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Have you registered for VAT? The EU wants your $$$

If you're based in the US and you're writing software which you sell electronically in the EU, are you doing anything about this?

http://www.us.kpmg.com/microsite/e-taxnewsflash/2003/eTNF03_07.html

It seems the EU wants selllers to account for VAT even if they're non-resident. I'm not sure how they plan to implement this outside the EU. I thought countries couldn't make up laws and apply them to other countries.

Commissioner for getting as much money as possible
Monday, June 09, 2003

You don't have to do it.

Only when you want to sell to people inside the EU.

European sellers also have to add this to the price, so it's perfectly normal.

When I place a postal order in the US customs adds the VAT when the package arrives.
Until now electronic delivery escape this tax, but that is only luck, not reasonable.

When you sell to a European you enter Europe comercially.

Erik Springelkamp
Monday, June 09, 2003

If a US seller has no physical presence in the EU, and sells to an EU citizen over the internet, what legislation has the EU enacted that can apply in the US?

Commissioner for getting as much money as possible
Monday, June 09, 2003

The buyer is under EU jurisdiction and will get tax added when the goods are imported, unless the seller is registered and has prepaid the amount.

Of course, adding a tax when downloading software is not feasible, but that's not really any different than the rest of the gray economy.

Roland Kaufmann
Monday, June 09, 2003

"I thought countries couldn't make up laws and apply them to other countries"

Well, if I would sell drugs to a US-citizen who would ship it to the US, the US would demand my extradition, and I would be on trial in the US, even if I never left my country.

I could give some more polical examples, but I will refrain from that because this is no political forum.

When the US seller accepts money from a European country, he deals with this other country, and there are regulations that come into play.

Erik Springelkamp
Monday, June 09, 2003

It's like saying that if a Danish citizen comes into my bakery in New Jersey and buys a Blueberry Danish, intending to take it with him back to Denmark, I need to collect a VAT to forward to Denmark.

Yeah, right.

I have a server. I sell stuff. The server is in the US. The goods are in the US. The payment is in dollars. I am not entering Europe commercially in any way shape or form. It is the customer who is directing the packets be directed to his account in Denmark, not me. It's the same as if he walked it back to Copenhagen himself.

If the Euro-government weenies don't like it they don't have to use the internet. After all, it's OUR internet and they are not even paying us to use it! Outrageous! All Europeans should start paying a use tak for every internet packet sent because they are doing business in the US by virtue of the fact that we invented the internet.

Insufferable Yank
Monday, June 09, 2003

Isn't Maryland doing something similar inside the US?

Adding taxes to goods ordered from other states?

I used to see this all the time:
'Maryland customers add x% tax'

Erik Springelkamp
Monday, June 09, 2003

IMHO the EU VAT should be unenforceable outside the EU. I think a more workable paradigm for everyone concerned would be instead of "the vendor entered the EU to make the sale" that "the customer entered the US to make the purchase"

In fact, that would also solve our sales tax dilemma - simply impose the tax on the point of sale. If you're in Texas selling software, you have to pay Texas sales taxes on your sales. Customers shouldn't even be aware of it - just account for it in your price.

Then we can see states deal with megacorporations hopping boundaries to escape sales tax, and that should create a lot of entertainment for the rest of us.

Philo

Philo
Monday, June 09, 2003

In the US, it's the purchaser's responsibility if the transaction is inter-state.
Have you filed your 'use tax' forms? Many states put a reminder on the income tax form, if they have one.

mb
Monday, June 09, 2003

Insufferable Yank: If US Americans (who, except for Africans and Asians, are ex-Europeans!) would pay tax for so many things Europeans invented, they'd be poor!

You see, just as my argument is silly, so is yours! Use your brain before you write such crap!

I Love USA
Monday, June 09, 2003

Insufferable Yank wrote, "It's like saying that if a Danish citizen comes into my bakery in New Jersey and buys a Blueberry Danish, intending to take it with him back to Denmark, I need to collect a VAT to forward to Denmark."

No, because tax laws are intended to cover transactions that occur within a particular locality (country, state, principality, or whatever).  In IY's example, the transaction occurred in New Jersey, so it's clearly taxable according to New Jersey law.

A more accurate example would be if a Danish citizen calls you from Denmark and orders a Blueberry Danish to be delivered to him/her in Denmark.  Where does the transaction take place in that case?

Brent P. Newhall
Monday, June 09, 2003

By the way, our EU friends *do* realize that the net effect of this is

NOT AVAILABLE FOR PURCHASE IN THE EUROPEAN UNION

Right?

Philo

Philo
Tuesday, June 10, 2003

Darn straight! I just added "Sorry, no sales to France or Denmark" to my website. Let them make their own darn software!

