US Companies & their 2015 EU VAT challenge
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The document discusses the impact of the new EU VAT regulations effective January 1, 2015, which mandate that VAT is based on the customer's location rather than the merchant's location. It highlights the compliance challenges for US digital companies selling various digital goods and the implications for non-compliance, including fines and prosecution. The document also addresses common questions regarding registration and tax obligations under the new regulations.
US Companies & their 2015 EU VAT challenge
- 1. 0 US Digital Companies & their 2015 EU VAT Challenge December 22, 2014 9 John McCarthy, CEO – Taxamo Esteban van Goor, Indirect Tax Lawyer – Baker McKenzie
- 2. PRESENTATION OUTLINE 1 2 3 4 EU VAT Regulation Non-Union MOSS Registering Location Evidence Q&A5
- 3. The EU VAT Regulation
- 4. JANUARY 2015 SUN MON TUE WED THU FRI SAT 28 29 30 31 1 2 3 0 9 D A Y S TO GO ONLY
- 5. Previously based on merchant location Jan 1st 2015 EU VAT Regulation 2015 EU VAT RULE CHANGE VAT now based on customer location EU tax authorities have agreed Merchants must verify the location of customer with evidence
- 6. NON COMPLIANCE – NOT AN OPTION FINES FROM TAX AUTHORITIES LIMITS GROWTH /EXPANSION PROSECUTION FROM 28 MEMBER STATES
- 7. WHO IS AFFECTED? Anyone selling the following into or in the EU…. Games and e-books Software and software upgrades Websites, hosting, VoIP and content Music, films, images and photographs Basically any digital good
- 8. MOSS – Non-Union Scheme Not registered for VAT in any Member State 2 MOSS A new portal for for EU VAT on e-services One settlement for all EU countries One payment for all EU countries 3 4 No establishment in the EU Register for MOSS in any EU State (Member State of Identification – MSI) 1 Replaces VOES (2003)
- 9. Register MOSS - www.ros.ie
- 10. Business Details / Contact / History
- 11. Business Details / Contact / History
- 12. Business Details / Contact / History
- 13. VAT Return € Reporting Obligations StorageSettlement
- 15. EVIDENCE COLLECTION What Proxies to use?
- 17. Q&A
- 18. What is the difference between sales tax in the U.S., and value- added-tax (VAT) in the EU? QUESTION
- 19. US and Swiss registered company. Do we need to pay EU VAT in this new scheme? QUESTION
- 20. Do I need to register and declare if I don’t charge i.e. free downloads? QUESTION
- 21. The information I have been able to find addresses compliance for companies with a ‘permanent establishment’ in the EU. What about companies with websites owned, and hosted, solely in the US? QUESTION
- 22. Can I register for MOSS in more than one Member State? QUESTION
- 23. Under what legal authority is the EU requiring compliance with EU VAT regulations from websites owned and hosted solely in the US? How EU will chase VAT law breakers from USA? QUESTION
- 24. These rules for have been in existence since 2003 for US companies and I haven’t complied, why should I now? QUESTION
Editor's Notes
- #3: ----- Meeting Notes (20/03/2014 10:15) ----- Today's presentation will be a high level introduction to: > The EU VAT directive > Who Taxamo is > How does our solution help merchants? > Business case Infomation
- #4: ----- Meeting Notes (20/03/2014 10:15) ----- Taxamo has developed a platfrom to help e-service merchants to comply with the EU VAT change ----- Meeting Notes (20/03/2014 10:30) ----- at a high level the front end of our platform will: > Identify eu/non eu transactions > Validite B2B transactions > collect evidence for all transactions in accordence with the EU VAT directive > we also offer a univerail pricing option for merchants > the front end of the platform manages the VAT rate matrix for the 28 countries and product codes.
- #5: ----- Meeting Notes (20/03/2014 10:15) ----- It is important to highlight The 1st of January 2015 as an important date. on the 1st of January 2015 e-service merchants must start to comply with the EU VAT change
- #6: ----- Meeting Notes (20/03/2014 10:15) ----- E- services goods ; such as software, music, games and images have been difficult for governments worldwide to tax because they are not visal goods and the customer just downloads the piece of music or software when purchased. This is why the EU member states have introducted the EU VAT directive - the current rules of VAT on e-services is that that the VAT rate is charged at where the merchant located. as from 1st January 2015 is that the merchant must charge the VAT rate of the customer country residence. So at the moment when you buy music from itunes you are charge the lux VAT rate of 15% and come 1st january 2015 you will be charged the German VAT rate of 20% when you purchase the music on itunes. The EU tax authorites have agreed the introduction of this new VAT rule and the date is not going to change. For a merchant to be complaint for this new VAT change they must collect evidence to proof the country location of their customer. the EU have set out stick guidelines on what evidence needs to be collected And the payment process is vital for this evidence.
- #7: ----- Meeting Notes (20/03/2014 10:15) ----- Non compliance with this EU VAT change is not an option for merchants : it is the risks of non compliance is the same as it is today: >fines from tax authorities > Jail > it will retriction you business expansion in the EU
- #8: ----- Meeting Notes (20/03/2014 10:15) ----- taxamo has built a platform for E-service merchant to comply with the EU VAT change and it there is a opportunity for as the PSP's to partner with us to offer your merchant a solution that they need. For you as the PSP this represents an opportunity of a new revenue stream from existing merchants.
- #9: Replaces VOES – automatic transfer for anyone already registered Non-Union scheme applies if….2 & 3
- #10: Non-Union scheme applies if….
- #11: Non-Union scheme applies if….
- #12: Non-Union scheme applies if….
- #13: Non-Union scheme applies if….
- #16: 1.IP BIN of CC, Billing address (only UK) Do you always prompt for User declaration or wait until you cannot collect enough evidence 2. At what stage in the checkout process do you collect the proxies – and if you need more when do you ask you consumer? Do you collect evidence at the payment page? Do you stage the transaction at the payment page? 3. What proxy to default to? How do you manage an audit from another tax authority? Should you put a contingency in your accounts for non compliant transactions Austria? The letter of the law says one thing - is that what you need to abide by? The Law is the regulations that were passed – not the Explanatory Notes. We have heard in various EU conferences again and again that the explanatory notes are not legally binding. Some countries may interpret the rules differently to how the explanatory notes interprets them. There are use cases in the explanatory notes which you can code to however some country may view that as being uncompliant. Is it likely? Not sure – was at a conference where Austria said they were 99% behind notes – did not specify which bits they weren’t happy with.
- #17: IP + BIN + Country Other Payment methods – other flags. If you do not get match – prompt user – Maybe partial page refresh using Ajax? Do this PCI compliantly