are obligated to pay the VAT in that country.

      If there is one thing a government is concerned about, it is making sure they get paid what they think they are due.

      • grace December 17, 2014 at 2:35 pm #

        HI Steven,
        In fact, I never said that the customer should not or would not pay it. I merely pointed out that the bureaucratic setup for me (in the C.I.) will be less than for one who is in Europe.

        There is also a point where too many taxes (in this case a double one as it is basically the same as income tax) should be rebelled against if they hamper economic development which is the case in several EU countries (in particular with the excess of waste, not to mention corruption, in government circles at the moment).

    • Rob December 17, 2014 at 12:17 pm #

      Hi Grace,

      Thanks for your comment, good to hear from you here on the blog 🙂

      Cheers, Rob

  8. David Taylor December 17, 2014 at 1:07 pm #

    Hi Rob,

    Started moving my products to Clickbank for that very reason. I read that there will be a requirement to prove sales are not going to EU countries so I am going cold turkey if you’ll pardon the timely pun, and moving the whole enchilada to Clickbank.

    That way ALL of my sales are officially to a US business which does not count.

    It’s a huge pity. JVZoo and W+ are great platforms but I can’t comply while using them.
    And by ‘comply’ I mean ‘do everything in my power to not have to charge VAT’.

    This way I’ll only have to bother once I go above £81k.

    Cheers Rob,

    All the best,

    David

    • Rob December 17, 2014 at 3:56 pm #

      Hi David,

      I believe you are correct on the proof of non-EU sales and that’s something Duncan has picked up in his comment (below). In a way it would be nice to see more business going through Clickbank. It’s cleaned up it’s act quite a bit since “the bad old days” and it’s functionality from a sellers perspective is really quite good.

      Thanks for taking the time to share your views 🙂

      Cheers, Rob

  9. Craig December 17, 2014 at 1:25 pm #

    Hi Rob,

    Great post and interesting perspective.

    After spending the last two years developing and perfecting a digital product and now ready to start marketing it, this couldn’t have come at a worse time for me. However, I’m going to look at this as an opportunity.

    The simple solution for me would be to turn off sales to EU customers because that’s effectively what these euro decision makers are forcing us to do as it’s simply not viable to take on this recording and reporting burden when you’re selling at a low level.

    Most of my sales come from the UK and US so registering for this added beaurocracy is not worth it, but I’m now thinking that there may be an opportunity to use the ip detect to redirect EU customers to a page where I sell the digital product in a physical format, i.e. package the product on a CD/DVD complete with manuals and training. Since sales in this format do not attract the new VAT rules it may buy me some time to increase the turnover enough to make registration viable.

    I have no quibble with paying taxes, I simply want the opportunity to develop enough to ensure that my new tax collection role does not cripple my fledgling business.

    • Rob December 17, 2014 at 4:00 pm #

      Thanks Craig – glad you liked the post.

      Wise words there and I especially agree with your last paragraph. It’s actually the red tape and bureaucracy here rather than the taxes themselves which is problematic here.

      Cheers, Rob

  10. grace December 17, 2014 at 2:36 pm #

    Steven,
    I will also add that VAT was initially designed only to be temporary. Then greed band politics set in.

  11. Jan Jordyn December 17, 2014 at 2:58 pm #

    Zaxaa, anyone?

    Just been reading this:

    http://andybrocklehurst.com/could-this-be-the-beginning-of-the-end-for-jvzoo/

    Hope you don’t mind me sharing, Rob . . .

    Best wishes,

    Jan

    • Rob December 17, 2014 at 3:53 pm #

      Not at all Jan, thanks for your comment 🙂

      Cheers, Rob

    • Kelvin Eastgate December 18, 2014 at 8:25 pm #

      Jan, I was a Zaxaa subscriber and have been impressed by its ease-of-use, but I’m not sure whether their new EU VAT features will reduce the bureaucratic load on us much. If we use them as a platform it looks like they just facilitate application of the correct VAT rate – I haven’t seen anything that captures the two pieces of non-contradictory proof of location of the buyer.

      I’m happy to be corrected/proved wrong, but it seems much simpler to use a reseller service such as Clickbank, Udemy, Amazon, Fastspring, etc.

      Just my half-pennorth. Kelvin

  12. colin blamire December 17, 2014 at 3:19 pm #

    Phillipe
    It’s not Rob – it is the EU
    Your comments against Rob are quite unfair – you should use your spite on the cretins who run the EU not the small businessman who simply cannot afford to comply with the complexities of their absurd rules created to ensure their jobs are perpetuated.

    Thank you Rob for a concise explanation, much appreciated
    Colin

    P>S> Move to the Isle of Sheppy down here off Kent, we are declaring indepenence next year, the majority party being the Monster Raving Loonies

  13. Duncan Elliott December 17, 2014 at 3:35 pm #

    Totally ill-thought-out!

