New European V.A.T Law

[Lee]

I have recently been following some important EU related news quite closely over the last few months as it going to have a significant impact on the industry what is this new law? Read on...

Under a new law that has been passed in the EU from July 1st 2003 any internet based company selling services or goods to customers inside the EU will have to pay the member state of their customer/client the equivalent V.A.T (Value Added Tax) Rate.

This in itself is not a big problem, online business have been paying taxes for many years, the problems start to occur when you take a look at the current state of the V.A.T system in the EU state members on an individual basis.

The following list shows the percentage of V.A.T that you will need to add to your clients bills if they are located inside a member state of the EU:

Austria - 20% VAT
Belgium - 21% VAT
Denmark - 25% VAT
Finland - 22% VAT
France - 19.6% VAT
Germany - 16% VAT
Greece - 18% VAT
Ireland - 21% VAT
Italy - 20% VAT
Luxembourg - 15% VAT
Netherlands - 19% VAT
Portugal - 17% VAT
Spain - 16% VAT
Sweden - 25% VAT
United Kingdom - 17.5% VAT

This will pose several problems for the adult industry namely, how will our billing processors be able to handle transactions from European Union citizens? Afterall, with so many different VAT rates across the EU their billing systems need to be able to correctly calculate the correct amount of VAT to the surfers final order.

Several accounting firms have set up new divisions to handle this for the mainstream side of the internet industry however, until just recently, the adult internet (it would appear) was unaware this was happening.

It would seem that although the international market place is a wholly viable one for adult webmasters to break into, it brings with it more complications that simply breaking the language barrier.

This new law will be a good test of the adult industry processors to see how they can handle the economic chages of the global market place and, more importantly, how they handle the new frontiers of international marketing on a global scale.

Regards,

Lee

http://www.europeanwebmasters.com

[Winetalk.com]

do you mind the stupid question what EU laws have to doi with:
1) USA based companies
2) USA based processors?

I do not think it's applicable to the US based companies and..it DEFINATELLY puts europeans in disadvantageous position,
on TOP of the stromng Euro...
sux to be them
;-(((

[Lee]

Originally posted by Serge_Oprano@Jun 6 2003, 05:00 AM
do you mind the stupid question what EU laws have to doi with:
1) USA based companies
2) USA based processors?

I do not think it's applicable to the US based companies and..it DEFINATELLY puts europeans in disadvantageous position,
on TOP of the stromng Euro...
sux to be them
;-(((

Serge...

Ask Ebay

Go do some scouting around on the articles that will start appearing on the net in the next few hours / days then itll all become clear to you

Regards,

Le

[el pres]

Serge,

European companies already pay sales tax on online sales,
this new law is to make anyone selling to a EU consumer pay sales tax (to level the playing field so to speak).

So technically if I buy a membership from Spain to one of Mikes sites,
he would have to pay sales tax to the EU on it.

Here's some info in it from Price Waterhouse.
http://www.pwcebiztoolkit.com/

If this is actually enforced and you do a large amount of billing to the EU,
it would be easier to get au EU presence in a low tax country and file your returns at one rate.

If you don't have a EU presence you need to calculate taxes individually for all the countries.

[Winetalk.com]

Originally posted by el pres@Jun 6 2003, 08:17 AM
Serge,

European companies already pay sales tax on online sales,
this new law is to make anyone selling to a EU consumer pay sales tax (to level the playing field so to speak).

So technically if I buy a membership from Spain to one of Mikes sites,
he would have to pay sales tax to the EU on it.

Here's some info in it from Price Waterhouse.
http://www.pwcebiztoolkit.com/

If this is actually enforced and you do a large amount of billing to the EU,
it would be easier to get au EU presence in a low tax country and file your returns at one rate.

If you don't have a EU presence you need to calculate taxes individually for all the countries.

well.....
each state in the USA (with few exceptions) have SALES tax.

Collecting it is another story.

I just don't see how EU can ENFORCE their laws in USA...do you see USA enforcing seat belt laws in EU?

..or non smoking ban in EU airports?

My guts feeling tells me that EU can suck Mike's dick...even if it's small and they might not like it
;-))))

[el pres]

Originally posted by Serge_Oprano@Jun 6 2003, 08:51 AM
well.....
each state in the USA (with few exceptions) have SALES tax.

Collecting it is another story.

I just don't see how EU can ENFORCE their laws in USA...

Although you have state sales tax it isn't levied online.

EU sales tax has always been charged on online purchases.

I agree with you, fuck knows how they are going to collect it,
but it is happening on July 1st, so it'll sort of be a wait and see approach.

[JR]

i dont think they should have to collect.

i think we should impose a 20% tax on any EU person trying to buy something in the US.

seems fair.

