EU-VAT - New rules for online downloads for EU customers starting 1/2015

The EU changes VAT-regulations regarding online downloads (e.g. e-books, digital services, etc.) and the change will be effective starting 1/1/2015.
Is there a chance that MarketPress will be able to handle the new regulations, which are relevant for all European, but also all non-European sellers, selling digital products to EU-customers (not businesses and b2b transactions)?
The applicable VAT for each sale from January 2015 on is the VAT of the customer and no longer of the seller and has to be shown accordingly to the potential buyer.
At the moment I am planning to go offline with my directly downloadable products I offer via MarketPress on my website, when the new VAT-regulations take effect on the 1st of January 2015.
Thank you very much for your kind help.

With best regards,
Roswitha

  • RGerhart

    Sorry for starting this topic again. After reading a lot of older posts and questions regarding the EU-VAT, I only found the relevant question after I already posted my own question.
    The discussion already started here:
    https://premium.wpmudev.org/forums/topic/marketpress-and-new-eu-tax-law

    Unfortunately, excluding the EU from sales is not an option for me, as I am inside the EU and a large percentage of customers are from other EU countries. At the moment, I am thinking about switching off my own MarketPress shop on my website and only embedding third party links to my own products.
    As the whole changes are a large effort, I am not sure I would go back to MarketPress, once I made the switch on my website. So if MarketPress could be adjusted to handle the new EU-rules is a rather urgent topic for me.

    Thank you very much.

  • RGerhart

    Thank you very much, Vinod Dalvi, for letting me know about the discussion.
    With the different comments in the discussion you linked to, I am not sure the new version 3.0 will include all the new requirements for EU digital sales, which are necessary to correctly declare the EU-VAT from January 2015 onwards.

    The VAT in the EU for digital downloads and services will entirely depend on the EU-customer's country. (Businesses and b2b transactions are excluded, as soon as they enter a valid tax ID. Real, non-virtual products are excluded from the new regulations as well and the old regulations where the VAT of the seller's country is applicable still continue for those products. That means that the tax handling of e.g. print products via the shop will differ from the digital 'services'.)

    Each EU-country has an own VAT rate. It also needs to be determined, if the digital product is sold at a reduced VAT rate in the country, which may be the case for e-books, in case they are treated like print books [which some EU countries at least plan], or courses and trainings.

    When will the country of the customer be determined and from what stage in the shop onwards will the customer see the full VAT information according to his country for his purchase?

    As the new regulations in the EU not only affect EU sellers, but every seller of digital products who sells to someone in the EU, the VAT change is rather extensive.

    Thank you very much for your help. You see, I am rather nervous about all the necessary changes and requrements the new regulations demand.

    With kind regards,
    Roswitha

  • Dev4

    Living and doing business primarily in the US, I have not had to deal with VAT.
    I got curious and did a little research on it, and the new rules for 2015. What a mess!

    Anyways, I got to thinking about what i would do if i were in your shoes...
    Other than go rogue, and sell from outside the EU, which in the long run would probably not turn out so well.

    So here is what I came up with.

    Install multisite, create identical sites for each eu tax zone each with their own tax rules.

    Add items to one site, and use cloner to push all items to other sites (you can send them all at once)

    Then you will be charging the correct vat for each customer, and you will have records for each group of customers in each site

    You could get fancy and add a country of origin based redirect to make it seamless for customers.

    Of course it would not work for all business models, but might be a useful approach depending on your specific situation.

  • RGerhart

    Thank you very much, Dev4, for those ideas how to handle indeed 'this mess' created by the EU.
    Where I worry is, that multiple copied sites (and it would mean about 28) would mean identical content and that would be an SEO nightmare.
    The new VAT problem also not only is for EU sellers, but for all sellers of digital content worldwide who sell to EU customers.
    I am not sure I want to handle all the legal updates for 28 stores manually and alone. When the shopping plugin can't handle that as a whole, it will cease to function for me and supposedly many other sellers of digital products worldwide.
    I then will rather swap to only selling via Amazon links. So the rule which by the EU was intended to prevent Amazon from avoiding taxes in the EU, for real is a big bonus deal for the company. That is how the EU bureaucrats backfire again and again.

  • Dev4

    Glad to hear WPMUDEV is working on it. That will be the best solution.

    Re this law applying to all businesses worldwide... Well maybe.
    Laws passed in one country or union do not automatically apply to everyone. Big companies outside the EU who have dealings in the EU will have to comply, but EU governments are going to have a hard time enforcing this on people who have no EU legal or financial presence.

    Still i would not personnaly get into that sort of battle, because there are risks. But just saying, it may not be universally enforcable.

  • Dev4

    I feel a little pretencious suggesting a design for this without really studying the current code, but from a busienss standpoint
    Without getting into the actual php of it, i can suggest something.

