VAT within EU

HvTFoto · 2015-03-25 02:13:05

Sales from/within Sweden (from a business) triggers VAT if the customer (company or individual) is resident in Sweden. If the customer is resident in another EU-jurisdiction (i.e. Denmark, UK etc) the Swedish seller is obliged to charge VAT unless the customer is a company registered for VAT (in which case the reverse charge mechanism is used). As the rules are harmonised the same applies the other way around, i.e. sales from Denmark to Sweden, UK etc. triggers VAT unless the customer is registered for VAT.

In the cart it's only possible to have one country as the jurisdiction in which VAT is to be applied. It would be nice to have an option to set "EU" as the jurisdiction (and also if possible to exclude VAT charged on sales to other EU-jurisdictions if the buyer provides the VAT-registration number).

Is this something that is being worked at? If not, is this something that's possible to change "on your own" and if so, what files do I have to tamper with?

Regards

Hans

Ben · 2015-03-26 06:08:10

Hi Hans, we're looking at handling some kind of support for the new VAT regulations, though not in the way you've described. Since the VAT rules are overly onerous, and require the collection of data beyond what the Cart can offer, we're looking at providing a setting to prevent sales from one EU country to another (or also from a non-EU country to a EU country).
Would this be of benefit in your case, or do you have a significant portion of sales from other EU jurisdictions?

I imagine that capturing a VAT-registration number would require the Cart to verify that it's a valid number that matches the details of the customer. Again, do you see a significant portion of your sales falling into the scenario of VAT-registered customers from other EU jurisdictions?

HvTFoto · 2015-03-26 15:43:43

Thanks Ben,

For now I don't sell much outside Sweden but it makes me a bit uncomfortable knowing that the cart doesn't comply with tax regulations. I appreciate the fact that it might be difficult and requires a lot of work to implement a feature that captures the VAT status uf the buyer. That being said, is it difficult to add a feature which capture if the sale is to someone within EU? That would solve most of my problems as I as a business with primarily, not to say exclusively, individuals as clients is obliged to charge VAT on sales to individuals within EU (I believe that I can make arrangements so that any potential EU resident and VAT registered entity can contact me by other means to arrange the sale in the rare event that such an event happens). One suggestion (have no idea whether or not this is difficult to implement) is to have a field/option stating "include sales tax to EU". That would solve close to 100% of my sales as I'm obliged to charge VAT on sales to UK, Denmark, Finland etc but not to Norway (not part of the EU community). BTW, I don't offer digital downloads.

Regards
Hans

wolfram · 2015-03-27 05:08:31

Sorry, I dont want to hijack this posting, the point is that I have the same problem and urgently need to solve it.

Ben · 2015-03-27 06:38:07

What's your preferred solution?

HvTFoto · 2015-03-27 07:41:20

Ben,

Are you asking me or Wolfram? If me, I would say; implementation of the cart in a way that is compliant with EU VAT regulations. If that's not possible, at least an option that makes it possible to have VAT charged on sales within EU.

In order to stress the importance of my request it would be nice if other cart users within the EU would chip in and second my proposal as the more requests to this effect the higher the chance of implementation.

//Hans

Ben · 2015-03-27 09:43:24

Hi Hans, I was asking Wolfram however I really appreciate any input on this matter

If I understand you correctly, would your second option consist of a VAT amount that affects sales from any country to any EU country? In that case I would have to see whether the existing 'Sales Tax' field would still be useful for other countries. For example, would a photographer from the US charge both Sales Tax (to be paid locally) and VAT (to be paid to Europe) on an order destined for the EU. This is where it gets complicated.

We don't sell many carts, so I can't justify spending a whole lot of time on this. So I'm looking at finding a solution that best meets the needs of customers in the EU with a reasonable effort.

wolfram · 2015-03-27 17:36:07

Hallo together,
At the moment I intend to add the VAT to the price, tell the people that the VAT is included and everyone that is outside the EU or has an UID-number will get a discount code to reduce the overall price by the included VAT.
Best for me would be to have a possibility to choose for which countries I would like to add the VAT.
If an American sells something to Europe he ships it without VAT and the European customs will charge the tax from the customer.
Greetings
Wolfram

Last edited by wolfram (2015-03-27 18:41:07)

HvTFoto · 2015-03-27 17:56:20

A US Vendor would not charge VAT to a buyer in Europe (I don't know if he would charge sales tax but I don't think so). A Vendor within EU (not all European countries, 27 I think) would charge VAT to a buyer within EU. Isn't it possible to include a new "state" in the sales tax field and call that state EU and the chart pick this up the same way it does for e.g. The state of Texas?