[Mike AI]

Yeah I cannot see how the jurisdiction would work....

I do not know how European gov't will be able to collect from American Webmasters....

Another reason to mock Europe.... they are heading the wrong direction on this. They are gonig to KILL what investment, and internet business they have native in their countries.

[MikeFold]

been following this for months....
the easiest to read for my pea brain is here....

http://www.ecommercetax.com/doc/052503.htm

there are more articles leading up to this recent one under the main URL.

[Winetalk.com]

Originally posted by Mike AI@Jun 6 2003, 09:54 AM
Yeah I cannot see how the jurisdiction would work....

I do not know how European gov't will be able to collect from American Webmasters....

Another reason to mock Europe.... they are heading the wrong direction on this. They are gonig to KILL what investment, and internet business they have native in their countries.

my thoughts on the subject presizely!

I think they shooting themselves in the foot!

[MikeFold]

hmmm...
saw the 99th post.....lets make it 100 and see if that tagline changes
:P

Mike AI (and everyone else reading and asking how they will enforce it)

Lets play Jeopardy....
The answer is: Adult Web Site Operators

[MikeFold]

Non-EU suppliers of electronically supplied services must register in at least one EU country, and account for VAT on services sold to EU private individuals and non-business organizations.

[Almighty Colin]

Originally posted by MikeFold@Jun 6 2003, 10:10 AM

Lets play Jeopardy....
The answer is: Adult Web Site Operators

What group of people will not voluntarily pay the EU tax until their cc card processor makes them?

[Mike AI]

Lets play Jeopardy....
The answer is: Adult Web Site Operators

Mike, that would be:

What group will not give a shit, will not pay VAT taxs?

[Almighty Colin]

Originally posted by Mike AI@Jun 6 2003, 10:15 AM

Mike, that would be:

What group will not give a shit, will not pay VAT taxs?

10:15 am
10:15 am

:-)

[MikeFold]

good answers,
but not what i was thinking

[Hooper]

It'll be a cold day in hell before I'll pay taxes to a government that I receive no benefit from.

Are they going to make one of those sissy's with the white wigs come to our houses asking for a few pounds for the queen?

[Timon]

Be careful Hooper, the Belgium revenue department might just come and kick in your door if you don't pay this non-enforcable tax ;-)

[Mike AI]

Be careful Hooper, the Belgium revenue department might just come and kick in your door if you don't pay this non-enforcable tax ;-)

This is most American's wet dream. The average American is better armed then the entire Belgium Army....

So I say, bring it on.... We will be waiting!!

[Winetalk.com]

Originally posted by Mike AI@Jun 6 2003, 10:44 AM

This is most American's wet dream. The average American is better armed then the entire Belgium Army....

So I say, bring it on.... We will be waiting!!

hey, don't sell the International laws short..
I declared the war on France and they hit the highest unemployment in years 3 months later...

EU declaring tax on USA merchants.....

what is this world coming to????
;-))))

better be safe than sorry,
Effective Immideatelly,
all EU Oprano sponsors are required to pay EU VAT tax, 30%

I would like assure everybody we'll pass it along to EU
;-))))

[Rolo]

First version of this law will have ZERO impact on US business... will hurt the high VAT tax countries in the EU more than US business. Already now some companies within the EU are moving from 25% VAT countires to low tax countries with 13-15% VAT. When some of the countries within the EU sees that they are NOT getting more tax income, but actual loosing tax to other parts within the EU, then it will be changed.

At that time I think ALL EU business will get the same rules as US business would have to apply, but at that time there will also be 25 countries in EU (10 more than now), and politicians will realize that it will cost more to administered 25 different VAT rates, and control them. So they will make 1 VAT rate for all digital products. Maybe the EU is lucky and that it will be around the time, when the US is looking at collecting sales tax on the internet, and maybe then, they can make a deal with the US to collect tax.

This is another law made by politicians (probably French), which have no roots in reality. It might sound good on paper, but thats about it...

I´m looking forward to version #2, until then I wish European companies/webmasters good luck - and hope you will vote for some more wise politicians next time.

[Timon]

Don't underestimate the Belgium Army!! Spend a day in Belgium and you'll see at least a handful of tanks and hear F16's roar overhead all day long, no matter where you are! Those people take their armed forces very seriously.

Fortunately for Hooper their revenue service has no access to all that gear and an American shotgun is still mightier than a Belgian bureaucrat's pen ;-)

[Timon]

Seriously it's bullshit, it's another fuckup in a long list of examples of how governments force profitable companies offshore and end up collecting zero taxes for being too greedy.

[Timon]

I bet eventually we'll all end up with 2 companies.

