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TaxRobin
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Experience:  International tax
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Hi I have recently started a business that will sell online

Resolved Question:

Hi
I have recently started a business that will sell online training services, along with e-books that can be downloaded in pdf format. I will be targeting mainly the USA, but can sell anywhere, i.e. UK or the EU. I am trying to sort out the VAT implications, especially the EU implications and I have tried to get an answer from HMRC with no luck. How do I go about charging VAT? (I have heard about the e-service scheme within the HMRC but I am not sure if I am eligible as we will sell to individuals, non-businesses and businesses, in fact anyone that cares to give us money!) We are planning to use Paypal and possibly Worldpay, but it is the invoicing that we are having difficulty working out.)
Regards
Joanne
Submitted: 3 years ago.
Category: Tax
Expert:  TaxRobin replied 3 years ago.
Hello,
That VOES you hear about is for non EU businesses. VAT On e-Services are a special Value Added Tax (VAT) scheme for non-EU businesses providing electronically supplied services to EU consumers (that is, private individuals and non-business organisations).
If you are a non EU business then you would choose the country in the EU (I am assuming UK) that you want to account for the VAT in just the UK.
The scheme does not apply to supplies to business customers in the EU as they will account for any tax due using the 'reverse charge' procedure.
The BTB (business to business would pay their own VAT and the BTC (business to customer)would be charged the VAT based on UK rates.
The BTB will self account for the VAT.
Your invoice should supply the date , the amount, and the item. Keep a list of the names, addresses and VAT registration numbers of the BTB transactions and be able to produce this list for inspection at any time if asked to do so.
The invoice to the BTC would have the VAT listed.

Here is the url to the Welcome page for HMRC VOES

https://secure.hmce.gov.uk/ecom/voes/welcome.do;jsessionid=A9879D31806A33DB7B0DC40BB5F80E85

Customer: replied 3 years ago.

Hi, sorry but I don't get this at all.


 


We have a Scottish registered limited company and are therefore liable for UK VAT. We will be selling online services to the world which in turn causes VAT issues.


When I contacted HMRC they sent me to some ambiguous list showing the member states in the EU, and from this I gathered that I had to contact each member state and apply (?) for VAT registration in that country (all 60 odd of them and each charging a different rate possibly). HMRC themselves did not help me at all. So I am at a loss. I have e-mailed HMRC regarding the e-services but have not had a reply after 3 days so far.


In a nutshell, how do I invoice customers online in say Germany (EU) or USA (Non EU)? If they are a business in the EU do I charge UK VAT and therefore show it on the invoice to them or not charge/show VAT at all? If they are not a business, i.e. an individual do I charge UK VAT or no VAT at all? (Also, am I then to include on my website a question asking if they are a business or not?)


If they are outside of the EU, i.e. USA, India, China, etc do I charge UK VAT or not at all?


Do I have to sign up to all the individual member states and if so how, and how do I then pay the VAT to each member state (if this is what is required and I don't know whether I do or not) or shall I just shoot myself and have done with it? Sorry this is such a headache and HMRC are worst than useless.


Regards


Joanne

Expert:  TaxRobin replied 3 years ago.
You would not charge VAT to the US customers or others that are outside the EU. The nature of the online selling would mean that are not liable for VAT.
The US customers would pay what is called Use Tax in their own state if they are liable. The Use Tax is like Sales Tax in the US and the buyer would be responsible to report and pay based on their US state laws.
You would not use VOES because you are an EU company.
The other sales you may have that are to other EU country businesses does not change just because this is through the internet.
You need to establish if the supply will take place in the UK or in the other country. I am thinking other country due to the nature of the download and total use of the internet.
You could zero rate the VAT and then the member state receiver would account on their VAT Return at the rate in force in that Member State.

Customer: replied 3 years ago.

Right thanks, XXXXX XXXXX do not charge VAT to outsiders of the EU (i.e. USA).


 


I have now re-checked the HMRC website and found that yes I zero rate businesses inside the EU, but have to get their Vat registration number and check it against the Europa website for validity.


 


For individuals and non businesses within the EU, I have to charge UK Vat rate until I reach/exceed the threshold applicable in that country, eg 35,000euros in Belgium, and then I would have to register for VAT in Belgium and charge their VAT rate on my goods/services after this amount is exceeded.


 


Q) If I could just ask reference the supply of goods/services; our business will supply online live training to individuals/companies on a regular basis, as well as pdf downloads and podcasts. The supply obviously originates (e.g. via Skype) in the UK but is listened to/watched in the foreign country, how does this apply to the HMRC rules? Does this establish that the supply takes place elsewhere to the UK? What are the consequences either way?


 


Regards


Joanne


 


 

Expert:  TaxRobin replied 3 years ago.
Yes, I interpret it to be in the country where the download takes place.
The changes that have taken place in the UK based on e-services (I think) apply.
There are two changes. The first affects the VAT place of supply rules and will mean
that supplies of telecommunications, broadcasting and e-services made by a
business established in one EU member state to a private consumer located in
another member state (“intra EU B2C supplies”) will be taxed in the member state in
which the consumer is located. These services are currently taxed where the
business supplier is established. This change will ensure that in future they are taxed
appropriately where they are consumed.
The second change is the introduction of the VAT Mini One Stop Shop (MOSS), an
online service that will give businesses the option of registering in the UK to account
for the VAT due in respect of B2C supplies of these services in all the other Member
States (at the appropriate rate of tax in each state) by submitting a single return to
HMRC.

See this:
http://www.hmrc.gov.uk/budget2013/vat-place-supply-rules.pdf
Customer: replied 3 years ago.

Thanks for this as I had not heard of these changes ahead.


So for the supply change will this mean that I will not charge vat to an individual once this change is implemented (or zero rate it)?


And, I assume that the thresholds will still be the same (35000.00 or 100000.00 euros) so the second change will not affect anyone making sales under the amounts relevant to the country, again when the change is implemented?


 

Expert:  TaxRobin replied 3 years ago.
You would still charge VAT but you would not need to register in all the countries.
You would be able to meet your obligations but only in the country where you are in. Before required the registering in numerous countries.
I sympathize with you on all this. VAT issues are the least favorite.

The thresholds would still be in effect.
TaxRobin and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Thank you Robin, I will leave you in peace now. I think I have a grasp on this but I fear I may have to come back in the future for additional help.

Expert:  TaxRobin replied 3 years ago.
You are most welcome.