New EU VAT regulation for 2015 and eJunkie

[progsounds]

Hello,



starting from Jan 2015, EU VAT regulation will change and the VAT for electronic services (such as selling and delivering digital content) will be based on consumers country. This means for us (the sellers), among other new obligations, that we have to collect 28 different VAT rates.



I wish to know if eJunkie VAT management (that now is very poor featured) will be upgraded to help us in this.



Thank you in advance.

[E-junkie_Guru]

Thank you for bringing this to our attention. I presume Development is already aware of it and planning accordingly, but I'll refer them to your post just to be sure. What extra VAT-related features would you like to see implemented that we currently don't support?

[progsounds]

Thank you for your prompt reply.

By now, you can set your VAT rate and nothing more. What will be needed to face next year VAT regulation is:



- VAT rate based on consumer country (not seller country. This is mandatory for B2C sales)

- possibility for the consumer to insert his VAT ID (no VAT calculated. mandatory for B2B sales)

- Consumer address MUST be retrieved even if no shipping is required. This is mandatory since we need a proof for the calculated VAT rate.



Thanks again.

[elmer77]

Could we have any news about Ejunkie supporting the VAT for EU regulation starting at Jan 1st 2015?

Will this be a feature of the new admin?

This is now only 2 months from now, and this is important else this would lead to importnt legal issues (around 50% of my sales are going to europeans consumers...)



Also an important point for B2C sellers regarding to the différent VAT rates in Europe: the new admin should give the possibility to set the price of a product INCLUDING VAT to have the possibility to show to all customers the same public price: then depending of origin of the custumer, the VAT amount will be different (leading in the end to different prices EXCLUDING VAT per each transation) For example, I can have a product solt at the same 10.00 EUR INC VAT to all european customers: if the customer is in France, the would lead to a amount of VAT of 2.00EUR (VAT rate of 20% in france), but for a Dannish customer who will still pay 10.00 EUR, the VAT collected will be 2.50 EUR as VAT rate in Danemark is 25%.



Please give us some information about the new VAT regulation support, as if this not supported, we might consider to change our cart system to avoid being in illegal situation.



Thanks,

[E-junkie_Guru]

We will certainly revise our EU VAT rate determination to apply the rate for the buyer's location on digital items (items using Single File Download, Redirection, Send Stored/Generated Codes, or "Package files from other products..."); however, as with all taxes calculated by our system, this would be added to a lump-sum "Tax" line item in the cart.



Showing separate tax amounts for each item or deducting tax from a fixed "incl. VAT" price would involve rather considerable changes to our system, and while we'll certainly add that to our wishlist, we can't say when or even if we'd be able to implement that sort of thing.



We're still working out some other details about changes to VAT calculation, so we'll followup here for your feedback when we have more to share in that regard.

[gunther]

So this means we can trust on a implementation of the new EU tax situation into EJunkie from January, 1st 2015 on?



I'd like to add to Elmar's post: In many EU countries it's mandatory by law to show the customer the end price incl. tax. This means, we would have to know the country of the buyer before displaying the price. Since this is mostly impossible, this leads to the idea of have the same Gross Price (inkl. Tax) for all European customers and the net price will then differ according to the country. This would be the only way to be really safe in legal terms.



Please find some more information about the changes in the EU tax law from January 2015 on here: http://www.foreigninvestments.eu/include/Changein_European_Union_VAT_Rules.pdf

[elmer77]

Thanks Gunter for this additional information.



From our point of view and as user since 2009, Ejunkie should definiltly push to top priority that the correct managment of EU TAX be developed urgently (I feel that EjukieGuru's answer is very pessimistic and let us think that this not at all a priority to mange this...)



Also most of users of Ejunkie are selling to public (not to entreprises) the price displayed must be the Gross Price incl tax, so this would definitly lead to choose a solution to calculte vat specificly depending from the country of origin and consider it by deduction of the Gross Price (inc vat) and not as suggested as an "added lump sum".



We historicly choose to use Ejunkie due to its very easy embedment and its clever design. But since 2009, it's looks like that the cart system has not much evoluated or very slowly: this is quite discouraging and may lead us finally decide to move to another system if they would not consider as a priority to make the cart being legal & compliant with EU tax, or simply give a "big boost" to their deveopers team.

