Read this from bit.ly/149FmmT and weep (especially #2 & #5):
Impossible Things To Do Before Breakfast, Including Complying With EU VAT
To help national governments and the EU to understand why their current, "there, there, dear" response isn't adequate, we have been collating a list of aspects of the legislation that are ‘impossible' or at best economically unviable and unreasonable, for micro businesses.
It's a work in progress, as people start trying to comply, but here are five of our ‘favourites' so far:
[1] Display the correct price
You don't know where a customer is based until the final stage of the checkout process. The UK and some other Member States require you to display the VAT-inclusive price at all times. You can't do this unless you know where your customer is and if you insist on them declaring their country before visiting your sales page, you're likely to use the sale.
Even if you could get their country, the 90% of businesses below 100,000 € turnover use PayPal's ‘buy now' buttons, rather than a shopping cart, so you wouldn't be able to display the correct price. It's coded into the website page, not the shopping cart.
Most micro businesses are having to bypass this by applying a best guess ‘fudge factor' to cover VAT and then work it out afterwards. This causes UK and worldwide prices to go up unnecessarily, to compensate for Hungary's 27%, and is already costing people sales because the digital market is so price-competitive. And it's a completely unjustifiable level of admin for the sale of, say, a €2.99 EUR e-book.
[2] Manually email, to bypass the VATMOSS rules, but actually get the email to arrive
We have already seen people whose Yahoo accounts have been blocked for spamming because manually sending a pdf to a stranger (a customer) multiple times a day sets off the spam alerts for the main free email providers. This effectively closes this person's business until they can get their account unblocked. As requested, we will write to the key email providers for statements on this.
Even if you can send the pdf, most incoming email servers automatically reject emails with large file attachments from people not in your address book or whitelist, because there is a high risk that these are from spammers or contain a virus file.
So we have moved from instant downloads with happy customers to grumpy customers who have to wait for a manual email that may or may not ever arrive. Getting a reputation for spam can also cause your email address – and even your website server – to be blacklisted as a spammer, meaning you are then dropped from Google search results.
[3] Apply the correct rate of VAT.
Most of these businesses use PayPal or other very small business shopping carts. Some of these CAN handle country-based VAT, but not until the final stage of the checkout process. And they can't handle multiple rates per country. If you sell an e-book (with ISBN) and a pre-recorded course to a customer in Italy, the transaction requires two different VAT rates.
If you sell that same e-book with a live webinar, then the e-book is taxable in the place of supply, but the webinar is exempt from the new rules and is taxable in the business's country. So you could have two different countries in one transaction. Micro businesses are not set up to handle this level of complexity.
[4] Accurately collect the place of supply
Customers will quickly realise that, for example, pretending to be in Luxembourg gets them a discount. It is easy for a customer to declare a false address on a web page. It is also easy to use software to fake your IP location. As studies have shown this week, IP addresses are also incorrect in up to 10% of cases.
And if customers buy during their lunch break at work, most companies use secure VPN instead of IP, so you wouldn't get the IP data. It's not available from mobile devices. So the customer's declared address and the system IP address are not reliable pieces of data.
And most micro businesses don't have access to data such as the country code of the landline / mobile used for the transaction or the credit card bank details – and nor should they. These businesses simply cannot comply with the place of supply data collection requirements. And if the customer is buying after clicking an email link then they potentially never visit your website, so you have no way of collecting anything other than their PayPal account address.
And there are huge concerns with them storing this data for 10 years.
[5] Get the Member States to agree on what ‘digitally-delivered' means.
The UK HMRC has been helpful and has issued clear guidance [sic], clarifying it and adding definitions each time we have requested them. However, these definitions are quite different to those in, for example, Holland and Spain. In those states, the proportion that is ‘digital' falls under the law and the proportion that is live doesn't.
In the UK, any product with more than minimal human intervention is exempt. A business cannot comply with the different definitions for each of the 28 Member States.
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Martin Stephenson
Vexillia: Wargames Miniatures & Accessories
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