2015 EU VAT rules ("MOSS")

[PALU]

its not illegal to have an online store on a server outside of the country you live in...companies do it all the time.

You do not understand the difference between the country where you host your webpage and the country where your company is located or where you are self-empolyed? You have to LIVE (or register your company) in "Columbia" to evade the tax - not virtually move there your webpage. Man - that's basics.

[aciddose]

I'm not sure why people are so confused by this stuff. I'll make a short, easy to understand list of statements:

• Any sales/consumption tax is the worst idea ever. It puts the brakes on the entire economy, effectively tossing out a percentage of economic efficiency overall. http://en.wikipedia.org/wiki/Deadweight_loss
• A sales tax is generally applied at the location of the sale, to the sale itself. Not to the customer, not to the seller. Rules for exactly how this is applied vary by location.
• Any consumption tax unfairly places a burden upon smaller participants in the economy. For example individuals with a lower income pay a higher percentage of sales tax. Smaller businesses have far more significant overhead associated with sales tax and the deadweight loss related to sales tax is far more significant for them also.

This should all be easy to understand.

"To the sale itself" means a portion of the exchange is taken by a third party. In some locations it is required to list prices including the tax, some it is not. In some locations a sale is considered to take place at the location of the customer (as it appears with VAT) while in some it is taking place at the location of the seller.

For example here in Canada GST is applied only to sales occurring inside Canada, by location of the customer and regardless of whether this is a business or individual (a GST number is exchanged to allow deduction of GST paid from GST collected so as to avoid multiple taxation.) So if I were to import a product, customs will apply GST as the product crosses the border. If I purchase software online I am required to report this myself and pay the appropriate fee voluntarily unless the business operates in Canada and therefore has a GST registration, as they will want to collect the GST from me as a customer which will cover any GST paid by the seller for the products during import.

VAT is slightly different, I'll admit I'm not 100% familiar with it. As far as I'm aware it's similar although not identical to the system of deductions used with Canadian GST.

[aciddose]

You have to LIVE (or register your company) in "Columbia" to evade the tax - not virtually move there your webpage. Man - that's basics.

That isn't true. Depends upon the locality and law.

For example a seller in the United States is not as far as I'm aware required to collect GST for sales made to Canadian customers. This is however an option to them! In addition, again, as far as I'm aware if you operate a site hosted in Canada or use a .ca domain you are required to follow certain regulations even without a Canadian corporation.

(Notably, I am not required to follow these regulations as I use a .net domain.)

As for your "Columbia" example, you're referencing income tax avoidance (note evasion vs. avoidance) which has little or nothing to do with sales tax.

Even if you live in the United States, you can register a Colombian corporation to act as a "holding" company. If you're selling software, this holding company can "hold" the rights to your source-code, although not actually holding it in a physical sense, only in a legal sense for tax avoidance purposes. You can set your Colombian corporation in an agreement with yourself or your United States corporation to license the source-code, thereby creating a deductible expense. Your United States corporation can make the sales while making zero or negative profit and therefore avoiding any corporate income tax.

Now you can buy an island in the Caribbean and have a fortress constructed there with machine gun turrets and a very large zeppelin paid for by your Colombian corporation.

As for tax avoidance as an on-topic subject, I'm unfortunately not familiar enough with VAT regulation to really say what you could do. I would imagine it may be possible to do the same with a holding company and charge a license fee to yourself, meaning that you add zero value when making your sale and therefore collect zero value-added tax.

This seems obvious enough that such a loop-hole would have special regulation set up to close it.

[PALU]

You have to LIVE (or register your company) in "Columbia" to evade the tax - not virtually move there your webpage. Man - that's basics.

That isn't true. Depends upon the locality and law.

For example a seller in the United States is not as far as I'm aware required to collect GST for sales made to Canadian customers. This is however an option to them! In addition, again, as far as I'm aware if you operate a site hosted in Canada or use a .ca domain you are required to follow certain regulations even without a Canadian corporation

But what you write is the other way round. We are talking here about evading new EU VAT, being an EU citizen and having a "Columbian" website. It's not about getting some new "Columbian" law requirements, but evading the EU ones. AFAIK it's not ever going to work.

And a "holding" company is one thing and moving your website to another server is totally something different.

And using a "personal PayPal account" (as chaosWyrM wrote) as a way to get the money from this business will not work - in Poland our Tax Office can get your financial data from PayPal.

And I will shut up now

[chaosWyrM]

people do this kind of thing to avoid taxes every day. its not illegal. for instance, i refuse to purchase items from online places that charge me new york state tax (because they are located in new york and they MUST collect those taxes if shipping to a new york address). if i purchase the item from new jersey...i dont have to pay new york state taxes on it (or new jersey taxes because i dont live there).

its not illegal to do that...its smart.