    I invested pretty much 2 whole days reading deep into the actual legal documents on EU VAT MOSS. And it is a classic example of the law of unintended consequences and politicians diving headlong after the money, no matter what.

    The problem is not in paying the VAT, in terms of the money. If everyone is going to have to pay the VAT, then the price rise will affect everyone, so no-one (in theory) is at a disadvantage.

    The problem arises in 2 main areas;

    1. Any EU country can chase you for an audit to prove you have NOT sold into their country. How are you going to prove this? In reality, HMRC has said such audit will come via them. Either way, it’s not great to be chased by a money-hungry government organisation seeking proof which you don’t have. So by the strict letter of this legislation, it is not enough to say you don’t sell to the EU. You have to prove it; even if you ‘only sell to the UK’.

    2. The problem is the actual analysis of the data, BEFORE SALE, to prove the country, and then charge the correct country’s VAT.
    Before you take payment, you need to find out and store the recorded data (for 10-11 years) to prove the customer’s country *at the time of the purchase*. (Note it is not necessarily their country of residence – it is their location at the time of the purchase that is needed). You need to take 2 or 3 proofs (depending on the method on the customers’ internet connection!) which must not conflict. The most feasible (but still technically hard work to integrate) measures of proof are;

    a)IP address, checked against an IP country database
    b) Telephone landline of the internet connection used to make the sale, checked for country.
    c) SIM of the mobile phone used to buy, checked for the country code of that SIM.
    d) Registered address as given by the customer at time of order.

    The legislation is not clear on what to do if they all conflict…

    Anyway, you then have to take the data which proves the country of the customer, and apply 1 of potentially 75 different VAT levels (although realistically closer to 27; some of the 27 countries have more than 1 VAT level).

    When asked if a software solution to this problem exists, HMRC reps replied “Not to our knowledge”.

    So they have instigated law which has no widely-available method on compliance!

    —-

    For us, going via a platform like ClickBank is not a solution because ours is a financial product with a digital product attached.

    One solution that is clear from the legislation and the HMRC’s question and answer sessions is this;

    Make a webinar (or other human interaction element – Facebook page, group chat etc) the “dominant part” of the marketing and the product.

    So you can reposition your software as (human-interaction) training via webinar which (incidentally) comes with free or ‘attached’ software.

    Anyway, I very much suspect that this will be tested from the top down, with the government tax offices going after the big fish first, and then filtering down towards the smaller fish. Ultimately, as is almost always the case, it will be tested in a court of law, before anyone gets absolute clarity.

    I just sincerely hope it is not us that is in that courtroom, and not anyone here.

    Good luck

    Duncan Elliott

    • Rob December 17, 2014 at 3:52 pm #

      Hi Duncan,

      Great comment and a mini-blog post all wrapped up in a comment! Thank you, I’m sure a lot of other readers here will find what you have said very useful 🙂

      Cheers, Rob

      • Duncan Elliott December 17, 2014 at 5:25 pm #

        😉

        And the other delightful part of this…

        It was only by total fluke that I heard of this, because we’re not VAT registered.

        The HMRC informed VAT-registered businesses about VAT MOSS some time back, but totally failed to appreciate that this applied equally to non-VAT-registered businesses.

        So there will be many businesses who maybe aren’t connected to business forums and communities, who are not VAT registered, who sell digital products, who have not got a single clue about this.

  14. George December 17, 2014 at 5:09 pm #

    Hi All,

    If you register in a tax haven (hosting / website) how are the EU/UK going to enforce complience?

    1 they could contact your payment processor (paypal)? which is both registered in the EU and USA

    2 Request your Hosting company to remove or hijack your site (aka Pirate sites)

    So I am investigating a hosting solution within Europe but is outside of EU and looking for alternative payment processors. I am even considering hosting Hong kong but have to check page loading times.

    It is a global world in which we live and operate in, so do not readily comply with Government and corporate influenced policy fight back.and think like global companies and look for solutions.

    George

    • Rob December 18, 2014 at 8:06 am #

      Interesting ideas there George. I don’t know enough to answer but it shows that one possible consequence this is to drive more operators underground.

      Good to see you here 🙂

      Cheers, Rob.

  15. Brandon December 17, 2014 at 6:09 pm #

    A Benjamin Franklin quote comes to mind: “we must all hang together, lest we all hang separately”.

    At the moment I am only involved in affiliate marketing, but when I am ready to start selling my own products, I think I will go the Clickbank route.

    Merry Christmas and a Happy New Year (No irony intended)

    Brandon

    • Rob December 18, 2014 at 8:02 am #

      Good quote Brandon 🙂 Thanks for contributing and best wishes for the season to you too.

