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2015 Means EU Tax Increase On Cloud Storage, E-books and Smartphone Applications
schwit1 writes With the new year, a change in fiscal rules in the European Union is increasing the tax on many purchases of digital content like e-books and smartphone applications. Under the new rules, first approved in 2008, the tax rate on digital services like cloud storage and movie streaming will be determined by where consumers live, and not where the company selling the product has its European headquarters. Tax experts say Europe's revamped rules could add up to an extra $1 billion in annual tax revenue for European governments.
It seems like it'd attract less attention to only avoid some of the VAT rate - so PO box and VPN in Switzerland (8% VAT) could still attract a decent saving. Personally, I stopped offering digital downloads - the costs (and more to the point, risk) of compliance simply weren't cost effective given the time could be better spent charging an hourly rate. I've a strong suspicion that the additional revenue won't be nearly as much as predicted, most of which will likely be wasted in ill-fated attempts to force non-EU providers into compliance
Ok so thats your first bit of evidence. Where's your second? The law requires two bits of non-contradictory bits of evidence to be retained. Billing address in Spain but IP seems to be in Germany? You need to go find a third bit of evidence to support one or the other. In terms of ensuring you are always in compliance, its actually a lot more complicated/involved than you seem to think.
This is so much more than that.
I own a web hosting business. My company id based in Canada (where I reside), and my servers are located in Canada.
If a European resident decided they wanted to do business with my company, all of a sudden I have to submit to their tax rules. I must collect and submit taxes to their countries government. Obviously I have the choice to decline, and tell the potential customer to go do business elsewhere... but that is bad for business.
I can register with MOSS in the UK, and it will allow me to accomplish this hassle much more easily, but it is still a complete pain in the ass.
Yes, there's some paperwork involved.
Some? We have 35 different VAT regimes here... And VAT changes regularely. Try to integrate that into your webshop.
The problem with this system is that it's backfiring. Yes, it is intended at the big companies who can pick a convenient country to pay taxes in. But it only hurts thousands and thousands of little mom-and-pop webshops who suddenly need to file extra paperwork, keep "2 reasonable proofs of location of the buyer" (Duh? Over the internet?) and must keep that information for 7 years (Hello! Security breach knocking at your front door!). So, to downloading a font, a game, or anything else purely digital, I now have to enter my address details into each and every shop. Why? It's a freaking download. Creditcard number should be enough.
Then there are 2 additional problems:
"Fix it? It has been disintegrated, by definition it cannot be fixed!" - Gru in Despicable Me.
In Finland we have 24% VAT and all we get is a bloated public sector that gets nothing useful done. If I want healthcare in a reasonable time, I have to go to a private clinic. Education is obviously not free, but it's true that someone else has to pay for your personal gain. The natural outcome is that everyone gets a university degree even if they don't need one, i.e. a lot of productivity and other people's money is being wasted on what isn't even very high quality education once you get past the elementary school level.
While the OP in principle is correct, the increased tax revenue is not the most important consequence of the change. The drastic part is the legal burden added on companies offering e-services. Any company (regardless of whether they are located in the EU or the US, regardless of their size, and regardless of their annual turnabout) that want to makes sales in the EU will now have to read and understand 28 different national tax laws regarding VAT. Not only do all these countries have different VAT rates, but they also have different exceptions depending on what it is that is sold. In one country the VAT rate might be 20%, unless the sale can be categorized for example as advertisement, in which case the VAT rate is 10%. In another country the item that is sold might be categorized in a different manner.
The burden of figuring out what tax to charge lands entirely on the salesman, even if he's just a hobbyist selling a single item. Needless to say, learning and keeping track of 28 different legislations is impossible unless you are a large corporation. But despite this, a german shop owner charging the wrong VAT rate for a bulgarian customer might end up being sued in a bulgarian court of law. And in the long run get extradited to bulgaria. Since this law change in practice is going to wipe out small business owners, there have been quite vocal protests raised. For example a twitter storm ended up making the #EUVAT hashtag trending at number 3 worldwide. (see http://euvataction.org/2014/12...) More information about what the salient consequences of the law change are can be found at http://euvataction.org/key-fac....