Patreon to Europe on #VATMOSS: “Not our problem, mate.”
idea15.wordpress.com
idea15.wordpress.com
Of course, that's assuming you have a similar problem to Patreon, where the author claims that every patron would be involved in the VATMOSS transaction, which I can't speak to at all. If it's just a line-item per book for you but a line item per EU patron for Patreon that's not comparable.
In terms of detecting whether the transaction is EU or not, there's a complicated workflow with 3 pieces of evidence etc, but (a) that's what Taxamo helps with and (b) if a bootstrapped Canadian startup can deal with this, presumably so could anyone else.
> The UK government is also in the process of introducing the Diverted Profit Tax, announced by the chancellor, George Osborne in the Autumn Statement.
> The tax aims to counter the use of "aggressive tax planning techniques" to divert profits from the UK to low tax jurisdictions.
> Profits made after 1 April 2015, and diverted to other countries, will be taxed at 25%.
This is a pretty watershed moment for world wide business tax strategies. It will be interesting to see how it plays out.
I would hate to be one of the big accounting firms, or an employee of one, right now. Inter-country tax laws are about to get alot more complex and my guess is that at least of of the big accounting firms get bankrupted in the next few years due to this.
Current tax law is kind of like trying to follow the bible, or quran, to the letter of the law. There are so many inconsistencies and just plain old conflicting rules that you just can't do it.
EDIT To clarify, I'm pretty convinced, mostly from analysts I've talked to, that sooner or later a PWC or ther accounting firm will give a company tax advice that a country doesn't care for and they will get taken to the woodshed by that country. I'm not even referring to outright illegal activity like Arthur Anderson and Enron.
So yes, more money in the future due to increased tax regulation but a heck of alot more risk due to it as well.
You have to realize that Arthur Anderson was taken down because a relatively small team of auditors was corrupt.
PWC has 10,000 partners and almost 200,000 employees. It just takes a team of 50 to mess up and the firm can be gone.
It's basically just populist grandstanding.
could you expand? My feeling would be that with increasing complexity, big accounting firms stand only to make more money.
But I find myself wondering, if a company like PWC is also "Too big to fail."
In this day and age, I have little trust in very large organizations, as I see them in league with politicians and bureaucrats.
Edit: Change "too" to "to" in "Too big to fail."
If only there were some kind of service, to whom one would pay a service fee perhaps, and who in return could promote your work, then collect and aggregate small, recurring payments from international payers while properly computing the tax liability.
Some kind of intermediary which enabled people to patronize artists, such that millions of artists around the world can simply pick up a check and focus on their work.
Incidentally, the Google Play store does not do this. Each developer is the merchant of record. I can only imagine that nearly every smaller business selling through Google has neglected to pay at least some sales taxes that they owe.
It isn't even close to that simple. It should be, but because of the record-keeping and reporting requirements, tax thresholds (or lack of them), general overheads of being as familiar with 28 states' tax systems rather than just one, and failure to provide sensible systems and advice by governments on a scale that would bring most businesses to failure, it just isn't.
The EU's own web site about this specific issue -- which is widely cited by everyone up to and including national tax authorities in member states -- didn't even have correct VAT rates listed for all member states on 1 January 2015 when the new rules came in. I don't mean figuring out whether a business's particular digital product or service qualifies for a special rate in some states. I mean just the headline figures for the standard VAT rates in each state.
That said, a lot of the madness appears to come directly from the EU rules themselves. Here in the UK, after dropping the ball initially, it seems like HMRC (the national tax collection agency) is trying to be helpful for smaller businesses who have been caught in the cross-fire between big businesses and governments. However, it's already clear that HMRC themselves have limited authority to act unilaterally, and ultimately they are required to enforce the tax rules given to them from above. The situation will only be fixed when European level government realises how badly it's screwed up, but right now they're more concerned with things like whether Greece is going to leave the Eurozone and potentially lead to a collapse in the Eurozone itself, so I'm not sure anyone is really listening as, ironically, they systematically undermine the very free trade that the predecessors of the EU were originally supposed to encourage.
Hyperbolic much? Way to blame Patreon for the arduous EU tax policy.
Compliant marketplaces take care of that for you so that the individual seller/creator does not have to register as a data controller.
Why not just cut-off EU users?
I say "arguably" because of course I've no idea how that borderline-crazy rule is supposed to be enforced. (And I may be misunderstanding it too.)
I'm based in the EU (in London) and I recently registered my business for VAT because of this regulation. Now I get to raise an eyebrow, metaphorical or literal, every time I account for a digital purchase I make from a US company and mark it down as "zero-rated" for VAT. It's not zero-rated as far as my government is concerned; the seller just didn't bother to charge the VAT and as the buyer it's not my problem.
(Edit: I hope.)
(Further edit: Thinking about it again, if a Patreon patron really doesn't receive a digital good in return, surely they don't have a case to answer after all?)
Except that as soon as you became a VAT registered business it legally became your problem ;-) You have to "reverse charge" the VAT for those non-EU supplies and include them on your VAT return: https://www.gov.uk/vat-imports-acquisitions-and-purchases-fr...
Nearly all of my own purchases are subject to this and it's a bit of a pain in terms of admin overhead, but the good news is in many - but not all - cases the net financial position is the same as if you hadn't paid, since you can reclaim the reverse charged VAT.