      Cheers, Rob.

  16. Michael December 17, 2014 at 6:42 pm #

    Hi,
    Thanks for the information.
    I wasn’t aware of the changes.
    Michael

    • Rob December 18, 2014 at 8:03 am #

      It’s a pleasure Michael, thanks for taking the time to comment:-)

      Cheers, Rob

  17. Vince Squires December 18, 2014 at 5:16 pm #

    Thanks for this insight, although can someone clear up an important point…

    I thought this only applied to someone selling their own products, but after reading this I’m not sure.

    You mention that many platforms do not comply, so if I was selling a smaller marketers product as an affiliate would I have to be responsible for the VAT?

    CheerVince

    • Rob December 22, 2014 at 9:00 am #

      Hi Vince,

      I believe the answer to your question is no. Provided the affiliate is paying you directly (and is not simply diverting payments from the customer as used to happen in some systems like the old WarriorPlus set up) then you shouldn’t have to worry. Again this is purely just my (unqualified) opinion!

      Thanks for your feedback Vince – good to hear from you on the blog 🙂

      Cheers, Rob.

  18. David December 31, 2014 at 6:08 am #

    Rob, firstly I would like to congratulate you on your blog… a really thoughtful approach to this conundrum of EU VAT 😉

    Just wanted to pick up on something that Duncan mentioned, which also impacts on attempting to avoid selling into the EU…

    It is actually the Buyer’s country of residence that is required to determine the VAT amount to be charged and collected… not the place of sale.

    E.g. If you are UK tax resident and are staying in a hotel in Spain and decide to purchase a digital product online using the hotel’s wi-fi, the seller is responsible to ascertain that you should be charged UK VAT on the purchase… Likewise if a tax resident of Spain makes a similar purchase in the UK, they are to be charged VAT at the rate applicable in Spain.

    It is for this reason the highly paid clever stupid people in the EU are so concerned about contradictory data being collected…

    Therefore, if you attempt to steer clear of selling into the EU by identifying the IP address alone, you could still fall foul of the regulations by selling to holidaymakers and business people from other member states temporarily in the UK.

    One of the key bits of data to identify are the first 6 digits of the credit card being used to purchase, which identify the bank and jurisdiction… that’s not to say of course that the purchaser doesn’t operate an offshore account. Even then if they buy through their PayPal ID we can’t see their card details!

    What a minefield; however, there has to be a limit to what lengths we have to go to, in order to prove this… I mean the purchaser might be reticent to provide all the data required that will be stored for 10 years and complete the purchase with non-identifiable info… are we going to need an online polygraph to check they’re telling the truth..? Is an online polygraph even possible..?

    Sorry to hear Duncan that Clickbank is not an option for you, because it seems to be the only bullet-proof one currently out there… it appears the only way to stay safe is not to be the vendor.

    So much for creating a level playing field with the big boys… it seems tons of people will publish through Amazon if they can, not to have the burden. I think it’s more likely the EU are in the pockets of the big boys, because after all this is tax collection from the consumer, it doesn’t effect the obscenely low rates of corporation tax they pay!

    Anyway, that’s enough from me, I just wanted to join in the discussion… Happy New Year and best of luck with your business endeavours… fortune favours the brave 😉

    • Rob December 31, 2014 at 10:23 am #

      Excellent contribution David. You make some very good points here, thanks for stopping by and taking the time.

      Happy New Year to you too 🙂

      Cheers, Rob

  19. Malc Simmonds January 8, 2015 at 7:24 pm #

    Hey Rob

    I like option 3 – use platforms who are already VAT compliant! Rob, you are saying you have some income outside CB, etc and soon JVZoo, who are getting their act together I believe). And I am guessing this is money thorough Paypal. The MOSS system is a bit of a pain – but surely it can’t be too much of a job for a person bookkeeper to do for you once a quarter?

    The reason for all this tax stuff is that globally many companies are able to use the Internet to avoid tax. And tax authorities don’t like it! Well, I suppose money for repairing the roads etc has to come from somewhere. This has been a big concern for tax authorities for many years and at last they are taking action. 😐

    This is the EU’s first fumbled attempt to deal with that. They realise it is punitive for small businesses and they may well modify their approach.

    But charging the VAT rate applicable in the buyer’s country is clearly the way to go (from their perspective). It’s logical. Just bureaucracy-heavy (just as we are used to with the EU.)

    And no – you can’t go on a person’s IP address to not sell to them! Anyone who uses HideMyAss knows you can pretend to be in any of a dozen different countries – eg to get Netflix in non-Netflix countries when on holiday. So an IP does not guarantee where you are.

    So, listing everything on compliant platforms seems to me the best solution at least until you get huge, and possibly even then.