My server is not in Europe folks! So if you are buying stuff off it, you are doing so in the US! We only accept cash US dollars! if you don't like it, write your own!

man, this is the whole problem with those Europeans. that's why we left and forged a new lad of opportunity - to get away from all that crazy VAT tea taxes and nutty stuff like that.

TAXATION WITHOUT REPRESENTATION IS TYRANNY, EURO-SLAVE OWNERS! YOU TAX ME - I GET TO VOTE IN DENMARK! UNTIL I GET THE VOTE - NO TAXES FOR YOU!

Denmark does NOT pay for the internet services they recieve from the US. Let's turn the internet off for the Euroers! No net for you!

Insufferable Yank
Tuesday, June 10, 2003

Apparently Insufferable Yank hasn't been paying attention to the Sales tax wars going on in our own country...

Philo

Sufferable Yank
Tuesday, June 10, 2003

sorry if this question is OT, but do all resident taxpayers in the USA have the right to vote (including non-citizens)?

ek
Tuesday, June 10, 2003

Christ but there are some idiots posting here. If an American company sells to someone in Europe then they are not liable to collect sales taxes for the US guvmint, because (duh!) it is the buyer who has to pay the tax, not the seller. Since the buyer is liable for paying, he STILL HAS TO PAY VAT IF HE IS IN EUROPE.


Tuesday, June 10, 2003

Hmm. Cross-border taxation. This might explain all those "reduce your federal income tax bill!!!" emails from other countries I keep getting...

{I went into the tax office one year to pay, because I'd forgotten and this was the deadline day. So I wrote them a cheque for the fairly impressive amount of money, and handed it to them saying "OK. Now you can have this, but ONLY if you spend it on missiles..." That confused them.}

Katie Lucas
Tuesday, June 10, 2003

The problem with software and VAT is that the software can be transported via the net. In Norway (not-EU) we have to pay 24% VAT on every purchase. Except food with 12% VAT. And books and newspapers without VAT. But when we are buying a product abroad, we have to declare the product at the border or at the post office. We get back the VAT from the country where the product was bought and pay Norwegian VAT. So the problem with software is how to collect the VAT. If you are selling to people the VAT will increase the cost of the product. But company’s running for profit will not. They get it back.

Stig

Stig Hodnebrog
Tuesday, June 10, 2003

Paying VAT for imported goods is completely normal for all imports into regions that have VAT, whether states or provinces or countries.  The EU just says that they'd like to collect this tax for electronic delivery, as for physical delivery where the collecting is done by customs officers.

Obviously this tax is paid by the customer, not by the business, as always with VAT.  Also obviously the EU does not have any means to enforce this desire, unless a business has a physical presence in Europe in which case their local representation might get sued, just like American branches of foreign companies can be sued for noncompliance with US laws.

Having the US government mandate VAT addition for electronic exports seems like an unlikely event since the US government never did anything about phyiscal exports to VAT-collecting countries either. So existing web shops with no physical presence in Europe will pretty much continue as usual.

Chris Nahr
Tuesday, June 10, 2003

Insufferable Yank: You still don't get it! What do you achieve by adding "Sorry, no sales to France or Denmark" to your website and writing "Let them make their own darn software!"??? Nothing!

If I (as European) would have the company in the USA and customers in EU, I wouldn't care about that KPMG newsflash! After all, what can they do against you: If you're (relativly) small, do you think EU have time to care about you!??! Come on!

Collecting VAT (and other such questions) should be discussed between US and EU. But, I also must tell you, that this US goverment imposed taxes on EU steel two years ago. And? Has someone wrote: "No more US cars in EU" or even such crap as "Cars [remember Benz, he was German] are an European invention"??? No! I still see people buying Chrysler und GM here in Europe. (while US Americans spill French wine on the street)

PS - And, just in case you overlooked it, read what Philo wrote: "Apparently Insufferable Yank hasn't been paying attention to the Sales tax wars going on in our own country..."

PPS - As you can see, I know more about US than you know about Europe. Because I want to know. Because this planet is not only my island!

I (really) Love USA
Tuesday, June 10, 2003

Insufferable Yank, didn't you hear? You don't get to vote in Europe, even if you're a citizen. We have kings, queens and lifelong dictators. Surely you know that America invented democracy -- how could it be any other way?

Tom
Tuesday, June 10, 2003

This was just hilarious, please continue. "No taxation without representation" - even more fun. That one was certainly conceived in the light of imports and exports and had nothing, whatsoever, to do with a fight for democracy?

On a more serious note, you are not obliged to sell your software at all, why not just stop selling it?

Jouster

Jouster
Tuesday, June 10, 2003

There is a history behind this, and a moral. The moral is that when you see anybody, government or other, doing something apparently idiotic, then presume there is probably a good reason for it you don't know about.

