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Selling to EU buyers? Beware - The new EU OSS/IOSS VAT law affects you (and is already in effect)

Labeled as information in Domain Buying and Selling Discussion, started by twiki, Jul 6, 2021

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  1. twiki

    twiki Top Contributor VIP Gold Account

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    Domain sellers, here comes trouble, I'm afraid:

    Starting from the 1'st of July this year, the new EU OSS/IOSS VAT regulation came into effect.

    Many sellers here probably have no clue of this.

    Also the new legislation can be so cumbersome, that many sellers might find themselves unable to sell to EU buyers anymore. The accounting issues can be quite staggering. (Edit: at our company we already decided we can't sell to EU buyers anymore, at least for now).

    Start by reading here: https://ec.europa.eu/taxation_customs/business/vat/modernising-vat-cross-border-ecommerce_en

    Some very basic notes:

    - If you sell to any EU country (except your own if you're EU based), you're doing distance selling. It doesn't matter whether you sell needles, elephants, services or domains. You have to collect and pay VAT accordingly. Edit: Furthermore domains are digital goods so they are definitely of interest for the lawmaker.

    - All taxable buyers in the EU are to be charged with VAT. This includes all individuals, and companies without an valid EU VAT code. Note, most buyers are individuals.

    - If you sell more than EUR 10K of goods in a year, you're obligated to collect VAT and disperse the VAT to the corresponding country (where the buyer lives).

    - There are only two ways of doing this. Either register for VAT in each country (close impossible) or sign up for the One Stop Shop (OSS) that does this. You will need to have an EUR bank account that will be used to pay that VAT that will be then dispersed automatically to all member countries depending on where the buyer resides. The latter is what you do.

    Edit: Additional note, If you sell in US dollars, or any other currency than euros, you will lose money % when converting to those euros and also by the transfers.

    - The accounting is a huge problem. You will have to keep track of all sales and deduct VAT already paid (for example to Sedo), and pay the difference while keeping separated amounts for each country.

    - Also by the law you need 2 different proof methods as to where the buyer resides (country). Unfortunately with domain platforms you only have 1 proof - what the platform tells you. So in effect, unless they change their systems, you can't - and you're already illegal by the letter of the law. An example of such second proof would be the buyer IP for example that you get through a geolocation service.

    Edit: This location proof information has to be stored for years with accuracy and presented to authorities whenever required, for verification.

    - There is no minimal value for this. Any sale has to follow VAT laws.

    - Domain platforms are not obligated to apply for OSS themselves. Therefore they won't help.

    My own mitigation of the problem:

    - Despite having a company with several employees, this headache is more than we can handle right now. SO WE HAVE DECIDED TO STOP SELLING TO EU BUYERS ALTOGETHER.

    - My interpretation (so far) is that the only network that can still be used is Afternic. Unlike other platforms, Afternic actually resells your domain further as you are not provided with buyer details but just the amount. That's good.

    ( Edit: Also Afternic often ups the price via their resellers or GoDaddy Auctions, so in effect they are a reseller - which means any Afternic sales can continue and are not affected by this law. Again this is my interpretation so far.)

    - We are stopping using Dan.com and redirecting all lander traffic to Afternic due to this.

    - Our Sedo listings will be Make Offer only. If the buyer is a taxable person from an EU country, unfortunately we will not be able to entertain the sale to them anymore.

    This might change but preparing and getting ready for this extra headache is going to take time. We have a good accountant but he's already in deep into getting this untangled. Unsure if it is worth the hassle. Domain accounting for thousands of names like we do is a huge challenge already.

    Please inform yourself, be aware, get compliant and stay within the law to avoid the nasty things.

    Important note: Don't fool yourself that by selling as an individual you're protected from this. You're not. If you are selling domains on a regular basis, you're a business - regardless of being incorporated or not already. Therefore, the law applies to you as well.

    Final note: Get legal and accounting advice as I'm just an user here and not an expert in either. So the above still needs to be taken with a grain of salt - it is what I understood so far though. Good luck.
     
    Last edited: Jul 6, 2021
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  2. twiki

    twiki Top Contributor VIP Gold Account

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    Additional notes:

    - Read the Explanatory Notes 99-page pdf to get start info

    - This continues the previous MOSS law for digital goods.

    If one thinks domains are not in this category, MOSS already applies for this since years ago (2015). The only escape so far was that each country had its own yearly limit, which was for example GBP 75k for UK (and I think about 40k for Germany). But the new overall 10K limit for all sales in the EU makes this basically in effect for most sellers.

