This is not a cash sale in a local book store.

previously when I had a new idea that I might be able to turn into a business I could form a limited liability company for about £10, try the idea out with essentially no paperwork at all

then if the idea panned out I could worry about the huge-pain-in-the-ass-that-is-VAT later

now with this regulation it's a problem once I've made my first sale to a non-domestic EU customer, and my agility goes through the floor

EU countries have gone from being fantastic places to start a digital services micro-company to being at best mediocre ones, all to try to stop Amazon avoiding VAT

utter madness: small companies started as side projects turn into the big ones, but apparently we no longer want that

Well, so how do we deal with Amazon avoiding VAT and still being fair to all players on the market, big and small?

the significant problem is now the fact that I have to register for VAT domestically if I want to to sell to people in other EU countries

before if my turnover was below ~£70,000 I paid no VAT at all due to the exemption (giving me a competitive edge vs. big companies with better economies of scale)

after the new regulations if I make any EU sales I have to either fill in VAT returns for EU member state I've sold to (not feasible, that would be hundreds of VAT returns/year in many languages), or register for domestic VAT which will handle that for me, but kills my business model

the EU Commission doesn't see this as a significant problem, likely as it is a beneficiary of VAT (the VAT being an EU mandated tax)

having less turnover or income than the value at which you move above the zero rate band is not evasion

low income people aren't evading taxes by not earning enough to be liable to pay them

There are two hard parts to what the EU did, for businesses.

The first is you have to charge variable VAT rates and remit the collected tax. However VAT rates do vary not only by country but in some cases within countries too, and they do change, so you have to make sure you have a really up to date list of tax rates and geographies where they apply. Including varying rates down to the city levels.

But the real kicker is that you can't trust the user's claim about where they are. Users are financially incentivised to lie about their location because these are digital downloads. So if they claim to live in a low VAT region they pay less, but download the same files. Simple as that.

As a consequence the VAT regulations have a LOT of complicated edge cases and "guidance" in them about how to figure out where the user really is, not where they say they are. This is hard of course, the user may be using VPNs and so on. There is specific guidance on how to handle users who are on ships sailing between VAT regions, or planes that are in the air when a purchase is made. So you've got a really complex pile of logic to start with, and then you're also in an adversarial situation where the users are all trying to screw you over by forging their location. And if they succeed, you can suffer big fines.

Oh and finally of course, you can't use any technical tricks to figure out where the user actually is, because then you'd violate EU privacy laws ... have fun with all of this! In practice it has to all be outsourced, it is too much work to implement in house for all but the largest of firms.

Many small businesses were concerned that they would have to register for VAT in all EU countries and deal with individual VAT laws, but the implementation for small businesses allows you to basically register at your home countries tax authority and provide them with a list of sales broken down by country. (MOSS in the UK, iirc) The initial hubbub has largely died down.

This is grossly simplified, but captures the gist. No tax advice, yadda, yadda.

and

https://www.theguardian.com/small-business-network/2015/sep/...

my solution was to stop selling into the EU, though amusingly once the UK leaves the EU I'll be able to start again (by just ignoring the EU's VAT rules)

> new VAT scheme

whereas this is from 2015. I was confused by language where you described it as a law to target Amazon. Now I see that was just an opinion.

> my solution was to stop selling into the EU

Interesting business decision. Was the cost of compliance that high, or was your revenue that trivial?

> though amusingly once the UK leaves the EU I'll be able to start again (by just ignoring the EU's VAT rules)

Well I was having a conversation with one of the UK's foremost VAT specialists on Friday, from one of the UK big 4 accountancy firms. He was very clear that the general opinion is that the UK will align with the EU for VAT. This was a response to my question about the catastrophic cashflow impact that losing the VAT rules on imports would have to UK businesses. He told me not to worry, as VAT alignment was simply a necessity.

the cost of having to pay VAT on all of my UK REVENUES (digital services, remember!) would vastly dominate the PROFIT (not revenue) made from my EU sales

compliance wise, I'd rather not have to fill in VAT returns if it is optional (this is a side business, not my main employment)

> Well I was having a conversation with one of the UK's foremost VAT specialists on Friday, from one of the UK big 4 accountancy firms. He was very clear that the general opinion is that the UK will align with the EU for VAT.

well I'm glad his crystal ball is operating well... saying that I'm sure we will have a similar VAT after leaving (payable to our exchequer instead of the EU), but unless something radically changes the EU's laws won't be directly enforceable in the UK post brexit, and it's unlikely the UK will go out of its way to collect EU specific taxes for the EU's benefit

regardless, all of my "is EU VAT optional outside the EU?" discussion in this post and above is only an interesting thought experiment, it's not worth the possible consequences in practice (especially if your main worry is the lack of UK VAT free allowance like me... maybe if you're a large US based SaaS provider it's different)

> the cost of having to pay VAT

Presumably you mean the higher price from charging VAT

> on all of my UK REVENUES

"your UK sales will not be liable, unless they’re above the UK VAT registration thresholds". So it makes no difference to your UK revenues at all, you either had to register for VAT because your total revenue was over the threshold, or you didn't.