The history is the fight between AOL and Freeserve, or to put it more generally, between non-EU ISP's and EU ISP's. Freeserve have long complained that AOL had an unfair advantage over them because AOL was avoiding the 17.5% VAT that Freeserve customers had to pay in the UK, as Freeserve was a EU firm, and AOL was not.

As has been pointed out, even though VAT is payable on anything downloaded from your server to the EU, it is none of your business as a vendor unless you choose to make it so. The purchaser of your electronic services or software is the one responsible for paying the tax, just as is the case with hardware.

Now if I, as a non-resident in the EU, buy a laptop in London, I then can claim the VAT back at Heathrow, and am then responsible for paying any customs duty or sales tax in Saudi or Sri Lanka or wherever. In fact I will get the laptop through Customs with no problem in most cases (as long as I take it outside the packing case!) so I am likely to get away with smuggling it. On the other hand, a 21" TV is likely to get stopped, as I found out last time I took one from Saudi to Lanka. And downloaded software is never likely to get caught. If you deal with companies that might wish to both stay the right side of the law, and claim the VAT back, then you might consider setting yourself up to collect VAT even though you are based outside the EU, but that is a marketing decision, not a legal one.

This has been going on for a long time with goods. You don't see Levi-Strauss or Sebago complaining that although their jeans and shoes are made in the USA, EU residents have to pay tax on them. The only difference between goods and software is that in the former case there are middlemen who deal with the matter.

Stephen Jones
Tuesday, June 10, 2003

This only applies to sales to end users, supplies to companies are exempt (just ask for their VAT number)

In practice for the small guys, it's unlikely anyone will bother, however they could force the credit card companies and paypal to get involved (just like the US does for credit cards cleared in the US but paying for stuff in Cuba, more of a problem for canadians than europeans).

It is however aimed at amazon,ebay and AOL to stop them gaining the current 15-20% discount they enjoy relative to EU companies.

Peter Ibbotson
Tuesday, June 10, 2003

This whole "Internet taxation" is rather funny, when you consider there are already laws and procedures that completely cover all this stuff.

Really, how is buying over the internet any different from a mail order catalog? Why can governments just treat these transactions exactly the same way?

BTW, the rule for catalogs (at least in the US, and I assume internationally as well) is that if the seller has a "significant presence" in the jursidiction that the buyer lives, then the seller must collect appropriate taxes. Otherwise, it's just up to the buyer.

Chris Tavares
Monday, June 16, 2003

Don't collect VAT for the EU

The EU can't mandate a U.S. company collects VAT taxes and the EU has no juristiction to do so ... and they know it.  For enforcement they are threatening to selectively non-enforce copyright infringement cases brought by U.S. companies.  So if you don't act as EU tax collector then the EU will give people a blank check to pirate your software!

What next - a software company needs to check VAT tax regulations in every country in the world that decides to add this law - then I will be sending checks to Japan, Nigeria and Indonesia?

The problem is not the EU's right to tax their citizens to death - which they can do for all I care.  It is that they are foisting the administration of this tax (the calculation and collection) on U.S. companies!  A EU consumer can pay tax directly to EU.

Furthermore - the whole basis of the tax is to make U.S. firms less competative againt EU firms overburdened by excessive taxation..  So it's like - I want you to spend a bunch of time and money to make your firm less competative and if you don't we'll pirate your software.

I'm amazed more people aren't fighting this tax - the EU can kiss my ass.

F the EU
Monday, March 22, 2004

PS - any company that collects VAT tax in accordance with this new regulation is most likely, by definition,  in violation of their own privacy policy to NOT provide customer details to third parties (which is boiler plate in most software companies)

"Keep adequate records of transactions subject to EU VAT for audit purposes. "

this means that if EU asks they expect all order details from EU customers (name, company, contact info, amount purchased, etc)

To any company acting as EU VAT tax collector that also states that according to their privacy policy that they don't provide info to third parties - amend your privacy policy to state that you WILL give up customer data to anybody who strong arms your company or quit acting as a EU lackey.

To the guy who was talking about U.S. steel tarriffs - 1) the EU threatened retaliation in the hundreds of millions of dollars and 2) Bush yanked this tarriff so it no longer exists.  The stell tarrif was wrong and so is the EU over reaching it's juristiction threatening U.S. companies. 

If the EU tries to selectively enforce this the U.S. should retaliate with a 20-30% VAT on European software that varies according to each state in the U.S. the software was purchased in to ensure maximum headache - which is what the EU is doing now.

F the EU
Monday, March 22, 2004

API and UPI report that the French Government announced today that in light of the Madrid bombing, France has raised it's terror alert level from "run" to "hide."

The only two higher levels in France are "surrender" and "collaborate"!

F the EU
Thursday, March 25, 2004

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