The reverse charge as described there is for services rather than goods, though. How does it work with goods, and specifically digital goods like downloads of the sort that VATMOSS applies to? I'm quite sure sellers of such goods from outside the EU to within it are expected to use VATMOSS, does that mean there is no corresponding expectation to reverse charge?
I clearly need to do quite a bit more reading!
The other issue is I don't believe there's any such thing as digital goods - they're considered electronically supplied services. Things like Web hosting are included in this. I'm not sure what purchases you're making from the US, but in my case things like Web hosting, Mailchimp, Pluralsight, videos, etc. all of these are e-services that I have to reverse charge.
(I am basically a relatively high-functioning example of the sort of idiot HMRC are going to have to deal with now -- clueless and fumbling but determined to do the proper thing thoroughly, and without an accountant because I'm only likely to be filing for a few quid a quarter anyway)
The other annoying thing is many accountants are not familiar with the nuances of Internet based or digital businesses, particularly those that deal with overseas customers, so knowing the basics yourself is essential unless you get lucky (I've realized it's sorta like asking a back-end C developer a front-end JavaScript question - they have the skills to try and look it up, but it's not necessarily going to be the best advice).
Is patreon one of them or both, and how do I know when looking at someones patreon page?
Good question actually. What's Paypal doing about VAT?
One would hope that by now that it's all been sorted.
(HMRC answered the same question that way in an online chat - lost the link to the transcript, but it's out there.)
I can understand that it's likely that the equation comes down on the side of the European creators costing them less over the long run.
I know that there are many different services like the ones in this thread, but as a single developer, on a bootstrapping project they'd still be out of budget
seems to be empty for me.
Patreon is also really just a distributor of money, they don't provide the person with a service.
Why is a person with a web design business looking to use a site used to help artists who have trouble connecting art and normal business income?
Finally she tweeted about how many people saw that blog post and said she should have included a tip jar. It really seems like she cares more about what she can get out of a situation than anything else.
What makes you think this is true?
Why can't Americans play poker online? Why does Amazon have to collect state taxes for states they don't have a physical presence in? Google is forced to censor French and German search results. Facebook is forced to follow EU privacy laws. And on, and on. Having customers in a country means you're doing business in that country in this modern world.
IANAL. But you may want to check with one.
American anti-gambling laws.
"Why does Amazon have to collect state taxes for states they don't have a physical presence in?"
Because those states count things like affiliate programs and subsidiary companies as a sales tax "nexus". Amazon tends to kill those programs to avoid being taxable. They only collect sales tax in 24 states.
"Google is forced to censor French and German search results. Facebook is forced to follow EU privacy laws."
Yeah, because they have operations in those countries, and can thus be sued there. Also, perhaps, because they might be blocked in the relevant countries, and would rather stay in those markets.
The EU simply cannot make me collect VAT (or do any other crazy thing they think up), because I'm not in the EU. They can ban me or my services or products in their jurisdiction, or make life hard for my customers in their jurisdiction, which may be enough.
It's more than that. The U.S. actually prosecuted executives of foreign online gaming companies for providing services to U.S. citizens. The problem is not that American citizens fall under U.S. law, but foreign companies have to follow U.S. law for online only services as well. [1]
Bear in mind that if people merely keep operating now as they did in 2014, HMRC loses nothing - it's only the tax authorities in other EU states who lose out. While no-one should take this as legal advice, I suspect all we'll see is other EU tax authorities taking action against the biggest non-compliers rather than individuals.
Especially all of the unnecessary paperwork for a backwards psuedo-nation.
And it's of course entirely reasonable to expect your users to know that they have to do the paperwork for contributions in the 1-10 dollar range themselves without ever explicitly telling them.
I'm not even sure that level of information is available to the users. If I were being funded on Patreon, would I have to get in touch with every single patron and ask them for their VAT details? And what would I do if someone didn't answer?
This is no different from the borderline criminal behaviour Uber and AirBnB are encouraging.
Here in the US, that's very common. For instance, contractors are often paid in full and expected to handle their own taxes. Generally they do. This isn't considered borderline criminal.
https://www.gov.uk/government/publications/vat-supplying-dig...
Per this law, the third party marketplace/gateway is responsible for compliance and liability. That is how everyone in the EU affected by the law views it, and it is why most marketplaces and platforms are slowly but surely coming into compliance.
This particular marketplace, on the other hand, hired a consultancy firm whose raison d'etre is tax avoidance http://www.bbc.co.uk/news/business-31147276, who proceeded to give them what they paid for. That tax advice was so incredibly wrong it was almost laughable; it misrepresented the "place of supply", the fundamental piece of information behind the entire continental tax change. https://idea15.wordpress.com/2015/01/20/vatmoss-place-of-ser...
This issue is not a question of extraterritorial sovereignty or individual responsibility. It's about dodgy tax advisors giving dodgy advice to a company which paid good money for it.
But Patreon is not in the EU's jurisdiction and therefore isn't subject to their laws (with the exception of any treaties that the US has with the EU).
> …hired a consultancy firm whose raison d'etre is tax avoidance…
You keep saying that like it's bad. The whole point of tax accountants is make sure that a business or individual pays the minimum legal amount they have to.
I am glad to see services like Uber and AirBnB available.
How do you see it?