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11:22 AM EST, Tuesday Feb 23, 2010
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EU VAT |
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A question to US (non-EU) based paysite webmasters.
Whenever you are selling a service or product to the EU to a non-vat-exempt entity (e.g. "a user"), you are - in theory - required to be VAT registered, as you must add VAT to the sale price. As there are many EU countires, the EU allows merchants to be registered in only one EU country, and pay the VAT there. Now I don't think a lot of people would be blocking EU payments, so becoming liable to pay EU VAT can happen to anybody.
It becomes especially complicated when you use a payment aggregator and you do not even "see" your clients, and when you have affiliates who are also paid by your processor - not to mention when the company, the processor, the affiliate, the user and the servers are in five different countries.
I was wondering if *anybody* is doing this - I mean payin EU VAT. I'm not even sure if US paysite owners know about these rules - nor do they care. The EU has no jurisdiction outside of its territory obviously, so in case of an inquiry an US merchant could simply tell EU authorities WTF, GTFO and STFU.
What are your opinions?
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HunGirly - The Sex Game
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11:46 AM EST, Tuesday Feb 23, 2010
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Interesting question..
I personally don't care since my taxes don't include. I file sole proprietor and to date write off a business loss.
I guess if a national sales tax goes in like the Democrats want then we will have to rethink how we charge customers and bill taxes.
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Johnny Jones has ordered that all people who don't meet his personal standards of having a right to speak on YNOT be silent.
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12:00 PM EST, Tuesday Feb 23, 2010
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Oh well...
One of my biggest concerns is that this puts EU businesses in a bad situation. An EU-based company just cannot get away without paying some sort of VAT, which is approx. 20%, no matter where they go. OTOH, US merchants just don't give a damn, as the IRS just doesn't care, why should it? With these regulations in effect the EU is basically screwing its own businesses.
But I guess that's kind of my problem 
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HunGirly - The Sex Game
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02:51 PM EST, Tuesday Feb 23, 2010
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The IRS only cares about the IRS.
We do have to charge our local state sales tax if we make sales to citizens inside our state. The amount varies from none to 10% depending on your state. Sales outside the state you do business in has the tax obligation transferred to the buyer. But nobody really knows who buys what and nobody reports their purchases on their annual income tax returns.
There are service taxes as well and most of them are billed on receipt of service and remitted by the company to the government. Mostly these apply to public utilities, phone, cable, electricity and some products like alcohol, fuel oil, tobacco products ...
Trust me, Americans are no strangers to taxes. They tax the heck out of us.
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Johnny Jones has ordered that all people who don't meet his personal standards of having a right to speak on YNOT be silent.
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03:00 PM EST, Tuesday Feb 23, 2010
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| mass-dad wrote: |
Trust me, Americans are no strangers to taxes. They tax the heck out of us. |
I didn't mean they were. It's just the EU is shooting itself in the leg with its VAT regulations, which non-EU merchants who sell virtual services can just ignore, giving them a competitive advantage. This actually "forces" EU companies to incorporate offshore.
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HunGirly - The Sex Game
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11:39 PM EST, Tuesday Feb 23, 2010
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Understood..
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Johnny Jones has ordered that all people who don't meet his personal standards of having a right to speak on YNOT be silent.
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02:17 AM EST, Wednesday Feb 24, 2010
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In the USA sales taxes are collected at the point of sale but in e-commerce if the buyer is in California and the seller is in New York for example, the seller in New York does not collect sales taxes for buyers in California.
However, that buyer in California is liable for declaring and paying use tax (at the same rate as the State Sales Tax) on that purchase on his annual state tax return.
VAT (or Ad valorem tax) is in the form of a sales tax on goods consumed and in many states this tax applies to only goods with exclusions for food, medicine, books, services, certain rents (real property in example). Some states are also taxing services now.
The is no national sales tax on the federal level ( a VAT) -- there are duties, tariffs, an income tax, an inheritance tax and a flush the toilet tax (they wish  ) imposed.
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08:23 PM EST, Wednesday Feb 24, 2010
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In, the UK, the Inland Revenue (Our IRS), copped on to the taxable online market a few years ago - scandals were leaked to the press about 19 year old kids making £3000($5700) a month on drop ships on E-Bay.
So, these days, if you want to sell something as minor as your old gym socks, your account details MUST have your National Insurance Number (in the US, it's your SSN)..
I'm unaware of anything like that in the rest of Europe or any plans to monitor online earnings - given the amount of bureaucracy, you'd really have to be earning a lot before they would take any notice.
I'm guessing that Hungary has a minimum declarable earnings tax level in self-employed status. In the UK, if you earn under a certain minimum amount dictated by the country, you have to declare it, but it won't be taxed.
As long as you declare your earnings from online stuff in that minimum earnings "sandwich", you don't have to worry too much about the particulars. In the UK, it's currently set at roughly $32,000. Anything below that, and UK tax offices can't be bothered.
They DO want to know that you've earned it, but it would have to be a serious audit before they starting asking you for proof of receipts, etc..
VAT registration to own a business is not compulsory in the UK, so I'm assumming that rule applies to the rest of the EU - the tax % is another issue. Avoid VAT registration anyway unless you're making more than 30,000 euros a year from this industry, because you can probably manage your books yourself without having to get accountants and lawyers involved.
If you are earning a lot more, go offshore - Isle of Jersey is the UK's little tax loop hole - a lot of companies buy new products from major retailers and ship from there untaxed - they can make a killing! Malta,Cyprus and Gibraltar are also interesting offshores - a lot of the biggest online UK casinos work from there to avoid tax.
There's still loads of legal loopholes in Europe, and the offshore one is definitely the best, but also the hardest and costly to set up, from what I understand. See if you can find other tax exemptions first before considering offshores.
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09:08 PM EST, Wednesday Feb 24, 2010
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Npwebmaster,
"Unfortunately" we are a company, and our yearly income is way to high to be exempt from VAT.
But it's more complicated than that. Imagine you use CCBill, and charge $9.95 for membership, and share you profit with your affiliates 70:30
CCbill takes its fees, you affiliates get their share, you end up with something like $2. Now that works when you sell to non-EU countries. Immediately you sell to a EU country, *someone* has to pay the VAT. As CCBill is in Malta, that would be somewhere around $2. However, CCBill does not put an extra VAT on your sale price, they use a flat pricing everywhere. Your affiliates doesn't care, either. In the end, you end up where paying the VAT on the original sum is your responsibility. More than that, it's almost impossible to figure it out how much the VAT you have to pay should really be. This whole process is just... broken.
_________________
HunGirly - The Sex Game
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