    Look at the way state sales tax is handled in marketpress to start
    But:
    Instead of : if customer state = seller state then add the set rate,

    Do this: if customer " tax zone" is in list then charge rate from list

    Then allow user to add tax zones and rates in a table, with a flag on each record to indicate if zone is state or country or city

    Example of table
    Michigan, state, 6%
    Los Angeles, city, 9.75%
    Ireland, country, 17%
    California, state, 9%

    On checkout table is checked looking for matches first on city, then if no match found then checks state, then if no match found checks country, if still no match found then no tax is applied

    The advantage of this approach is that it will kill two birds with one stone
    It will not only address the vat issue in the EU, but will also fix the issue where a seller in the USA is in business in more than one state, so has to collect taxes for more than one state. And they could also sell in VAT countries as well.

    The sequence of checking city then state then country allows easier set up for rates where the state has one rate but in specific cities the rate is higher.

  • RGerhart

    Hello Dev4,
    Wonderful idea. Just one more addition.
    As the new EU-tax regulation applies only for digital (automatically downloaded) products, could the selection include a product related selection/reference, where it selectively can be put into action and where not? (Only for those like me, who have a mixed variety of physical and none-physical products in their stores.)

    My thoughts about the re-doing of the store to accomodate the new EU-regulations also went into the direction to earlier ask the customer to register/log in and enter his address, as the VAT would need to be shown to the customer, before he makes his final purchase confirmation/payment.
    Perhaps as soon as he enters a product into his shopping basket?
    I hesitate to spy on the customer and check the location before that via IP, what the EU-commission seems to expect as a standard.

  • Jack Kitterhing

    Hi there @Dev4 and @RGerhart,

    Hope you're both well today! :slight_smile:

    Some very interesting points here, the purchaser would be able to see the final price at checkout (even as a guest) before actually confirming their purchase, this is already there.

    Definitely need a charge tax/no tax per item, that makes perfect sense.

    Thanks again for the suggestions! Keep them coming. :slight_smile:

    Kind Regards
    Jack.

  • Dev4

    It just occured to me. What is taxed or not taxed is not always the same from on jurisdiction to another. This is true between states, and between EU countries to some degree.

    Also there may be a higher or lower tax on some items both in the EU and USA (and for GST in Australia and Canada as well). So a simple tax/no tax field will not work. We will need a tax id/code to designate the type of tax.

    The US is probably worse than the EU on the differences in tax law.
    In the US for example, some states charge tax on all candy, some on no candy, and some on all candy except chocolate, and some charge a high tax on small candy but a low tax on large candy

    So my suggestion for this is :

    Either a simple fix as described above...
    But instead of tax yes/no make it
    Tax1 yes/no
    Tax2 yes/no
    Tax3 yes/no
    Tax4 yes/no

    Then add one more field to the tax rate table to indicate the Tax id for that line (1-4)

    4 options should allow for almost every set of posibilities (99+%)

    Each item would allow for the flax for tax id 1 to 4 to be on or off.
    The item screen would only show those tax ids that are included in your tax jurisdiction tables, so if you only have one tax for your shops customers you would only see the tax1 option yes/no on each item

  • RGerhart

    Hello Jack Kitterhing,
    The prices shown to guests and customers so far in the shopping basket are only those, which include the standard tax rate of my country as that of the seller, which is not the one that will be applicable for the EU-customer from 1st January 2015 onwards. So I can't see how this should work out correctly for guests of the website next year. (Except one determines the guest's country by checking his IP and then somehow re-directs the customer to a country page.)

    Hello Dev4,
    I agree that the selection tax / no tax is not sufficient, as different tax rates need to be considdered.
    I am not sure about the right number of possible tax rates. But if they are combined with a country differentiation (by customer country), that would be fine, because the EU is the same. Some treat e-books as books, others not, others have special rates for them entirely, others differentiate between e-book newspaper and book ...
    So there would need to be a
    - country/area determination of the tax rate (not by the seller, but by the customer country)
    - different possible tax rates per country (4 should be fine)
    - a tax-selection at the product level. (Though I am not sure I see this working on a product level, when countries treat different products differently.)

    Perhaps a 'product type' field with a tax-table running in the background could be insterted in the product area. This field could be filled either with a standard list of tax rates, or extendable with further kinds of products with manually adjustable or generally updated tax rates for standard kinds of products.
    So in principle an unlimited list of possible tax reference lists, to enable numerous country combinations of full, lower, special and no tax on a product basis.

    I hope those suggestions help and don't confuse more than necessary.
    Best regards,
    Roswitha

  • RavanH

    With the new rules it is fast getting too messy to continue selling digital goods in the EU :slight_frown:

    For Woocommerce, there is an extension created on https://wordpress.org/plugins/woocommerce-eu-vat-compliance/ but I've not got an idea of how they approach the issue. To complicate things, there is an exception created for small businesses. A small shop can register for so-called MOSS status. This apparently means a somewhat simplification of the compulsary administration but is by no means a full reversion to the (already complicated enough) previous state.

    I fear these new rules, meant to tackle big business tax evasion schemes, is only going to hurt small businesses :slight_frown:

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