New European VAT (sales tax) laws

As many of the EU based readers of this forum may know already, there are to be new Value Added Tax laws across the entire European Union from Jan. 1st. From this date onwards, all B2C trade has to pay VAT in accordance with the VAT rate in the country in which the customer is located. To do this, the vendor has to either create an entire tax presence in each and every one of the 28 EU countries, or use a so-called 'simplified' VAT 'Mini-One-Stop-Shop' (known here as a VAT MOSS) listing each and every sale and the country of destination for that sale and keep records and evidence for every sale for six or seven years. I can assure you, that this system is anything but simple! This ruling will effect EVERY business that sells downloads into the EU. This does not just effect EU companies or individuals. This (despite information to the contrary given to me by a UK tax official whose job it is to know these things) will effect ALL companies, regardless of whether you are VAT registered or not, or even if you are a private individual selling a download as part of a single ebay transaction. In other words, this effects Reaper! There are so many anomalies within this ruling, that only a sort of collective madness can ensue! How do I know where the customer is? What if he/she is crossing a boarder? How will this be enforced, when the local tax authorities are not the collecting agent? Some makers of small apps and plugs are stating that they will cease to sell outside of their countries, as it just is not worth the bother. You cannot just not sell to the rest of the EU; remember all that fuss about buying cars in Italy and Spain, when they were cheaper there and the dealerships that were sued and even fined by the Commission, if they tried to refuse to sell? I can think of three ways around this. 1. Send out a physical CD or USB stick, but still permit the download as a courtesy. (OK for higher priced items, but sucks for stuff under a tenner!) 2. Set up a virtual shop in the Bahamas and let the authorities bust a testicle over that one. (Dangerous, as they will probably go straight to the parent company anyway!) 3. Put into your T&C that the purchaser has to declare that they are a business, then it becomes (as far as you are concerned) a B2B transaction. Interestingly, the selling agents such as Bandcamp have already stated that they are ignoring this ruling completely! I have a feeling that many, many major, as well as small players, will just ignore this ruling and the various VAT authorities will be left with a quandary. Do they admit that the whole scheme is utter bo-locks and completely unworkable at every and any level, or do they send billions, chasing pennies across 28 different countries, as well as across the entire World? I was talking to a US based company owner who collects millions from EU customers for software downloads and he told me that he has not got the slightest intention of paying even the tiniest amount of attention to this new ruling. His exact words were "Well, they can go f**k themselves!" When I am not being a wind-swept and groovy studio owner, I run another business and for the little direct on-line stuff we do, we are going with option three. I shall watch the various governments try to wriggle their way out of this disaster with interest!

Wow. I guess the heads of Europe got together to draw up a plan to screw themselves, their countries, and everybody in them. Conspiracy theorists could have a field day.

There's a thread about this back at KvR:

I think this is their way to kill small independent artists and force them all to go to the "Sell via a distributor who deals with the VAT and pays you a royalty" way. In other words, good news for distributors or accountants. Bad news for small business and independent artists.

You are thinking way too small here. This will affect ALL businesses that sell electronically outside their own borders. It isnt JUST about the music biz.

I'm not surprised. The EU wastes a huge amount of money and doesn't publish audited accounts. They are desperate for cash.

A way around this is manually sending download links, but that can be painful if you have a few hundred customers (not hard for a small business).

Thanks for alerting us to this ridiculous bureaucratic insanity. It baffles me why the EEC seem hell bent on doing all in their power to prevent people from doing business (or at least making it as difficult as possible). :(

My Amazon and NewEgg orders this year added tax. I'm not sure when that started, but the internet is hardly free and open any more. Bureaucrats will kill innovation every time it's tried.