> I'd rather not have to fill in VAT returns if I don't have to

Wouldn't we all love to avoid administering taxation.

> well I'm glad his crystal ball is operating well.

I think it is rather more than a crystal ball when you are the UK VAT lead for a big 4. This means you get consulted on it by the government, get to sit in on meetings with them, and work with the biggest companies in the UK who will also be lobbying the government. I think you rather trivialise their positions when you assume they know the same amount as me and you.

>(payable to our exchequer instead of the EU)

When did you ever pay VAT to the EU? I pay all of my VAT to HMRC despite trading extensively across Europe. It is possible as a consumer that you paid VAT that was passed on by the supplier to one of the member states tax authorities, but under what circumstances could it be paid to the EU?

> it can claim jurisdiction all it wants, enforcing it is another matter

Not at all, the UK government will enforce on its behalf, as we will expect them to enforce on our behalf.

> but unless something radically changes the EU's laws won't apply to me in the UK after the process is complete

The UK is in the process of bringing all EU law into UK law (where it isn't already) with the strangely titled Great Repeal Bill. So EU law will apply to you. Also the government have committed to an open border in Northern Ireland as mandated by the Good-Friday agreement. This will require a customs union, and a joint body of oversight (like the European court). The government has further committed that Northern Ireland will have the exact same terms as the rest of the UK under it's coalition deal with the DUP. Therefore the whole UK will be covered by that customs union. This is before we even discuss what EU oversight will be placed over a future trade deal with the EU. So whilst the government might bluster about what leaving the EU means, it is quite clear that it's options are

a) stay in the customs union and therefore under EU law

b) Leave the customs union and violate the Good-Friday Agreement, whilst also breaking the coalition agreement and therefore bringing down the government.

I wonder against that backdrop how you think you are going to be outside of EU law? You seem to have a downer on the EU, if you don't mind me saying?

given the cabinet doesn't seem to know what their objective is, this seems like a fantastical claim

> When did you ever pay VAT to the EU?

not directly, but that's why it exists and where (a chunk of) the money goes -- read about the history of the VAT, it used to form the 40% of the EU's budget (down to about 14% these days)

> Not at all, the UK government will enforce on its behalf, as we will expect them to enforce on our behalf.

doesn't work like that in practice, once we're out HMRC isn't going to spend money chasing people for taxes due in Bulgaria, in the same way it doesn't chase people for taxes owed in Russia today

> The UK is in the process of bringing all EU law into UK law (where it isn't already) with the strangely titled Great Repeal Bill.

yes

> so EU law will apply to you.

no, at that point it will be UK law

> Also the government have committed to an open border in Northern Ireland as mandated by the Good-Friday agreement.

depends on what they mean by "open" -- regardless of that: there's nothing that prevents a customs border in the good-friday agreement (have a read, it's only about 10 pages long: [1])

> (various points based on the assumption that the government will commit absolutely to one policy voters don't care about and completely abandon all others)

the government has also committed to leaving the EU customs union and the single market

I agree that it's hard to see how both are possible, but politics is the art of the fudge

> I wonder against that backdrop how you think you are going to be outside of EU law?

I don't accept the premise or the conclusion -- b) doesn't violate the GFA[1] or the confidence and supply agreement[2] (not a coalition)

to be blunt: it seems like you're making things up

> You seem to have a downer on the EU, if you don't mind me saying?

why should I like it? if you're running a medium sized or big business it's fantastic (unless you're a large foreign business like Facebook, Amazon or Microsoft), but I'm trying to run a small business, and it seems like they're doing their best to kill me

hell, if in 5 years we're still subject to the ever increasing mountains of poorly thought out legislation written by morons, I suppose emigration is always an option

[1]: https://www.gov.uk/government/publications/the-belfast-agree...

[2]: https://www.gov.uk/government/publications/conservative-and-...

http://ebiz.pwc.com/2013/01/eu-2015-vat-changes-to-eservices...

This was quite a hit to small companies, because now they have to manage collecting and remitting taxes to every country their consumer customers reside in. Previously they only had to collect and remit taxes to their own home country.