Ben · 2015-03-27 18:32:45

We've interpreted that VAT needs to be collected for digital purchases sold from non-EU countries to EU countries. I'll ask Matt to chime in on that.

Wolfram, is it necessary for you to pick which countries require VAT, or should it be a set list of countries for all TTG customers in the same situation?
Hans, rather than a new state, the way I have planned to do this is to add a new column to countries named something such as 'is_eu', which would be set to Yes for those 27 or so countries. VAT would then be calculated into any sales that originate from one EU country for sales to another EU country. We would then need to also capture the customer's country prior to checkout.

From your understanding, can you help with these questions:

1) Is VAT the only tax you would need to collect? i.e. is there also an additional Sales Tax for sales to EU customers, or for sales to non-EU customers?
2) Do the rules for VAT tax collection apply the same to both digital and physical items?

On a side note, another feature that European customers have requested is back-calculation of tax. (so for example, a 10% tax on a $100 item would be calculated as 9.09 giving you 90.91 after taxes paid). Would you find this method useful in general and in particular in regards to the VAT changes? This change is already ready in my code.

Matthew · 2015-03-27 18:48:06

I haven't paid a great deal of attention. I looked at the news about the issue just long enough to think, "Wow, this sounds terrible," and to get a headache thinking about it, and then I walked away.

My understanding of the issue is entirely based upon articles such as this one:
http://www.theguardian.com/small-busine … businesses

So my understanding is that selling would need to be enabled for each country, a VAT registration code and rate entered for that country, and tax added to the purchase based on those values. Sales to a disabled country -- I suppose determined by the buyer's shipping address -- would trigger a "Sorry, we don't sell to your region." message and put brakes on the checkout.

But that's just me trying to suss things out, and should not be taken as any official description of how this should work.

Frankly, I think this is all completely insane and damning for small businesses online.

Matthew · 2015-03-27 18:51:40

This is Shopify's policy on things:
https://docs.shopify.com/manual/setting … -vat-rates

And includes gems like, "You are now required to obtain two pieces of evidence of the buyer's location. For every order, Shopify will provide you with the billing address and the customer's IP address."

So I suppose the cart would need to record that same information for each order.

wolfram · 2015-03-27 18:56:24

Ben,
When I am talking of VAT, then I am talking of sales tax.
So, when I am selling Prints (no digital downloads, there I don´t know the law)to someone in the EU and the customer has no VAT reg. nr. then I have to add our Sales tax.
So I only need to extend the Sales Tax Country to all European countries. If there is a possibility for the customer to insert in a separate field the VAT. reg. Nr. which would exclude then the addition of Sales Tax it would be perfect.
For a correct bill then we would also need to have the VAT. reg. Nr. of the Seller and the Customer below its address.

HvTFoto · 2015-03-28 02:52:12

Ben,

A new column would be perfect.

VAT is the only tax that has to be collected. The European "sales tax" is the VAT.

The rules for digital downloads are to my understanding somewhat different than the rules for physical delivery. When it comes to digital downloads I believe the rules are quite cumbersome, as a Vendor you need to be registered in each EU jurisdiction (although I understand that the registration is handled by the Tax Agency in your own jurisdiction) and there are also some thresholds which I don't know from the top of my head but can check early next week.

Yes, back-calculation of tax would be useful as well.

//Hans

Ben wrote:

We've interpreted that VAT needs to be collected for digital purchases sold from non-EU countries to EU countries. I'll ask Matt to chime in on that.
Hans, rather than a new state, the way I have planned to do this is to add a new column to countries named something such as 'is_eu', which would be set to Yes for those 27 or so countries. VAT would then be calculated into any sales that originate from one EU country for sales to another EU country. We would then need to also capture the customer's country prior to checkout.
From your understanding, can you help with these questions:
1) Is VAT the only tax you would need to collect? i.e. is there also an additional Sales Tax for sales to EU customers, or for sales to non-EU customers?
2) Do the rules for VAT tax collection apply the same to both digital and physical items?
On a side note, another feature that European customers have requested is back-calculation of tax. (so for example, a 10% tax on a $100 item would be calculated as 9.09 giving you 90.91 after taxes paid). Would you find this method useful in general and in particular in regards to the VAT changes? This change is already ready in my code.