    - It doesn't matter if you're not in the EU, such as in the US for example. You will have to apply for the IOSS scheme (non-Union in this case). More info here on the IOSS.
     
    Last edited: Jul 6, 2021
  3. Mike Goodman

    Mike Goodman Established Member

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    And who is going to enforce all this? Do you believe non-EU authorities are going to spend massively on suppressing any section of their own small business sectors in order to comply with the dictat of a shower of EU technocrats?

    If so, kindly explain how and what those countries have to gain from such actions. Have you any ideas about how much such a policing and enforcement effort will cost? Not cheap. Are the EU technocrats expecting the non-EU authorities to foot the bills?

    Choose between a cat in hell's chance, a snowball in hell's chance and no chance. After moaning a bucketful about non-compliance the technocrats will realise the costs to the EU will be far greater than what they can possibly gather in and quietly drop it.

    Dan and Sedo are domiciled in EU member countries, so they have no option but to comply. At least until the idea is buried.
     
  4. noneisnone

    noneisnone 444 VIP Gold Account

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    mike raises a good question who is going to enforce this ? also will this boost the visibility of marketplaces located outside of the EU ? interesting to see how this plays out
     
  5. sircc

    sircc Established Member ★★★★★★★★★★

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    ...or they move offshore. I can think of a few countries they can move their operations to.
     
  6. twiki

    twiki Top Contributor VIP Gold Account

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    I have no idea about enforcing outside the EU. However I know they are deep involved in this and there are already trade agreements with the US and many other countries. If EU needs to get money from you, that will pop up at your US location with no hassle for them. They have the means of doing this. Furthermore they will push all online platforms into compliance. Otherwise platforms themselves will get burned for this.

    Also the big companies are forced to do this. Dan has a MOSS setting for long time already that allows VAT to be computed either on the basis of the seller or buyer country.

    My opinion here is, I would not risk it if I were you (or anyone else in the US etc). The fines and accumulated unpaid VAT and penalties could easily be higher than all the income you've ever got.

    And this might be even worse with platforms like brandables, because a lot of that % is kept by them but the seller has to collect and distribute the total VAT owned for the total sum sold to buyer, if the platform itself doesn't already distribute that portion of their own income. So you could even end up due for more than what you even got.
     
  7. twiki

    twiki Top Contributor VIP Gold Account

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    That would not be a solution. The EU is able to block their payment systems if they're a non-compliant platform from anywhere.
     
  8. twiki

    twiki Top Contributor VIP Gold Account

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    Anyone makes their own choice. Very small sellers? Probably not (although not guaranteed) - for example you are protected by the 10k yearly limit.

    But are you serious about domaining as a business? In this case, the risk is probably not worth it. Check your lawyer to be sure.
     
    Last edited: Jul 6, 2021
  9. redemo

    redemo Established Member

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    @twiki How does this news affect us delirious ale-swigging marauders in the U.K. since we aren't in the E.U. any more?
     
    Last edited: Jul 6, 2021
  10. twiki

    twiki Top Contributor VIP Gold Account

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    This is already valid under MOSS for years, you need to use the non-Union scheme if you're no longer in the EU.

    Edit: The OSS/IOSS just sets a new, very low limit of 10k that makes it fast applicable to most sellers.
     
    Last edited: Jul 6, 2021
  11. twiki

    twiki Top Contributor VIP Gold Account

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    I want to repeat this cause is important:

    Guys, please check this with your lawyer. Seriously. It's not a joke.

    The EU is really set up on getting all the buck from everyone for the VAT (which BTW averages above 20% so it's a huge tax). So much so, that they have even removed previous exemption for sales under $10.

    Oh and they're getting billions already and preparing for a ton more, this is actually a next step in the new umbrella of the global taxation accord already signed by more than 100 countries.
     
    Last edited: Jul 6, 2021
  12. sircc

    sircc Established Member ★★★★★★★★★★

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    I have not read the document but I highly doubt the European Union can enforce tax collection, outside their jurisdiction.

    E.U. sales platforms will most likely be the ones to collect VAT on top of the selling price, if sold to European entities.
     
  13. twiki

    twiki Top Contributor VIP Gold Account

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    You're 100% wrong about this. This tells me you haven't discussed this with your lawyer.

    You will be charged in the US if you live there. This enforcement already exists for many years.

    Edit: The only "luck" factor is when the dice will actually get to your number. But given enough time, they will eventually get there. I don't think the risk is worth it.

    Important note, digital platforms selling to EU are 100% easy to identify via their payment processors. They will be forced to get compliant, a process already in place and rolling fast.

    And your own sales will be disclosed to EU as per taxation laws. You might eventually get the nasty letter in the mail.
     
