MOSS (Mini one-stop shop) VAT scheme circumvention?

[Xilaboi]

Hi. I'm a company owner selling digital goods out of Denmark. I'm not a corporate but sole proprietorship. I'm totally fine with income tax and also VAT in general for ONE country.
MOSS is complicated as hell, and with COVID. Denmark decided to delay VAT returns. Which other EU countries didn't, or at least the MOSS scheme didn't. Since I'm operating out of Denmark with my expenses here. I have to pay VAT for every EU customer (except danish) yet I'm not able to get VAT returns for my company expenses (currently for a year).... That was the straw that broke the camel's back. They have turned my company from a healthy one with no loans. Into one taking loans to be able to pay MOSS vat.... I have no idea when I'll get my VAT returns, and I'm honestly very mad to get forced to take loans to pay tax, when otherwise not needed to. MOSS is already so complicated. A company can in no way 100% guarantee a customer's input is valid, and it's costly trying. It makes me nervous whether I'm doing it right or not and that I'll one day get a big a*s fine, for trying my best.

I was wondering as an offshore company (outside EU) could I circumvent MOSS? I had my eyes on Stripe Atlas, because it's cheap and easy, and Stripe is already my main payment solution.
I know MOSS is also for companies outside EU. But the EU can't check up companies residing outside the EU. They high likely wouldn't care about a small company like mine only making 40-80.000 euro a year either way.
What also worries me is how do I give myself salary? Do I still need my danish sole proprietorship, and do payouts to my danish sole proprietorship's bank account? Or do I do payouts directly to my private bank account?

My interest in this is not only to circumvent MOSS, but also to establish a more international structure which allows me to easily move to another country and still get paid and pay local tax wherever I am. I have a dream of travelling around. In particular, I want to live in South America for a long-term period.

Anyone who can answer my questions? What would you do?
And what are some good fair priced offshore company agents? I tried once establishing on the Seychelles through Anglo-Corp Ltd which today is named CPIE Services, which unfortunately scammed me approx 1800 euro.....
Being anonymous is BTW not of importance. I want my company to continue to be transparent with who I am and where I am for their safety and trust.

 

[Dasboot]

Europe has truly gone insane...

I once bought a telescope from the DDR around the mid eighties, that required applying for an import license. Later got deduction of VAT for volunteer purposes in the early nineties, but it was still a matter of getting a couple of documents - some of which was produced in Hungary.

This is WAY worse than anything that we had even during and right after the Eastern bloc!

I would think that the taxation leeches have made sure that its the market & residency that ultimately counts, i.e. that the new company will get a huge bill if/when they see your website catering to a local market. You'd also be personally responsible as long as you reside in Denmark... But you'd have to check the fine print, I'm no expert at all - just saying that I would think this is the intent of the laws & regulations.

Also, if you set up an offshore entity the chances are that regulations would change after a few years - you might end up moving more than once...

All of these considerations might lead at least some people to simply set up a company with nominees or such. The West is just done for, running a small business will go from almost impossible to outright dangerous - I've seen this coming for at least a decade setting up & running several companies in Norway!

 

[Sols]

No, you cannot legally avoid EU VAT this way. There are so many ways this could fall apart, from financial institutions reporting you under CRS/AEOI to the tax authority one day asking you to explain where your income is coming from.

As long as you live in Denmark, any company you control and manage becomes Danish resident for tax purposes and by selling to/within the EU, you are in scope for VAT. They might not catch you right away but if/when the Danish tax authority catches the scent of tax evasion, they will come after you and they will not be nice. You're looking at much more than just hefty tax payments in that case: penalties, late interest, and worst case prison (rare but not unheard of for tax crimes which in severe cases now also lead to money laundering charges).

EU VAT is very messy and unless you have an in-house accountant, businesses usually outsource it a local accounting firm. I don't want to "pile on" but if you have to take out loans to pay for VAT, it sounds like you might need to get someone in to help you with your cash flow. You'd normally always leave enough cash reserves in a company to cover liabilities including tax. A good accountant can probably sort this out for you and help it from getting any worse. That would be time and money much better spent than setting up an illegal offshore structure.

If you plan to leave Denmark and move outside of EU/EEA, you have more room to dodge VAT since enforcement of non-payment from foreign companies is, for now, quite limited. But as long as you stay in the EU, you're taking a big risk going offshore to avoid VAT.

 

[Utah]

Easy solution here. Use a payment processor that also takes up the VAT/GST/Sales tax requirements in various countries (you're talking about VAT in Europe, but other countries have similar taxation). Examples are 2checkout and Paddle.