[gunther]

Elmer, I totally agree. Time is really running. It's barely 7 weeks left.

[E-junkie_Guru]

Right at the moment, we're focused on preparing a soft launch of our new Admin panel for public beta testing; we'd anticipated having that ready this week, but now looks like it may be next week. Once that's done, we can devote more attention to other things such as updating our VAT calculation as a high-priority matter.



Rest assured we are taking the matter of EU VAT changes very seriously and have been engaged in considerable internal deliberation about how best to handle that. Some aspects of this are quite thorny, considering the nature of our service and how it integrates with payment processors like PayPal Payments Standard, which the vast majority of our sellers use, in that we don't conclusively know the buyer's location of residence and shipping address until checkout transpires on the payment processor's site.



I'll have more to share here once I've cleared up some details with Development about the updated VAT strategy we're planning.

[progsounds]

Any news?



So far no public beta testing of the new panel, nor any info about the new VAT regulation. By now, I switched all the payments on my site to another service provider, but really looking forward to keep using eJunkie.

[elmer77]

Hi Progsounds,



Just to know, which other service provider did you switch to?



Thanks

[E-junkie_Guru]

We launched the new Admin public beta on an opt-in basis last week -- see the announcement with access link here:

http://www.e-junkie.com/bb/topic/6917



With that accomplished, we'll be able to turn our focus to other things, such as settling our approach to accommodate EU VAT changes by 2015.

[jean]

HMRC have now said that emailing of files would mean the transaction falls outside of the regulations. See their chart here: http://a3.mndcdn.com/image/upload/tnext_gen_article_large_767/cupriy34fjyc7oabkzbj.jpg





So for me what would work is the ability to separate customers into Uk (as I'd still be under the Uk VAT threshold), EU and Non-Eu (or even just EU, non-EU if the other option is too complicated)





Some ways it could be done:



1- all customers providing addresses and those in the selected region don't receive the instant download but instead the transaction details are sent to me so I can email/post the file myself



2- the use of variants under a product so a customer chooses if they are UK, EU, non-EU (or whatever is applicable to everyone else) and the digital file not automatically being sent to regions I have chosen. Again I'd be sent the transaction details and can then email/post the file





Sadly this all needs to be in place before Jan 1st!



edited to add- it seems to be unclear from HMRC as to if emailing a file still counts as digital but the principle still apllies- I'd just send a hard copy instead- so I'd need the option of having a different price maybe

[sgt_bilko]

I just don't see how this is going to work on a practical level because neither e-junkie nor any other cart provider really knows details of a buyer's precise location and fiscal residency prior to sale. How can cart prices be calculated on this basis?



I would also add that even after the sale we only receive minimal details that I very much doubt will meet EU requirements for VAT purposes. As a matter of security only the billing company has these details.



Assuming we had a situation where a flat rate price was applied to all sales across the EU it would then be incumbent on the seller to meet the VAT costs out of their own pocket, which would severely cut down on any meagre profit margin that remained.



The irony of this legislation is that it will push many small sellers to an uncomfortable choice between selling through the likes of Amazon or closing shop. Frankly I am aghast at the whole situation and the damage it will do to small startup companies that will now find online trading far less attractive than before.



There have been a few articles in the newspapers today:



http://www.telegraph.co.uk/finance/businessclub/11254829/New-EU-VAT-rules-threaten-to-kill-UK-micro-firms.html



http://www.theguardian.com/small-business-network/2014/nov/25/new-eu-vat-regulations-threaten-micro-businesses



If you are based in the UK I would urge you to sign the petition against this at https://www.change.org/p/vince-cable-mp-uphold-the-vat-exemption-threshold-for-businesses-supplying-digital-products



On a side note today I read that there are 28 countries across the EU and 77 different VAT rates that need to applied on a case by case basis. For a small one man business with minimal turnover the situation is completely ludicrous. I have spoken to three other online sellers today who have all said they will simply remove their products from sale.