Last edited by HvTFoto (2015-03-28 04:51:42)

HvTFoto · 2015-05-05 06:33:32

Is there an ETA for a potential update of the Cart to deal with the VAT issue on sales within EU. There is one treatment for digital downloads (very cumbersome) and a different treatment for physical deliveries (not that difficult I guess to have the cart deal with this).

//Hans

Ben · 2015-05-08 13:54:43

Hi Hans, I was away for most of April, and just getting back to thinking about this.

Can you confirm if the following all sounds correct?

1. Physical goods

Collect VAT if sold from any EU country to any other EU country
VAT rate is fixed, regardless of which EU country you're shipping to
Need to collect shipping address
Don't collect VAT or sales tax for sales to any non-EU country
Ideally, collect and validate VAT reg no, and not apply VAT to those customers

2. Digital goods

Collect VAT for digital goods sold to any EU country from any country, even non-EU countries
Rate varies depending on country of buyer
Need to collect address and IP address of buyer
Need to pay VAT to each country in EU that you've sold to

Depending on the validity of the above, proposed solutions for the TTG Cart:

1. Physical goods

Mark EU countries within our country list as such
Only apply Sales Tax (called VAT) for orders to those countries
Collecting shipping address --- already in the cart
Optionally, collect VAT reg no. The question here, is what we do with it. We won't be able to validate the VAT reg no., so should we just keep this for records for manual processing outside of the scope of the cart?

2. Digital goods

Provide a setting to prevent sales to EU countries other than the (possibly) EU country that the seller resides

Please provide any feedback to the above.

HvTFoto · 2015-05-08 21:45:15

Ben,

Below please find my comments.

1. Physical goods

VAT is to be collected if sold from any EU country to any other EU country if the buyer is an individual or a business not registered for VAT.

VAT rate is fixed (Vendor jurisdiction rate) unless the Vendor reaches a country specific threshold of sales to a foreign jurisdiction. These thresholds differ from jurisdiction to jurisdiction and range from some EUR26k (Romania) to EUR100k. If the threshold is met the Vendor will have to register for VAT in that jurisdiction and charge VAT at the rate that applies in that jurisdiction. Without knowing I would guess that very few (and certainly not I) will reach the various thresholds (if I do I will be happy to register for VAT in that jurisdiction). If my company (a Swedish corporate entity) have sales of EUR30k to Romania and EUR10k to France I would have to register for VAT in Romania (and charge Romanian VAT) but not in France (the threshold in France is EUR100k). So my sales to Romania would trigger 24% VAT (Romanian rate) and my sales to France would trigger Swedish VAT at the rate of 25% (the French VAT rate is 20%).

Yes, shipping address has to be collected

Correct, no VAT or sales tax to any other EU-country

It would be good if the cart could validate VAT reg no but I guess the work needed to implement such a feature is too much.However, it should be quite easy for the Vendor to validate the VAT reg no (at least in Sweden) as the Tax Agency as well as the EU commission have a website were the VAT reg no can be validated (can be done within minutes). One solution would therefore be to have orders were a buyer asks for not being imposed VAT put on hold at check out and released for processing once the Vendor has validated the number. Not sure if this is hard to implement.

2. Digital goods

I believe the rules are EU-specific, i.e. I don't think that a Norwegian vendor (Norway is not part of EU) shall impose VAT on sales outside of Norway.

Yes, rate varies depending on country of buyer.

Yes, at least the address has to be collected

Yes, you will need to pay VAT to each country in EU that you've sold to. However, in Sweden (and I guess in other EU-jurisdictions as well) you can use the MOSS system (Mini One Stop Shop) and report all of the VAT reported and paid to the Swedish TA and the Swedish TA then distribute the "foreign" VAT to the "foreign" jurisdiction. Using this system it shouldn't be that cumbersome for a Vendor to offer digital downloads to other EU jurisdictions than the Vendor home jurisdiction.

Edit: back-calculation of tax would be a nice feature.

