Starting on January 1st, yes last month, new E.U. tax regulations require that VAT (Value Add Tax) no longer be based on on your location, but the buyer’s location, not just for tangible goods, but for digital ones as well. There are a lot of questions out there about these New VAT regulations, so we are going to try and give you some of the important information that you should know if you are outside of the E.U.(If you live inside the E.U. you are likely already good to go, or a tax expert in your area should be able to help you out.
- I do not live in Europe, do I have to charge and collect VAT?Actually, even if you do not live in the European Union you are still suppose to collect this tax on all your sales to buyers living in the E.U.
- In truth, this is not new; technically, according to the E.U. VAT Regulations Directive 2002/38/EC, which went into effect July 1st of 2003; VAT Should be collected by non-E.U. businesses for all tangible and digital products.
- http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2002:128:0041:0044:en:PDF
- The new VAT regulations only change this for E.U. member states
- If I collect it, how do I remitting the VAT I collected?However you track your sales and sales taxes, you need to remit those taxes to the proper authorities, this can be done in one of two ways:
- You can register with each E.U. Member State and remit directly to each one, each quarter.
- You can register for VATMOSS in a single E.U. Member States and remit to that one each quarter and they will handle the rest. The VATMOSS you sign-up for may depend on you prefered language, but if you are reading this, then the Irish one(which is in English) might be the way to go
- What will happen if I ignore this and do not collect VAT from my E.U. buyers?From what we can tell, unless you are a big buisness likely not much.
- As the regulations saying non-E.U. businesses needed to collect VAT at the rate for the buyer’s location went into effect in the middle of 2003, if they have not gone after you yet, they may not.
- The E.U. itself would not go after you, each member state would have to do so on their own, and the amount you owe would likely have to not only be enough to come up on their radar, but also be worth the time and cost of collecting the owed taxes. (and they may get the IRS to help them).
- NOTE: This is not us saying you should ignore these regulations!
- Can’t I just stop selling to people in Europe?Sure you can, however, with a population of just over half a billion, you should take sometime and consider if you want to remove that many potential buyers.
- And it may be something you want to revisit later as your business grows
- I live and run my business in the United States, didn’t we fight a war to not pay taxes to Europe?Yes, your history book was telling the truth about that. However, one of the aspects of a global economy are tax treaties, like tariffs applied to large businesses importing products. It is simply a fact of doing international business.
There are a lot of information out there about these taxes and what they mean for you. Our simple bullet point gave you the important information you need to know if your business is outside the E.U.
Good luck and good sales!
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