Discussion
Hello.
I see more and more companies outside of the EU applying VAT to sales of services such as web hosting etc. I presume it is because of this...
https://www.gov.uk/government/publications/vat-sup...
My question is why would a company in the US bother with the admin of VAT for European customers?
Does the VAT they charge actually get repatriated to the whichever EU country the customer is in?
I see more and more companies outside of the EU applying VAT to sales of services such as web hosting etc. I presume it is because of this...
https://www.gov.uk/government/publications/vat-sup...
My question is why would a company in the US bother with the admin of VAT for European customers?
Does the VAT they charge actually get repatriated to the whichever EU country the customer is in?
Not sure I understand, they can't charge "VAT" unless in the EU with valid EU VAT number. Sure it's not a local sales tax?
From your link:
where the place of supply of services is outside the EC, that supply is made outside the EC and is therefore not liable to VAT in any Member State (although local taxes may apply). Such supplies are said to be ‘outside the scope’ of both UK and EC VAT
From your link:
where the place of supply of services is outside the EC, that supply is made outside the EC and is therefore not liable to VAT in any Member State (although local taxes may apply). Such supplies are said to be ‘outside the scope’ of both UK and EC VAT
Oceanic said:
Why would a company outside the EU want to administer tax collection on behalf of countries inside of the EU?
It won't want to - but it may HAVE to.VAT regulations sometimes require that an entity based outside an EU country but conducting a large amount of business with customers in that EU country may very well have to register for VAT to cover sales in that country. There are mechanisms in place to allow any VAT collected to be paid over to the VAT authorities.
Eric Mc said:
It won't want to - but it may HAVE to.
VAT regulations sometimes require that an entity based outside an EU country but conducting a large amount of business with customers in that EU country may very well have to register for VAT to cover sales in that country. There are mechanisms in place to allow any VAT collected to be paid over to the VAT authorities.
How is it enforceable. Let's say I am a web hosting company in the US, why should I charge VAT to a european customer? My business is not in Europe, the transaction occurs on the internet. How can the EU dictate to other countries businesses that they must administer this? VAT regulations sometimes require that an entity based outside an EU country but conducting a large amount of business with customers in that EU country may very well have to register for VAT to cover sales in that country. There are mechanisms in place to allow any VAT collected to be paid over to the VAT authorities.
Oceanic said:
How is it enforceable. Let's say I am a web hosting company in the US, why should I charge VAT to a european customer? My business is not in Europe, the transaction occurs on the internet. How can the EU dictate to other countries businesses that they must administer this?
If you buy a physical product in the States and bring it into the UK to use do you not think you should pay tax on that either? gizlaroc said:
If you buy a physical product in the States and bring it into the UK to use do you not think you should pay tax on that either?
Depends on the circumstances.What I'm getting at here, is how can the EU force businesses operating legitimately outside of the EU obey their rules?
Eric Mc said:
The EU enforces nothing. The tax authorities in each state endeavours to make those who trade within their state boundaries comply with the laws that exist within those boundaries. VAT is just one aspect.
OK, so how can the tax authority in say the UK expect a business outside of the EU to apply and administer tax collection on their behalf. They are not in the jurisdiction of the EU or the individual states. Or put it another way round, if the US government expected me to tax people based in the US their tax rate whilst I am trading in the UK as a sole trader, I would tell them to do one.
How can a country enforce tax on sales on businesses outside of its jurisdiction ?
Oceanic said:
Or put it another way round, if the US government expected me to tax people based in the US their tax rate whilst I am trading in the UK as a sole trader, I would tell them to do one.
if you are setting up a checkout taking payment for people in the US then yeah, you would be expected to apply their taxes depending on the scale of the operation. gizlaroc said:
if you are setting up a checkout taking payment for people in the US then yeah, you would be expected to apply their taxes depending on the scale of the operation.
If I were running a business online based in the UK surely I would be attempting to be compliant with the tax laws in my own country and not some other random country? If was expected to collect tax on behalf of the US government I presume I could apply an administration charge to the US government?There are ways and means by which an authority in one country can make a business comply with the tax regulations it needs to comply with.
For instance, they can block businesses in their country from doing business with the overseas entity. And if they fail to block, they can then penalise the business based in their country for dealing with a non-compliant overseas business.
The argument of "I don't have to comply because they can't hurt me" is naive.
For instance, they can block businesses in their country from doing business with the overseas entity. And if they fail to block, they can then penalise the business based in their country for dealing with a non-compliant overseas business.
The argument of "I don't have to comply because they can't hurt me" is naive.
Oceanic said:
If I were running a business online based in the UK surely I would be attempting to be compliant with the tax laws in my own country and not some other random country? If was expected to collect tax on behalf of the US government I presume I could apply an administration charge to the US government?
The rule has changed to make the UK more competitive with other countries which have a much lower tax rate than our 20%. If you sell to someone in Ireland you can charge 12.5% rather than 20%, if you sell to the Cayman Islands you can charge 0% tax.
You do also have to send the Irish tax office the 12.5%, however in the UK you can register with “Mini One Stop Shop” (MOSS) and they will distribute the tax to the appropriate countries, however..... you can only register if you are VAT registered, if you are not then it is a complete ball ache. You have to register for VAT returns in every market you sell to!
The above is talking about digital products, if you sell a physical product you can either charge UK vat to EU members who don't supply you a vat number or you can charge no vat if they do, and with non eu members you can simply remove the vat, as long as you keep evidence it was shipped.
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