[E-junkie_Guru]

It seems like a classic case of officials not fully thinking things through, not seeming fully cognizant of how things actually function at the real-world brass-tacks level -- one has to wonder if they've ever purchased something online and paid close attention to the order of steps they took through that process -- and presuming that something easy for them to describe must be easy to technically implement, as this recent xkcd comic illustrates:

http://xkcd.com/1425/



We've had a somewhat similar proposal here in the US, the so-called "Marketplace Fairness Act" which fortunately got stalled in Congress (though some are still pressing to get it passed by year end), whereby merchants nationwide would be expected to collect and remit sales taxes according to the rate at their buyers' respective locations. This raises a question of who exactly is being taxed, the merchant or the consumer? IMHO, since it's the merchant who must ultimately remit the tax to government, they are the party being taxed, so they should only be subject to taxes levied by their own representatives; they should not be subject to taxes determined by and payable to other jurisdictions where they have no representation or recourse. The latter amounts to "taxation without representation", and I seem to recall we held a revolution over that matter some time ago...



Unfortunately, even if the UK grants an eleventh-hour reprieve to those under the UK-only VAT threshold -- which it's not clear they can just do unilaterally if this is pursuant to a treaty with the EU -- that still leaves Continental EU merchants (and possibly all merchants worldwide who sell to consumers in the EU) subject to this absurdly complex scheme, made all the more Kafkaesque by the fact that, unlike the UK's MOSS, they don't even have domestic clearinghouses for EU-wide VAT collections/remissions, so they'd be required to register for VAT with each and every single EU country they sell to. Complying with domestic red tape is challenging enough for any merchant, so 28 countries' worth of red tape is simply untenable.

[sgt_bilko]

Earlier on I spoke to a recently retired accountant with considerable experience in international trade who concurred that this plan from the EU is completely unworkable because it is technically impossible to comply. They may as well shut down the internet.



More to the point it will act as a massive deterrent to those who might otherwise wish to sell online right at a time when most of the world's economy is in deep trouble, but then again the EU seems to be at the forefront of prolonging the global economic crisis. It's the one area where they lead the world.



Although the UK is providing the MOSS option it will still force sellers in the UK to deal with individual countries over discrepancies in payments and law, so in theory any seller could find himself audited by any of the other 27 countries, even a decade after closing the business. Indeed I am informed that if I make one sale in Hungary I am obliged to go and register there for VAT in person...



Thinking outside the box here I am just wondering if this is one of those cases where changing the product description or online delivery method might be sufficient to legally fall outside the fast approaching mess. For example software sellers always say they are selling a usage licence rather than a product.



Is there any word from PayPal on how this might be handled? It's already hard enough calculating sales when they charge different overseas transaction rates on each country.

[sgt_bilko]

Just reading this report from a firm of accountants it looks like the MOSS solution will only be transitional i.e temporary measure... In other words we will eventually have to decide which countries we wish to trade in and then apply to register for VAT in those individual countries. On that basis I would be forced to exclude the entire EU.



http://www.bradleysaccountants.co.uk/news/advice-for-small-businesses/sme-owners-use-twitter-to-protest-2015-eu-vat-rule-changes/801598819

[projectsbyjane]

@jp

Just wish to let you know emailing your files to customer still counts as providing digital downloads. The image you linked to... it's misinterpreted. It's meant to exclude biz which provide physical goods but include emailing some attachments.



Read this link here:

http://ysolda.com/blog/2014/11/26/they-didnt-know-the-impact-of-vatmoss-on-really-small-businesses

[sgt_bilko]

The most astonishing oversight of the buildup to VAT MOSS has been a failure to recognise that the data collection and retention obligations are so onerous that sole traders and the self-employed will be required to register as data processors and controllers with the Information Commissioner’s Office.

[sgt_bilko]

I just called up PayPal but they couldn't offer me any kind of useful assistance, merely stating that they won't be changing the way they work. All of this information came from a standard telephone agent though and I think we need some kind of word from higher up the organisation.



From what I have read if each customer receives a unique custom item or service then we would fall outside these VAT requirements. In a sense I already manage that because every eBook I sell goes out with an individual transaction watermark. Can we see a way forward through this avenue?