An American company to bill EU customers and an EU company to bill USA customers ;-)

[Rolo]

Originally posted by Timon@Jun 6 2003, 08:14 AM
I bet eventually we'll all end up with 2 companies.

An American company to bill EU customers and an EU company to bill USA customers ;-)

Yes, thats one of the reasons Visa/MC put the world into regions last year. They know that at some point in time a EU politician will get the bright idea to take them hostage, and force them to either collect the EU VAT tax or turn over their merchants and customers info to the EU.

EU citizens wil be the one to pay the price... higher price for goods/services and more control on how they spend their money.... all because the EU gets their money from VAT, and not a direct tax from peoples income. The reason they do not have EU tax on peoples tax return is that they do not want EU citizens to think that they are ruled by a bunch of politicians, which no one knows who are. But its the truth - UK, Germany, France, Spain, Italy etc. is given over more and more power to EU each year. Not because people want it that way, but because they do not see it.

[el pres]

Originally posted by Serge_Oprano@Jun 6 2003, 11:02 AM
better be safe than sorry,
Effective Immideatelly,
all EU Oprano sponsors are required to pay EU VAT tax, 30%

I would like assure everybody we'll pass it along to EU
;-))))

As a business they can claim it all back anyway.
It's only the end consumer that pays sales tax in the EU.



With paysite memberships, the EU is not taxing you,
it's taxing the consumer who lives in the EU.

You charge the standard membership fee plus EU sales tax, you then pay the sales tax to the EU, net result for you is the same.





Last edited by el pres at Jun 6 2003, 11:33 AM

[Rolo]

Originally posted by el pres@Jun 6 2003, 08:32 AM
You charge the standard membership fee plus EU sales tax, you then pay the sales tax to the EU, net result for you is the same.

It will hurt profits + make higher costs for running a business because you have to pay for more tax administration ect.

Ex. on how it will hurt profits on $39.95 membership:

US citizen buys it and it cost $39.95, EU citizen buys it and it cost $49.94 - how many EU citizens will actual pay upto 25% voluntary? They will shop around until they find a membership, which fit the price limited they are willing to spend. So lets say that the highest price you can sell your membership for is $39.95, then you will have to lower your EU price with upto 25%, and then add VAT to that price... This is what will hurt profits....

Like I said it looks good on paper, but it will not work in the real world.

[el pres]

Originally posted by Rolo@Jun 6 2003, 11:50 AM
It will hurt profits + make higher costs for running a business because you have to pay for more tax administration ect.

Ex. on how it will hurt profits on $39.95 membership:

US citizen buys it and it cost $39.95, EU citizen buys it and it cost $49.94 - how many EU citizens will actual pay upto 25% voluntary? They will shop around until they find a membership, which fit the price limited they are willing to spend. So lets say that the highest price you can sell your membership for is $39.95, then you will have to lower your EU price with upto 25%, and then add VAT to that price... This is what will hurt profits....

Like I said it looks good on paper, but it will not work in the real world.

The cost of tax administration is minimal because it should have already been calculated by your billing software, a one off programing charge.

If it is enforced then the EU citizens have to accept it,
the dialer is biggest biller in the EU and they get charged sales tax on that.

[Winetalk.com]

here is an idea to paysite owners:
charge EU customers VAT tax and HOPE you'll be able to re-pay to EU Tax System one of those days.....
;-))

European customers won't mind
;-)))

[TheEnforcer]

Originally posted by Timon@Jun 6 2003, 10:41 AM
Be careful Hooper, the Belgium revenue department might just come and kick in your door if you don't pay this non-enforcable tax ;-)

Not enforceable here but what happens if you go on a trip to somewhere in Europe and they were able to keep track of it. Theoretically you could be in a tad bit of trouble if you go for a visit.

Not a likely scenario but interesting to discuss.

[Rolo]

The cost of tax administration is minimal because it should have already been calculated by your billing software, a one off programing charge.

So is the EU software ready for Utah sale tax? Will EU business find it smart/good investment to get their system ready for VAT rates and VAT laws from western Iraq, and parts of Mongolia? Will there be free updates when Afghanistan changes their VAT rates and laws?

If it is enforced then the EU citizens have to accept it,
the dialer is biggest biller in the EU and they get charged sales tax on that.

I hear that many telco/isps companies in Europe are moving their billing companies to countries with the lowest VAT in Europe... does that mean that all EU citizens accept paying the highest possible VAT rate (25%) or are does that mean that EU citizens are already looking for the lowest possible VAT rate (13%)?

[Rolo]

Originally posted by TheEnforcer@Jun 6 2003, 10:45 AM
What happens if you go on a trip to somewhere in Europe and they were able to keep track of it.

