Is this idea VAT fraud or legal?

[Bexxley]

Hello guys,

Imagine this setup:
I have an e-commerce shop where I sell digital products.
My company is an UAE Freezone with 0 tax.
I sell to the German market.

Usually I have to pay 19% VAT to Germany on my revenue.
Therefore I had this idea:
In the checkout of my shop I make "Cayman Islands" (0% VAT country) as the default billing country in the customer details. (Shipping country does not exist)
So if the customer doesn't manually change his country, the invoice is addressed to a Cayman Islands citizen and I don't have to pay any VAT.
If the customer switches the billing country to Germany, I add 19% VAT on top of the total. This 19% would go regularly to the German tax office.

Does this work?
Excited about your opinions

 

[JohnnyDoe]

Hello guys,

Imagine this setup:
I have an e-commerce shop where I sell digital products.
My company is an UAE Freezone with 0 tax.
I sell to the German market.

Usually I have to pay 19% VAT to Germany on my revenue.
Therefore I had this idea:
In the checkout of my shop I make "Cayman Islands" (0% VAT country) as the default billing country in the customer details. (Shipping country does not exist)
So if the customer doesn't manually change his country, the invoice is addressed to a Cayman Islands citizen and I don't have to pay any VAT.
If the customer switches the billing country to Germany, I add 19% VAT on top of the total. This 19% would go regularly to the German tax office.

Does this work?
Excited about your opinions

If your customer enters a wrong billing address, it is not your fault.
This is what you will have to tell to the judge when you are called in court. Let’s hope the judge is a friendly member of this forum and not a silent vicious reader.

 

[Bexxley]

Okay, having to hope for a friendly judge isn't my standard. I need to be 100% legal.
So what could I do different?

The shop is available to all countries in the world (because digital products).
Therefore setting the default country to Germany wouldn't make sense either.
(Btw, Germany is just an example here. This would apply to all VAT countries.)

I really have no influence on what address the customer enters.
What would be the 100% correct way?

 

[Martin Everson]

What would be the 100% correct way?

To follow the VAT rules and charge were applicable.

It's also VAT Fraud. Do you think your idea will pass a Forensic or Tax Audit? You never want to be accused of false accounting for VAT in UAE never mind Germany. You may get away with it but if you ever get investigated......

 

[Marzio]

I need to be 100% legal.

If you sell products then you must apply customer's country VAT.

If you sell services then it matters the country where the service is rendered from: UAE in your case

The only legal solution would be to add a service to your product so that you could claim you are selling services with 0% VAT

All other solutions are VAT fraud.

 

[Sols]

This will work as long as your plans don't include growing your business to any major size. For a small business, no one will care. If someone ever does care, you're going to be in a bad spot.

Keep in mind that UAE is on FATF's grey list and may be extra willing to cooperate with and please the EU at the moment.

As a general word of advice, don't base your business success around evading EU VAT. There is room for improvements in your business plan and financial model if tax evasion is a requirement.

 

[wellington]

Small companies have to collect VAT when selling digital goods to people the UK/EU now?

How's that work with Web 3 goods ?

 

[Ibus]

Small companies have to collect VAT when selling digital goods to people the UK/EU now?

How's that work with Web 3 goods ?

There is a threshold in UK and in most of EU countries. UK : 85000 £/year. Estonia : 40000 €/year ...etc

 

[ShillGates]

There is a threshold in UK and in most of EU countries. UK : 85000 £/year. Estonia : 40000 €/year ...etc

no thats abolished

 

[Ibus]

no thats abolished

Yes if you sell outside from the country where the company is registered. But it remains possible from UK company to UK consumer. Or a french company to a french consumer. If not you can use MOSS.

 

[JohnLocke]

I was wondering where do you live OP ? depending on the country you may slip away with it as already mentioned.

 

[wellington]

So a BVI to EUROZONE? UK?

no thats abolished

 

[Sols]

Small companies have to collect VAT when selling digital goods to people the UK/EU now?

Yes, that's been the case for years.

How's that work with Web 3 goods ?

There is no exemption or other difference for Web 3 goods in the relevant laws.

So a BVI to EUROZONE? UK?

No, but selling into EU/EEA creates a taxable event in many cases.

 

[wellington]

Yes, that's been the case for years.


There is no exemption or other difference for Web 3 goods in the relevant laws.


No, but selling into EU/EEA creates a taxable event in many cases.

Gonna be crazy we have micro api calls of 2 cents, trying to calculate VAT rates on that.

 

[ShillGates]

yes indeed - but its al reportable and vat is due...... even 0.000001 , go figure , socialist europeans