I have three books ready to come out. I can’t currently release them because of the recent actions of our government, specifically the mess that is called EUVAT – a new set of tax laws created in 2015 with little notification that are hammering small businesses and sole traders.
If you’re not familiar with these, for many the VAT system limped along, expanding organically to cover the web as it developed – VAT had to be calculated and paid in the seller’s country. This was sometimes abused by larger companies to base themselves in a country with a low VAT rate. Then the EU changed it. From Jan 2015 VAT has to be paid in the buyer’s country to the buyer’s government, but still calculated and paid by the seller. The customers details have to be stored for ten years, and there is no threshold. From the first cent of a sale, VAT must be calculated.
You will hear a lot of misinformation
- that companies which are under the VAT threshold aren’t affected
- that MOSS means not completing a return
- that German language products are exempt.
These are nice ideas, but unfortunately they are untrue and stem from utter denial. In the vein of a teenager trying to pretend that if they do it standing up or if she wears a blue wristband she won’t get pregnant, many businessmen are clinging desperately to the idea that somehow they won’t have to deal with the consequences and it will be alright. Regrettably this blue blankie won’t stop them being hit with a VAT audit.
To be fair there is an element of “Jesus Christ, they can’t do that!” which is the single most common reaction when I mention this, followed by a protest that I must be mistaken. Unfortunately they are, they have, and we can either do something about it or stick heads back in the sand and grab onto a comforting myth.
The facts remain. If you sell a digital product to an EU customer (or a physical product from 2016)
- you need to have two pieces of data locating your customer, which have to agree – you need to store that data for 10 years
- you have to charge VAT on the product at the correct rate for the country and product
- you have to remit that VAT to the buyer’s country.
- there is no threshold: you have to do this from the first penny or cent you sell, and it doesn’t matter how large your company is.
If you get any of it wrong, you are liable for fines. Even if it is because the customer put in the wrong data, or because the VAT rates issued for use on the EU site are incorrect (which they currently are). The tax authorities are even trying to make sellers based outside the EU collect and remit this tax to them, something which US sellers are not taking very well.
This law is badly broken: –
- Paypal do not provide the data required.
- Storing customer data for ten years creates a PCI DSS issue and is illegal under some countries’ and US states’ laws.
- Using a third party like Amazon as they suggest cuts your income significantly.
The costs of trying to comply are outside the range of small businesses and micro-businesses. In fact even the EU Commissioners responsible admit that the law is having a devastating effect on small business and are trying to get it changed. More concerningly, the businesses getting hit are disproportionately owned by those who cannot take a conventional job. Women and the disabled are being slammed.
Concerning Killgrace
, this affects me quite badly because I use Paypal and so cannot confirm my customers’ location. I could sell through Amazon but the loss of income is huge.
If I sell my books through Amazon my income is cut to a third – 30% – of what get if I sell directly.
| Book Price | Sold on | Fees | Income |
| 0.99 | Amazon | 65% | 0.29 |
| 0.99 | Paypal | 5%+5p | 0.89 |
| 1.99 | Amazon | 65% | 0.58 |
| 1.99 | Paypal | 5%+5p | 1.84 |
(Paypal fees for other amounts are here:
http://pressbin.com/tools/paypal_micropayments/)
Switching to a third party platform lowers my income to 32% for 0.99 books and 31% for 1.99 – so less than one third.
At a time when I’m recovering from illness, I’m not really up to dealing with this and I know there are other people in a similar situation. It is a shame that a class action suit against the EU Commission for loss of earnings through bureaucratic negligence is not practical.
(see next page)