Please look up New York State Use tax rules and get back to us on how smart that is.

its quite smart. the use tax is wholly unenforceable for individuals and NO ONE reports it.

"New York’s Tax Commissioner, Andrew Eristoff, has conceded, however, that it will be difficult to verify that taxpayers are reporting their Line 56 obligations fully."

"difficult" is an understatement of monumental proportions. its entirely impossible, rendering the use tax impotent.

my statement stands, its not illegal for me to purchase an item from new jersey while i live in new york, and not pay either states taxes.

new jersey has no standing whatsoever, and new york has no standing because theres no way to asses, prove, or even suspect anything.

[chaosWyrM]

You have to LIVE (or register your company) in "Columbia" to evade the tax - not virtually move there your webpage. Man - that's basics.

That isn't true. Depends upon the locality and law.

For example a seller in the United States is not as far as I'm aware required to collect GST for sales made to Canadian customers. This is however an option to them! In addition, again, as far as I'm aware if you operate a site hosted in Canada or use a .ca domain you are required to follow certain regulations even without a Canadian corporation.

(Notably, I am not required to follow these regulations as I use a .net domain.)

As for your "Columbia" example, you're referencing income tax avoidance (note evasion vs. avoidance) which has little or nothing to do with sales tax.

Even if you live in the United States, you can register a Colombian corporation to act as a "holding" company. If you're selling software, this holding company can "hold" the rights to your source-code, although not actually holding it in a physical sense, only in a legal sense for tax avoidance purposes. You can set your Colombian corporation in an agreement with yourself or your United States corporation to license the source-code, thereby creating a deductible expense. Your United States corporation can make the sales while making zero or negative profit and therefore avoiding any corporate income tax.

Now you can buy an island in the Caribbean and have a fortress constructed there with machine gun turrets and a very large zeppelin paid for by your Colombian corporation.

As for tax avoidance as an on-topic subject, I'm unfortunately not familiar enough with VAT regulation to really say what you could do. I would imagine it may be possible to do the same with a holding company and charge a license fee to yourself, meaning that you add zero value when making your sale and therefore collect zero value-added tax.

This seems obvious enough that such a loop-hole would have special regulation set up to close it.

yes.

please everyone understand...i make no claim that i believe my tactic would actually work...quite the contrary, im in full agreement that this seems like such an obvious workaround that it would be covered.

what im asking is:

does anyone know HOW its covered? what mechanisms are in place right now that prevent my scenario from working? so far no one has shown any.

i also make no claims of understanding in the slightest how eu countries do things. someone mentioned that in polland they look at your bank accounts...i still dont see how that matters. were discussing setting up an online store thats not able to be forced to collect vat...not someones personal accounts and tax filings. im not talking about money laundering, im talking about setting up a shop outside the jurisdiction of eu vat laws.

ill ask a more specific question.

right now what makes me collect vat? i mean according to the law (the eu law...no law in my country says i have to) im supposed to. but i dont...and i wont, and should some eu authority want to...how could they make me?

[PALU]

right now what makes me collect vat? i mean according to the law (the eu law...no law in my country says i have to) im supposed to. but i dont...and i wont, and should some eu authority want to...how could they make me?

I thought that we are speaking about the situation for us EU guys - that's why moving just the webstore to outside EU server made no sense for me.

If you are outside of EU and you're asking how can EU make you pay VAT - that's not that easy for them. If you are small - I don't think they'll bother. If you're big - they can block your shop IP. Or they can try to take you to court or work with your country's Tax Authority - depending on EU-your country agreements.

[aciddose]

I thought that we are speaking about the situation for us EU guys - that's why moving just the webstore to outside EU server made no sense for me.

It should.

Will you be prosecuted if you own shares in a corporation operating in the United States and collect royalties or dividends from it?

According to the image in this post:
http://www.kvraudio.com/forum/viewtopic ... 5#p6043789

An EU business selling to a non-EU business is labelled with "reverse charge VAT 0%".

I'm not certain what this means exactly, does it mean VAT does not apply?

If so, you would pay nothing to license your work to a corporation doing resale from the United States (or Colombia for that matter) and the EU governments would have no way to know how your license translates to your royalty/dividend income unless this was part of the contract and required by law to be declared/registered.

In the United States such a contract is private and for good reason. In the case of a license agreement for example... The first thing I'd ask my lawyer about is whether we could create a corporation to handle sales from the United States or elsewhere with shares held by the author, then license the product to the corporation for $1 (or similar) to make valid consideration.