 

[Xilaboi]

No, you cannot legally avoid EU VAT this way. There are so many ways this could fall apart, from financial institutions reporting you under CRS/AEOI to the tax authority one day asking you to explain where your income is coming from.

As long as you live in Denmark, any company you control and manage becomes Danish resident for tax purposes and by selling to/within the EU, you are in scope for VAT. They might not catch you right away but if/when the Danish tax authority catches the scent of tax evasion, they will come after you and they will not be nice. You're looking at much more than just hefty tax payments in that case: penalties, late interest, and worst case prison (rare but not unheard of for tax crimes which in severe cases now also lead to money laundering charges).

EU VAT is very messy and unless you have an in-house accountant, businesses usually outsource it a local accounting firm. I don't want to "pile on" but if you have to take out loans to pay for VAT, it sounds like you might need to get someone in to help you with your cash flow. You'd normally always leave enough cash reserves in a company to cover liabilities including tax. A good accountant can probably sort this out for you and help it from getting any worse. That would be time and money much better spent than setting up an illegal offshore structure.

If you plan to leave Denmark and move outside of EU/EEA, you have more room to dodge VAT since enforcement of non-payment from foreign companies is, for now, quite limited. But as long as you stay in the EU, you're taking a big risk going offshore to avoid VAT.

Is there no legal way to state you have an income from a offshore business? It's not like I want to avoid income tax. Just MOSS, which two of my competitors already do, one in the UK actually (he still believe the UK vat threshold makes him an except from it, but I know that ain't true, except for UK customers), and then one in the Swiss, not EU though, but still has to comply with MOSS.

Ye that wouldn't look good, EU is striking hard on tax crimes.

I do use an accounting firm. It's just in 2019, I used up my reserves to buy an apartment, which at the point was a good decision, then COVID hit 8 months after, and I was fine for a bit. Then suddenly in May they announce that VAT returns for now has been delayed till minimum 2021..... And I also just signed a office lease in April, and had to spent money on lots of office equipment, which I couldn't get VAT returns for....
It's not that much I've loaned, I guess 3k out of 6.5k euro. It's not really a big deal, but I'm also living on a tight budget eating, way to many days eating oat meal only haha. But it's mostly the principle for me, that a company shouldn't pay VAT, if they don't get VAT returns. The MOSS complexity has just annoyed me ever since it was implemented, my accountants also thinks it's confusing, when it comes to the liability about customers inserting fake information.

I also thought of just indirectly asking my customers to put in fake address information. Like inciting them to do so, by putting the VAT on top of the price, instead of having one price for everyone. So price becomes 10 euro + VAT of country, then they'll prolly select a country outside the EU to not pay VAT, when it's on them. Companies like: CrystalIdea does it like that, so I guess it should be legal.
Question is the liability though, if they somehow figure many of my customers insert fake information.

Thanks for your answer.

 

[Xilaboi]

Easy solution here. Use a payment processor that also takes up the VAT/GST/Sales tax requirements in various countries (you're talking about VAT in Europe, but other countries have similar taxation). Examples are 2checkout and Paddle.

What do you mean by they take it up? like I still have to pay the moss vat, but they'll figure the customer location out for me?
I already have system in place which checks the IP and also blocks most VPN's, which I guess is the way most do it, or by credit card issuer origin. VAT rate is also automated, and the transaction is auto accounted for in my bookkeeping, all is custom made code, and such a pain in the a*s.

 

[Xilaboi]

Europe has truly gone insane...

I once bought a telescope from the DDR around the mid eighties, that required applying for an import license. Later got deduction of VAT for volunteer purposes in the early nineties, but it was still a matter of getting a couple of documents - some of which was produced in Hungary.

This is WAY worse than anything that we had even during and right after the Eastern bloc!

I would think that the taxation leeches have made sure that its the market & residency that ultimately counts, i.e. that the new company will get a huge bill if/when they see your website catering to a local market. You'd also be personally responsible as long as you reside in Denmark... But you'd have to check the fine print, I'm no expert at all - just saying that I would think this is the intent of the laws & regulations.

Also, if you set up an offshore entity the chances are that regulations would change after a few years - you might end up moving more than once...

All of these considerations might lead at least some people to simply set up a company with nominees or such. The West is just done for, running a small business will go from almost impossible to outright dangerous - I've seen this coming for at least a decade setting up & running several companies in Norway!

Ye I don't like the direction EU is taking.... I really envy the UK for leaving, it might actually be the perfect place to move to one day, it's close to Denmark and cheap flights, just need to find something cheap way outside London, and get used to the cars being in the left-side haha. Their VAT threshold, fits just perfect for a small company like me.
Thanks for answering, I'm very clueless when it comes to how residency matters for an one man company, but I guess it does by a lot.

