Advice on how to handle VATMOSS

[ramthedragon.livejournal.com]

Greetings everyone, I hope this is an ok post to make, but I have been a bit confused and concerned about VATMOSS lately.

For those who do not know VATMOSS is a value added tax recently put up by the European Union which taxes the seller rather than the buyer in digital goods. I didn't pay much attention to it because I am from South America and thought this wouldn't affect me, but it seems it can reach anyone as long as someone from the UK and the EU buys off from them.

Not everything is taxable though, like digital commission for speciphic clients don't fall under VATMOSS and in theory, anything sold via a third party marketplace. This should include Patreon, but Patreon seems to not want to go through the hassle of filing for VATMOSS for their users. So Patreon users will have to calculate tax on every single of their EU patrons.

This got me thinking what other things could potentially be taxed by VATMOSS, things like base packs, adoptables, YCH auctions; and how to circumvent the red tape without banning EU clients all together.

Has anyone had any trouble with this already? Or maybe some suggestions on how to handle this frankly very unecessary tax?

Comments

[ctk-hullo.livejournal.com]

If you've been selling to EU customers before the change, you've already been dodging their taxes. The only change was EU sellers to EU buyers. So... while a lot of non-EU people are probably breaking this law, there isn't much to worry about since it's not feasible for EU countries to enforce.

http://www.happybootstrapper.com/2014/im-us-whatll-happen-just-ignore-eu-vat-changes/

[ramthedragon.livejournal.com]

Oh I see! Very informative. Very well then, business as usual.

[greenreaper.livejournal.com]

As a practical matter, as ctk says, VAT is unenforcable for companies outside the EU unless you have significant operations inside the EU. Unfortunately the EU has not had much luck making the rest of the world pay its taxes (it is hard enough to do so between EU countries).

But be aware, if you are shipping to Europe; often shipping companies have been "deputized" to find packages for which duty may be payable and charge it to the consumer (adding their own charge on top).

As for "unnecessary" - nobody likes taxes, but if you have to raise money somehow, it might as well hit people proportionally to their spending - rather than (say) "punish" them for earning more money. VAT (https://en.wikipedia.org/wiki/Value-added_tax) is a form of consumption tax (https://en.wikipedia.org/wiki/Consumption_tax), which have a poor history in some countries (see: Boston tea party (https://en.wikipedia.org/wiki/Boston_Tea_Party)), but are often considered to be preferable compared to the alternatives. It's just a real pain for businesses, because they are typically the ones having to figure it out and collect the tax.

VAT can be varied to encourage or discourage the consumption of certain items; this can also be a good or bad thing depending on your perspective, but at least allows you to apply no/less tax on certain items. Of course, this leads to headaches, too (http://www.bbc.co.uk/news/business-21961566), including the great Jaffa Cake tax ruling (http://www.jaffa-cakes.com/jaffa-cakes-biscuits-name), where it was declared that since this treat was technically a cake, and not a chocolate-covered biscuit, it should have a lower rate of tax. (And yes, they really baked a huge Jaffa Cake to prove it.)

[danzadragon.livejournal.com]

Did a lot of research on this including HMRC's website, speaking with employees of HMRC and asking around on the net.

The consensus is:

If you have services where the profit generated is automated and there is no direct connect from seller to buyer then you have to pay VATMOSS.

Examples: Patreons, Youtube videos and 3rd party sites selling your work and cutting you in.

If you have services where there is direct contact, so being an artist, talking a lot to clients, sending WiPs, sending files, reviewing, making fixes etc... You're in direct 1 on 1 contact with that client and does not require you to pay VATMOSS.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/390300/VAT_MOSS_Flow_chart.pdf

First box, the key here is automation, HMRC staff confirmed this is key [makes sense as its the first question too]. If you do everything manually yourself you don't have to register or pay VATMOSS.

If you do have to pay VATMOSS, even if you earn under the VAT threshold and currently opted out of paying VAT, you have to register for VAT, set the value at nil and file for VATMOSS.

Hope this helps!

[zrcalo.livejournal.com]

"From 1st January 2015 in the European Union, VAT liability will switch from the country where the product is sold to the country where the consumer buys it. But the rules will only apply to digital products such as ebooks, e-courses, recorded training videos, music or audio downloads etc.

This means digital businesses – ones which have been lauded and encouraged by almost every EU state for the last 5 years – will be penalised, while other types of small businesses shifting around physical goods are completely unaffected."

-http://techcrunch.com/2014/11/25/eus-new-vatmoss-rules-could-create-a-vatmess-for-startups/

the solution is... your artwork can be printed and therefore is a physical good.

[gem (from livejournal.com)]

Actually if you're an artist selling things digitally and doing it like manually for example sending an individual commissioner a dropbox link where they can download the file or attaching a file into an email. Then that's exempt from VATMOSS. (This wasn't originally the case and it was only a few weeks before VATMOSS came into law that this subtlety was added in)

However if you have say...an mp3 file share type thing where you purchase a CD and an AUTOMATED system sends you a link to download all the files, then that's NOT exempt. So it's kinda all about the automation of how you conduct your business.

Worst case scenario if you're still really worried, just print a copy of the commisison and mail it as the whole VATMOSS things only apply to digital goods...for the time being. The idea is that eventually this will roll out across all products.