What happens if non-EU business don't follow MOSS EU VAT scheme?

[dotbloup]

Hi,

Non EU businesses who sell digital goods to EU customers should also collect the VAT from the EU countries where the consumer is located (same logic as for EU businesses selling to individuals in EU). Reference is below.

Telecommunications, broadcasting & electronic services - European Commission

Consequently, a web hosting provider in the USA should collect spanish EU VAT if the customer is located in Spain. Right now, The US webhosting company Hostgator does it.

European Union Value Added Tax (VAT) « HostGator.com Support Portal

But what if the non EU business don't do it???? European Union can't do anything about it, isn't it? They can't block those people... The non EU business aren't in a EU jurisdiction

Let's discuss the consequences:

If a non EU online business sell digital goods to EU customers and if they follow the MOSS scheme, the said NON eu businesses will have to increase their prices and add the EU VAT taxes on top of their regular price. They don't have any benefits for doing it. In fact, they can "kill" the EU competitors by not complying. They aren't liable to the EU jurisdiction, so they may not care.

On the other hand, EU companies have to add the EU vat taxes on top of their prices. Consequently, for EU customers, EU providers of digital goods may become more expensive than foreigners due to VAT taxes on top of their prices.

That's a big difference between incorporating in Cyprus (and be forced to follow the MOSS) and Hong Kong (non EU).


Am i right or do i miss something?

 

[vitomerchant]

Well if you can sell your service from an Seychelles offshore company or Belize for god sake who should ever do anything if you don't charge VAT!?

 

[SasxInc]

Yes, you are correct. But you have missed the 'shipping charge' part. If you sell service, then okay, you can sell cheaper than EU locals. BUT if you sell digital goods, you or your customers will have to pay shipping costs . So, it'll not be cheaper

 

[dotbloup]

I am

Yes, you are correct. But you have missed the 'shipping charge' part. If you sell service, then okay, you can sell cheaper than EU locals. BUT if you sell digital goods, you or your customers will have to pay shipping costs . So, it'll not be cheaper

I am sorry, i think you misunderstood, i only talk about digital goods like Ebooks, Online Subscription, Web hosting, Web application, Online services...

 

[dotbloup]

Example:

CYPRUS:
Cyprus company sells subscription to English lessons videos:
When the customer (individual) is located in a EU country:

Resident of France: Price of english lessons video + French VAT
Resident of Italy: Price of english lessons video + Italian VAT

Then, the cyprus company has to go to a portal (Moss) and declare the VAT
Then, the Cyprus company has to pay those VATs to the Cyprus government which will dispatch the money to right government.


BELIZE:
Belize company sells subcription to English lesson video:
When the customer (an individual) is located in a EU country, The owner of Belize company wanted to also leave Europe to escape Bureaucracy.

Belize company can bill the english lesson video without any Tax.

 

[SasxInc]

I am


I am sorry, i think you misunderstood, i only talk about digital goods like Ebooks, Online Subscription, Web hosting, Web application, Online services...

Sorry for missing that part.
In this case, you are the ultimate winner. Actually some people already doing this. This the unique idea

 

[dotbloup]

Sorry for missing that part.
In this case, you are the ultimate winner. Actually some people already doing this. This the unique idea

What i wanted to say, the EU governments don't get.

When you bill stuff for micropayments like for an item in a video game, you should normally create a line for a VAT. So for instance, your customer is slovenian, the item costs 2 euros + 0.44 euros for VAT.
Those 0.44 euros should be entered in the system and then added to the system of the EU gov. along this id of invoice and all sorts of crazy things.

For such a small amount... European Union doesn't want summarized VAT. It is stupid !

 

[Sansa]

I think you are right in your idea. But for me its better to be a part of the European Union rather than not being a part of it. It has some disadvantage for sure but it has a lot of benefits

 

[dotbloup]

I think you are right in your idea. But for me its better to be a part of the European Union rather than not being a part of it. It has some disadvantage for sure but it has a lot of benefits

You don't need to incorporate in Europe. You can get a non-eu company and a EU bank account

 

[JohnLocke]

You don't need to incorporate in Europe. You can get a non-eu company and a EU bank account

Second that.. you don't need to have a European company to do business online in Europe.

 

[dotbloup]

For your information, i discovered that the European Union is not a legal entity and can't be an enforcement authority.
Consequently, only a country can ask you to pay VAT.
If you sell 1000 E-books to french citizens without VAT, that should be France that should ask your company to pay the VAT.
Whatever you can read online, this never happened even inside europe.

 

[negon]

Whatever you can read online, this never happened even inside europe.

I totally agree. I have never seen any governement or country yet to collect VAT for an Internet company that is registered by foreigners. In fact none of the countries around in Europe have the manpower to monitor each and every company doing business online and do their background checks on each of them.

This is as with most of what you read online, there are laws everyone need to comply to. But then there are all the workarounds which could be considered a tax law offense if discovered. The money it costs a governement to prosecute a company that is registered by foreigners has to be hold up against what they "think" they can get out of it so in the majority of cases they give up.

 

[dotbloup]

I live in a European country and i have decided to look into the local legislation after i posted the last thread.

At last i understand how it is working !!!

If you live in one European country you can find also the same thing in the law of your country because the 28 countries have the same law about VAT (with different rate for sure)

Every country in Europe has a threshold. If you sell more digital good that a certain Threshold you have register to gather VAT in this particular country.

List of thresholds
https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/vat_in_ec_annexi.pdf


Examples: The threshold in France is 35,000 euros

If you sell more than 35,000 euros of Digital goods to French customers during the year, you have to register to VAT moss, gather the French VAT and do a SEPA transfer to the french tax authority (non resident french tax authority to be precise). otherwise, France may ask you to pay this VAT

The threshold in Germany is 100,000 euros

If you sell more than 100,000 euros of digital goods to Germany during the year, you have to register to VAT moss, gather the german VAT and do a SEPA transfer to the german tax authority.

If France government thinks that a Belize company should have paid VAT, they will send a letter to the Belizean company. If they don't answer they will look into all the agreement they have with Belize to get all the information about the company owner of the Belizean company.

 

[dotbloup]

For your information, i have checked in the French law and it is the same in the 28 countries. They say a company has to sell 35,000 euros per year before registering for VAT.
Let me tell you why it is important. They don't make any difference between a French / Europe / World companies.

 

[negon]

Belize company can bill the english lesson video without any Tax.

Thats what they can do and it play a role in the competition on the Internet because if you don't have to charge VAT you can offer your services cheaper compared to the competitor in your niche.

A UK company will have to charge VAT if someone not registered for VAT want to buy something from you.