 

[Utah]

What do you mean by they take it up? like I still have to pay the moss vat, but they'll figure the customer location out for me?
I already have system in place which checks the IP and also blocks most VPN's, which I guess is the way most do it, or by credit card issuer origin. VAT rate is also automated, and the transaction is auto accounted for in my bookkeeping, all is custom made code, and such a pain in the a*s.

You don't have to do any of that. In fact, doing it yourself is practically impossible.

If you go with 2checkout or Paddle (or some other company that takes care of it), they will take care of all of it. VAT calculation, collection, paying, reporting, registration, etc. You don't have to do anything, except use their payment interface on your website. You do pay slightly higher payment processing fees (5-6%).

 

[Sols]

Is there no legal way to state you have an income from a offshore business? It's not like I want to avoid income tax. Just MOSS, which two of my competitors already do, one in the UK actually (he still believe the UK vat threshold makes him an except from it, but I know that ain't true, except for UK customers), and then one in the Swiss, not EU though, but still has to comply with MOSS.

Ye that wouldn't look good, EU is striking hard on tax crimes.

Exactly, you can't pick and choose which taxes you pay. Your competitor in UK may be about to get a fun call from HMRC, and who knows what will come from Brexit. The competitor in Switzerland is probably too small to be worth enforcing non-EU/EEA compliance with VAT MOSS and will continue to thrive for now.

I do use an accounting firm. It's just in 2019, I used up my reserves to buy an apartment, which at the point was a good decision, then COVID hit 8 months after, and I was fine for a bit. Then suddenly in May they announce that VAT returns for now has been delayed till minimum 2021..... And I also just signed a office lease in April, and had to spent money on lots of office equipment, which I couldn't get VAT returns for....
It's not that much I've loaned, I guess 3k out of 6.5k euro. It's not really a big deal, but I'm also living on a tight budget eating, way to many days eating oat meal only haha. But it's mostly the principle for me, that a company shouldn't pay VAT, if they don't get VAT returns. The MOSS complexity has just annoyed me ever since it was implemented, my accountants also thinks it's confusing, when it comes to the liability about customers inserting fake information.

It's a rough situation but what I want to highlight is that potential short-term gains by going for an illegal offshore setup risks costing you way more in the future. Are there any other pandemic related aid you can apply for from the government? Or deferred loan repayments from the lenders?

I also thought of just indirectly asking my customers to put in fake address information. Like inciting them to do so, by putting the VAT on top of the price, instead of having one price for everyone. So price becomes 10 euro + VAT of country, then they'll prolly select a country outside the EU to not pay VAT, when it's on them. Companies like: CrystalIdea does it like that, so I guess it should be legal.
Question is the liability though, if they somehow figure many of my customers insert fake information.

This would in all likelihood be considered a form of tax evasion, if it's ever brought before the tax authority or a court. Check local laws to be sure. But generally speaking, whether intentional or through negligence, failure to accurately determine where a customer is based for VAT purposes is not something a tax authority will be very forgiving with. Especially if they can find proof you were telling your customers to lie.

A sudden decrease in VAT payments without a corresponding decrease in revenue/profits may trigger a red flag with the tax authority and lead to an uncomfortable audit.

Worst case outcome is they determine all your customers are in scope of VAT and it's up to you to prove the reverse. While worst cases rarely become reality, you need to consider and manage your risks here carefully.

The pandemic will end and VAT returns will go back to normal. With its advanced tax infrastructure and financial system, Denmark is probably better equipped than many other countries to go back to normal in a timely manner.

 

[Dasboot]

If you already have a good customer base and know how to build a business like this, why not get the one you have 100% legit and effective with the modern services others have mentioned here, and then start another one that is totally separated & completely dark web-like? ;-)

We gotta play the systems the way they are designed... My last company got a lot of support via the welfare system, I wanted to go full in on that sector but my partner did not - in the end we both got destroyed because we did not separate our engagements with the two systems of welfare state and what remains of free markets. We simply were too naive, uninformed and behind the curve - and that even when we both have known its a BIG lie for decades.

In short: we should have separated it all into one company spinning the welfare story, maybe producing something real as well (as we did) BUT most importantly always handling the cashflow from the state in the most cynical way possible...


I feel I've seen it all after a decade of trying to do this "socially responsible entrepreneurship" in Norway and Scandinavia, and then ending up even sponsoring the beginnings of a socialist dependency-machine here in Thailand of all places. Will probably have to spend too much on lawyers getting me OUT of the company here, more than even getting it started!

Sorry if this comes through as a rant, but its actually more of an effort to push how we have to think about the different, huge systems we are part of. What remains as 100% free in 2025 when the demonic "reset" they are pushing for might even be Monero, gold, darks & the dark web market ONLY...