They still need to pass sentence before they can arrest you - I´m sure you will know about it if they do, and then there are many other wonderful places to visit on the planet... EU is still only 25 countries out of 192 independent countries world wide

[Timon]

Originally posted by Rolo@Jun 6 2003, 03:26 PM
They still need to pass sentence before they can arrest you - I´m sure you will know about it if they do, and then there are many other wonderful places to visit on the planet... EU is still only 25 countries out of 192 independent countries world wide

Yeah there is Angola, Bangladesh, Soweto, Uzbekistan, Sierra Leone, Iran... etc.

Why would you need to go to EU?

[el pres]

So is the EU software ready for Utah sale tax? Will EU business find it smart/good investment to get their system ready for VAT rates and VAT laws from western Iraq, and parts of Mongolia? Will there be free updates when Afghanistan changes their VAT rates and laws?

If there was to be a US sales tax for online purchases, it really wouldn't be that difficult to account for it, as for Iraq, Mongolia and Afganistan, you get sales from there, great.

The cost's can be offset by the interest on the tax that you hold for up to 3 months.

If you bill 100k + tax to the EU a month, you're holding 16k a month,
If you bill through Spain.

So if you stick 16k on a three month deposit
another 16k on a 60 day deposit
and another 16k on a 30 day deposit
You make some cash back.

The biggest problem would be exchange rate risk, you'd either need to hedge your exposure or set up a euro account.

I hear that many telco/isps companies in Europe are moving their billing companies to countries with the lowest VAT in Europe... does that mean that all EU citizens accept paying the highest possible VAT rate (25%) or are does that mean that EU citizens are already looking for the lowest possible VAT rate (13%)?

If you can bill with a 13% tax rate you become cheaper than your competitor, so why not move. Not sure about setting up in Maderia though.

Germany's got low sales tax,
but heavily regulated employment/company laws and pretty strict pornlaws.

Luxembourg would not be a bad idea, as you could keep all EU profits offshore and not pay tax on them, but it's damn expensive to set up and maintain an office there.

But all dialer billing goes through the major telco's and they won't move offshore, they're probably not allowed to, this law is for online services.



Last edited by el pres at Jun 7 2003, 03:57 AM

[Rolo]

AOL is setting up in Luxembourg
Freeserve UK is setting up in Maderia
Tele2 is setting up Maderia
etc.

Thats just some of them I have heard off... I would think that more will follow as soon as those who have moved start to lower their prices or give higher returns to their investors. The UK have VAT rate of 17.5%, but already now, some UK companies are moving... I do not think that national goverments will be happy, when they see the effect EU´s new VAT laws will make. I read that some Scandinavian countries and the UK are already talking about changing the new VAT rules.

Germany got 16% VAT, and Maderia got 13%... The more money you make, the more those 3% difference means to you...

[Rolo]

Originally posted by Timon@Jun 6 2003, 09:26 PM
Why would you need to go to EU?

Exactly

[Opti]

Be interesting to see what billing companies actually do about collecting EU VAT come 1st July.

[Winetalk.com]

if I had paysite and used my own MerID,
EU would see big fat ZERO from me...

[Opti]

Originally posted by Serge_Oprano@Jun 13 2003, 06:01 AM
if I had paysite and used my own MerID,
EU would see big fat ZERO from me...

You will be ok.. but I can't see the aggregators being able to do that..

I missed this earlier.. but it does seem like a badly flawed plan at first glance.. the justifcation put forward 12 months ago for it even seems too simplistic to be taken seriously

Have you seen anyone from epoch/ibill/ccbill et al comment at all?

[Rolo]

If a non-EU company decied not to pay VAT, then it might only have problems working with the EU on legal issues - ex. copyright, hacking, anti-trust etc.

Processors with European divisions will be at a much higher risk for an audit after 1st of July 2003... but again processors could claim they are simply processing the transaction, and that the companies they work with will pay VAT based on where they are located. That would mean alot more work and higher cost for webmasters/companies within the EU and outside the EU. Plus processors would have to give up details on who are processing with them, which could leed alot of webmasters/companies into tax problems with their local tax authorities.

If processors without any European divisions will "wait and see", then I think they will be ok, until next round of VAT laws (6-18 months).

[Winetalk.com]

if I was 3rd party processor,
I'd have a special price 20% higher for EU members,
collect VAT
(if EU visitors chose that price)
and put it in the escrow acount and MAYBE eventually pay it to EU...or not,
depending on 2000 variables between July 1st and final clarifications from ALL jurisdictions involved.

could mean a REAL windfall of money for 3rd party billers,
if they aggressive enough and can't give a fuck
;-)))

..and I wish the best of luck to EU trying to enforce the unenforcable law....

[Rolo]

I wonder if the US plans to approach the WTO’s dispute settlement board?