    Question: How will this change when either the EU blows apart (a real possibility [I hope]) or the UK votes to leave?

    Oh no – more complications!

    Malc

    • Rob January 8, 2015 at 9:52 pm #

      Hi Malc,

      Thanks for a great comment. Some every interesting points very well made.

      Cheers, Rob

  20. Nick Winter January 23, 2015 at 10:16 am #

    Thanks Rob for the update – very concise and helpful as always!

    I’m planning on using your Option 3, with Fastspring. Don’t know how this will work out but so far I’d say their customer service is great.

    A couple of comments:

    a) From a UK perspective, if someone only has occasional EU (non-UK) sales rather doing doing a lot of techie stuff to exclude countries, why not just refund the occasional order from e.g.: Germany as they come in?

    b) You don’t mention another hassle of VATMOSS, that of curating all the data for 10 years. That alone makes your Option 3 for me a good bet.

    I read somewhere that in Italy you only have to charge VAT on ebooks if they don’t have an ISBN number. If true, that introduces yet another complication (and reason to use a 3rd party platform). Quelle horreur!

    (But leaving the EU wouldn’t make much difference, they would still want their VAT just as they do from e.g.: US vendors…)

    Nick

    • Rob January 25, 2015 at 10:40 am #

      Hi Nick,

      Thanks for your contribution – you’ve added some excellent points for consideration.

      Kind regards, Rob.

  21. Colin January 24, 2015 at 10:56 pm #

    Rob.

    I found this comment from another marketing company which you may find interesting.

    “if you have a live component to your digital sales (e.g. webinars, Q&A session, email support, follow-up call, social media group etc. or anything that entails you interacting with the customer in some way) you are exempt from this new tax”

    Colin.

    • Rob January 25, 2015 at 10:41 am #

      Hi Colin,

      Yes, I believe this is true. I didn’t mention in in the post so thank you for taking the time to point this out.

      Kind regards,

      Rob.

  22. Malc January 25, 2015 at 2:25 pm #

    Great point by Colin – I think that making sure that part of the product is non-digital is the way to go, if you not using a platform – eg Clickbank, JVZoo. You’d need to take advice as to what you could get away with.

    For example, on this page
    http://www.clarejosa.com/vat-moss-webinar-2nd-december-2014/

    HMRC answers a question by saying a video training plus a CD of the same training, posted, say to Germany, would be construed as TWO SEPARATE transactions! One vatable under VATMESS, and one Vatable under UK VAT!

    Also, Rob, the same webinar says that excluding EU sales may be illegal. Sorry!

    “Question: Is it a breach of EU trade law for us to reject or prevent sales from non-UK EU?
    Answer: HMRC: He doesn’t think we can do this. The single market directives would see this as discrimination, which is not permissible.
    Esteban: Freedom of services: it would be hard to do this. Note: he thinks it is technically infeasible.
    He does not think that banning non-UK EU sales would be acceptable.
    If you were audited and found to have non-UK sales then you would face a serious problem.”

    So, if this is part of your answer maybe have a think about that one 😐

    Malc

    • Rob January 25, 2015 at 3:52 pm #

      Thanks for posting the link Malc – very useful resource especially for UK vendors looking to investigate further.

      Kind regards,

      Rob

  23. Colin B January 25, 2015 at 6:00 pm #

    All Nigel Farage needs do is to forget all the (justifiable) stuff about immigration and publish this rubbish ruling instead
    He would zoom up in the opinion polls

    As to the ” not accepting EU orders” being unacceptable ,do people really think the courts are going to prosecute someone refusing to sell half a dozen seven quid e.books a year on ” Secrets of Beekeeping in The Outer Hebrides” to Bulgaria.
    Who is going to tell them. It is not breaking an HMRC rule.

    Were they to do so, then even more polling points to Nige.(Heaven help us)

    If you are a big player seriously selling to the EU then be bothered, otherwise , stuff them
    Sorry to trivialise this Rob, but we are in danger of holding the bullies of the EU jobsworth brigade in awe instead of treating them for what they are – d…….s

  24. Malc January 25, 2015 at 7:18 pm #

    I sort of agree, Colin B – “stuff ’em” – but the thing is, VAT have the ability to go back 7 years if they find anomalies in your accounts plus imposing penalties. So you could be storing up problems for yourself.

    My preferences would be:
    1. Sell everything through a platform – FB, JVZ, etc – who already does the VAT stuff for you
    2. Anything you sell through your own Merchant account or PayPal, take advice on how to make any product you are selling “non 100% digital”. Another poster here says to send emails or provide a support desk. That may be enough – but it needs checking.

    Just heard Syriza has probably got in, in Greece. That will be a cat among the pigeons! (Heh, heh)

    Malc

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