Fight for freedom the smart way!

 

[Xilaboi]

You don't have to do any of that. In fact, doing it yourself is practically impossible.

If you go with 2checkout or Paddle (or some other company that takes care of it), they will take care of all of it. VAT calculation, collection, paying, reporting, registration, etc. You don't have to do anything, except use their payment interface on your website. You do pay slightly higher payment processing fees (5-6%).

Aarh okay, well I already have a system which takes care of all that, with only 1% fee on top of Stripe fees, and then it supports cryptocurrency and game skin payments as well.

 

[Xilaboi]

Exactly, you can't pick and choose which taxes you pay. Your competitor in UK may be about to get a fun call from HMRC, and who knows what will come from Brexit. The competitor in Switzerland is probably too small to be worth enforcing non-EU/EEA compliance with VAT MOSS and will continue to thrive for now.


It's a rough situation but what I want to highlight is that potential short-term gains by going for an illegal offshore setup risks costing you way more in the future. Are there any other pandemic related aid you can apply for from the government? Or deferred loan repayments from the lenders?


This would in all likelihood be considered a form of tax evasion, if it's ever brought before the tax authority or a court. Check local laws to be sure. But generally speaking, whether intentional or through negligence, failure to accurately determine where a customer is based for VAT purposes is not something a tax authority will be very forgiving with. Especially if they can find proof you were telling your customers to lie.

A sudden decrease in VAT payments without a corresponding decrease in revenue/profits may trigger a red flag with the tax authority and lead to an uncomfortable audit.

Worst case outcome is they determine all your customers are in scope of VAT and it's up to you to prove the reverse. While worst cases rarely become reality, you need to consider and manage your risks here carefully.

The pandemic will end and VAT returns will go back to normal. With its advanced tax infrastructure and financial system, Denmark is probably better equipped than many other countries to go back to normal in a timely manner.

ye okay thanks for your answer.

 

[Xilaboi]

If you already have a good customer base and know how to build a business like this, why not get the one you have 100% legit and effective with the modern services others have mentioned here, and then start another one that is totally separated & completely dark web-like? ;-)

We gotta play the systems the way they are designed... My last company got a lot of support via the welfare system, I wanted to go full in on that sector but my partner did not - in the end we both got destroyed because we did not separate our engagements with the two systems of welfare state and what remains of free markets. We simply were too naive, uninformed and behind the curve - and that even when we both have known its a BIG lie for decades.

In short: we should have separated it all into one company spinning the welfare story, maybe producing something real as well (as we did) BUT most importantly always handling the cashflow from the state in the most cynical way possible...


I feel I've seen it all after a decade of trying to do this "socially responsible entrepreneurship" in Norway and Scandinavia, and then ending up even sponsoring the beginnings of a socialist dependency-machine here in Thailand of all places. Will probably have to spend too much on lawyers getting me OUT of the company here, more than even getting it started!

Sorry if this comes through as a rant, but its actually more of an effort to push how we have to think about the different, huge systems we are part of. What remains as 100% free in 2025 when the demonic "reset" they are pushing for might even be Monero, gold, darks & the dark web market ONLY...

Fight for freedom the smart way!

It didn't come through as a rant, it sounds like the right way to do it, and I've already been thinking to make a seperate entity, since I have a competitor, who just spams his product into several separated entities to boost sales.

 

[boomy]

You say you have the choice to leave the country and move to a nicer place with better tax conditions. So I would do that, spend your money to establish your self in South America if that is what you want and do it quick.

As our all friend @Martin Everson says, you have to get out of the EU before it is to late, Denmark is one of the countries with the highest taxes to be paid. Many startups flee from that country and only come back once they have made millions.

 

[glucklicher]

I too sell digital products and do it with for example Clickbank. It's kinda like a payment-processor, but the big difference is that they act as a "reseller". So officially, when my customers buy my products, Clickbank is the seller, not me. Because of this, Clickbank handles everything: payment-processing, invoices, deciding in which country the customer is and how much tax he has to pay, sending the tax to the required country, etc. They take 7,9% or so from every sale, but so I don't have to deal with MOSS, etc.

 

[Xilaboi]

You say you have the choice to leave the country and move to a nicer place with better tax conditions. So I would do that, spend your money to establish your self in South America if that is what you want and do it quick.

As our all friend @Martin Everson says, you have to get out of the EU before it is to late, Denmark is one of the countries with the highest taxes to be paid. Many startups flee from that country and only come back once they have made millions.

Where can I find @Martin Everson 's write-up on that?

 

[Martin Everson]

Where can I find @Martin Everson 's write-up on that?

Search the forum its all here.