Regards

Hans

Last edited by HvTFoto (2015-05-09 00:18:10)

Ben · 2015-05-10 22:49:27

Hi Hans, thanks for taking the time to respond. That clears up a lot.

HvTFoto · 2015-06-07 07:39:44

Is there an ETA for an update? The cart as it stands for now is, to be blunt, useless for European customers with cross-border sales as the cart doesn't comply with European VAT-legislation. If there are no plans of updating I suggest that it is clearly disclosed that the cart can't be used if/when the vendor and the purchaser are located in different EU-jurisdictions.

Ben · 2015-06-07 07:59:39

I am wrapping up work on Publisher and CRG. ETA of end of June for EU tax handling.

Ben · 2015-06-19 16:25:47

Hi Hans and Wolfram, for your interest there's a Cart 3.1.0 Beta coming out soon, change log here: http://ce4.theturninggate.net/docs/doku … _changelog

Ben · 2015-06-21 22:08:19

Hi, the BETA is out. Please check your downloads. Hans and Wolfram, I have sent you emails regarding the release.

wolfram · 2015-06-24 17:39:47

Hello Ben,
thanks for the improvements!
I understand that I have to add the additional needed UID-number field which the customer fills in during the checkout. The customer allway pays the full price with the included tax.
I get the order, check via internet the UID number and if it is valid give him the tax back.

I don´t know if there is a better way so that the customer does not have to pay the tax first and get it back later?

I don´t know if there is a possibility, that whenever the customer fills in a UID number that the order process is interrupted, I get a mail, check the number, if it is ok I send him a discount number for the included tax and he finishes the order with the reduced price?

Any ideas are wellcome!

Thanks
Wolfram

wolfram · 2015-06-24 19:18:42

One more thing,
I am charging the Austrian tax (VAT) only when shipping to an European country (exept if the European customer outside of my country has a valid UID-number). When shipping to one of all other countries in the world I ship without tax, only add the shipping costs.
So in my understanding I need to start with the ground price (no tax), when the Delivery country is one of the European countries I need to add the Austrian tax.
When I select a European country it does not add the tax it only shows me that € ... is allready included what is not true.
Am I wrong?

Ben · 2015-06-24 19:39:23

Hi Wolfram, regarding UID, the extra handling is beyond the scope of the cart.

As you've discovered, the taxation handling for EU is only working for non-back-tax. That means that if you wish the final price to differ based on whether a customer is in the EU or not, that you'll need to disable back tax calculations.

This limitation is news to me, and the result of having new features that affect each-other in multiple ways. I'll look into having the total amount reduced for non-EU customers when back tax is calculated. This may not be done prior to release of 3.1.

Community @ The Turning Gate

#1 2015-03-25 02:13:05

VAT within EU

#2 2015-03-26 06:08:10

Re: VAT within EU

#3 2015-03-26 15:43:43

Re: VAT within EU

#4 2015-03-27 05:08:31

Re: VAT within EU

#5 2015-03-27 06:38:07

Re: VAT within EU

#6 2015-03-27 07:41:20

Re: VAT within EU

#7 2015-03-27 09:43:24

Re: VAT within EU

#8 2015-03-27 17:36:07

Re: VAT within EU

#9 2015-03-27 17:56:20

Re: VAT within EU

#10 2015-03-27 18:32:45

Re: VAT within EU

#11 2015-03-27 18:48:06

Re: VAT within EU

#12 2015-03-27 18:51:40

Re: VAT within EU

#13 2015-03-27 18:56:24

Re: VAT within EU

#14 2015-03-28 02:52:12

Re: VAT within EU

#15 2015-05-05 06:33:32

Re: VAT within EU

#16 2015-05-08 13:54:43

Re: VAT within EU

#17 2015-05-08 21:45:15

Re: VAT within EU

#18 2015-05-10 22:49:27

Re: VAT within EU

#19 2015-06-07 07:39:44

Re: VAT within EU

#20 2015-06-07 07:59:39

Re: VAT within EU

#21 2015-06-19 16:25:47

Re: VAT within EU

#22 2015-06-21 22:08:19

Re: VAT within EU

#23 2015-06-24 17:39:47

Re: VAT within EU

#24 2015-06-24 19:18:42

Re: VAT within EU

#25 2015-06-24 19:39:23

Re: VAT within EU

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