[chaosWyrM]

right now what makes me collect vat? i mean according to the law (the eu law...no law in my country says i have to) im supposed to. but i dont...and i wont, and should some eu authority want to...how could they make me?

I thought that we are speaking about the situation for us EU guys - that's why moving just the webstore to outside EU server made no sense for me.

If you are outside of EU and you're asking how can EU make you pay VAT - that's not that easy for them. If you are small - I don't think they'll bother. If you're big - they can block your shop IP. Or they can try to take you to court or work with your country's Tax Authority - depending on EU-your country agreements.

yes...i was talking about eu shops moving the webstore outside the eu. but since people seemed to be having difficulty tracking, i made a specific question about me since im already outside the eu.

i still dont get why moving the webstore outside the eu doesnt make sense to you. why doesnt it make sense?

if youre saying that for me...being already outside the eu, theres nothing that can be done to force me to collect vat...why then would that change for someone in the eu who moves to a domain outside it? remember all this speculation is about small time rinky-dink eshops with minimal sales, as these are the ones people were saying were simply closing up rather than deal with all the new vat nonsense.

earlier i used a hypothetical scenario in which a colombian domain was used...i used colombia on purpose.

here is a short article explaining why:

http://www.internationalman.com/article ... omain-name

[Wildfunk]

if youre saying that for me...being already outside the eu, theres nothing that can be done to force me to collect vat.

But maybe they will force you like this when you try to access the EU

[aciddose]

chaosWyrM; Setting the server or domain in another country won't make any difference on the business end of things. Either you need to act as an individual, or you need to register a corporation to act on your behalf (more like wearing a mask, really) and that needs to be located to allow avoidance of this tax.

Where the server is located influences whether laws regarding transmission of data, storage of records and so on apply.

Where the domain name is registered affects only the domain name registration and information associated with it (the person who registered the domain and their information) and sometimes as in the case of .ca domains some requirements for the content displayed by the server, but nothing else.

The argument made by the courts in the United States is that any domain registered under jurisdiction of the United States causes any activity on that domain to fall under United States jurisdiction.

This is absolutely stupid, but here it is: They say if you own a .com with your server in Russia, you can be charged with crimes in the United States although you were not there and neither was your server, and none of the business or communication occurred inside the United States.

Since this argument is absolutely stupid, the way to avoid it is also absolutely stupid: Simply use a different domain.

However, the United States will simply declare they own the internet and that anything done on the internet falls under United States jurisdiction. Then some child in South Korea will play a MMORPG that is rated unacceptable for a child to view, and drones will be dispatched to fire multiple rockets and turn the child to a cloud of dust and smoke.

[chaosWyrM]

if youre saying that for me...being already outside the eu, theres nothing that can be done to force me to collect vat.

But maybe they will force you like this when you try to access the EU

so youre suggesting that european police are going to tackle me and bring me down in the streets of new york?

[Wildfunk]

Either you need to act as an individual, or you need to register a corporation to act on your behalf (more like wearing a mask, really) and that needs to be located to allow avoidance of this tax.

Does it really matter? 90% of all those small samples/presets sellers pay no taxes at all, they don't even run a company. Just look at all those Whoisguard-protected websites with no company/location info etc.

[PALU]

I thought that we are speaking about the situation for us EU guys - that's why moving just the webstore to outside EU server made no sense for me.

It should.

Will you be prosecuted if you own shares in a corporation operating in the United States and collect royalties or dividends from it?

yes...i was talking about eu shops moving the webstore outside the eu. but since people seemed to be having difficulty tracking, i made a specific question about me since im already outside the eu.

i still dont get why moving the webstore outside the eu doesnt make sense to you. why doesnt it make sense?

if youre saying that for me...being already outside the eu, theres nothing that can be done to force me to collect vat...why then would that change for someone in the eu who moves to a domain outside it?

Guys - I was talking (and I understand that that's what chaosWyrM means by "moving the webstore to the domain outside EU") about moving JUST the webstore. The business or - if you are self-employed - the country of residence is still in EU. That's how I understand what chaosWyrM is writing.

If that's the case - it changes nothing. If you sell a digital good to another EU country you have to pay the VAT, you can be held accountable for not paying it as it is mandatory (removing any income thresholds that are in some EU countries that give you an option to be a VAT payer or not).

Using a reseller is completely a different thing and moving your company (or yourself if you are self-employed) outside EU is completely different thing. If you want to use a reseller - you need to check it carefully. It needs to be a commission-based not a platform one where you are a direct seller - check out the shit-storm happening on Envato right now to read more about it.

[Wildfunk]

so youre suggesting that european police are going to tackle me and bring me down in the streets of new york?

Maybe they will detain you until you've paid your unsettled EU taxes