    Last edited: Jul 6, 2021
  14. sircc

    sircc Established Member ★★★★★★★★★★

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    @DAN.COM
    It would be nice to hear from the guys at Dan about this subject. Can someone chime in, please?
     
  15. Mike Goodman

    Mike Goodman Established Member

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    The 10k, to my understanding, is a "concession" from the technocrats. They were originally blabbering about no lower limit at all. I doubt we will tolerate such a low threshold in the UK and I'll be surprised if the USA does. IMO this story has some way to go before anything is agreed internationally to the point of implementation, or it will simply run aground and remain beached for all practical purposes.

    "Valid" under MOSS? When has it ever been enforced? To my knowledge very few actually comply, whatever the letter of the law. Stupid laws are rarely enforced. The enforcers, thankfully for all our sakes, have better things to do in keeping us safe and civilised.
     
  16. twiki

    twiki Top Contributor VIP Gold Account

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    I don't agree and I don't disagree here. Indeed many ignore it.

    It's a personal decision whether you risk it or not. Some will. Others won't.

    My opinion is that it's not worth it. But your lawyer's opinion absolutely supersedes mine which is not a qualified one.

    I've only posted this thread to inform about the issue. The mitigation, of course, is everyone's decision (and their legal and accounting advice). That's the scope of this post, and its limits.

    Hopefully it is useful - I believe it will definitely prevent some sellers from being fined with amounts they can't cope with.
     
    Last edited: Jul 6, 2021
  17. sircc

    sircc Established Member ★★★★★★★★★★

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    I believe you're missing my point. I do not collect taxes or VAT on sales, the platform does. If I sell a domain on Dan to a E.U. buyer, they would be the ones to add the tax on top of the purchase price. I believe that's how Sedo proceeds, no?
     
  18. twiki

    twiki Top Contributor VIP Gold Account

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    Note, EU can easily measure and enforce this through the marketplaces.

    If you're selling on your own, you might be able to fly under the radar - at least for a while.

    But if you're selling through a marketplace, then the flashlight is already on you cause that's what EU is cracking down on. Marketplaces. All international sales to buyers from EU regardless of seller country.

    The simple line here is, if you sell to any EU buyer you already owe like 20% of your sale or more, as VAT to EU.
     
    Last edited: Jul 6, 2021
  19. sircc

    sircc Established Member ★★★★★★★★★★

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    I'm not trying to argue with you but the point is, the tax or VAT if you prefer, is added by the platform, on top of the selling price. Sedo will collect and remit the proceeds, not the seller.

    Anything above that is plain silly and Mike Goodman is correct, good luck enforcing it. I'll flush Sedo, Dan or any other platform, including E.U. buyers if need be.
     
    Last edited: Jul 6, 2021
  20. twiki

    twiki Top Contributor VIP Gold Account

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    Again you need to discuss this with your lawyer and accountant. Your interpretation here is limited, and probably wrong.

    Simple note is, you're probably wrong since Sedo and Dan are not resellers but they charge a commission. So the legal needs to interpret this.

    Your obligation of being OSS registered is clear in this case. Edit: Only Afternic is OK (probably) as they resell, not pass the buyer directly to you.

    Also only the platforms that have all sales under $150 are forced to be OSS registered. So domain platforms are not obligated and will not become OSS compliant. Therefore the duty is on you. If they collect the VAT and are not OSS registered already, then you're in trouble regardless of the fact that they have kept the VAT and sent you the amount without VAT.

    Can't emphasis more how complex is this and that it requires professional expertise. Really.
     
    Last edited: Jul 6, 2021
  21. karamakate

    karamakate Restricted (15-30%)

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    Thanks @twiki for informing about current situations.

    At first glance, I think this will cause serious confusion.
    I am not part of the EU system. So is the country I live in.
    Therefore, technically the EU cannot force me to do anything individually. The system of each country/union concerns itself.

    Let's say I sold a few domain names to people living in the EU, and I passed the 10K limit. And I didn't pay any taxes. So then?! Are they going to send agents from the Bundesnachrichtendienst to my house and beat me? Or will they notify Interpol and go after me with a red notice?

    What is the global impact of this situation? Is there a common system in which the economic infrastructures of all countries are included and integrated?

    Perhaps, as a result of international agreements, they may force companies to participate in this taxation system, because all information of the companies is recorded and shared openly. However, it seems almost impossible to me to track and identify individual sellers one by one.

    For decades, the Chinese have been selling replicas of huge billion-dollar companies to the whole world, and they have been running around as they please without paying any taxes or penalties. But no one is able to intervene in this issue yet.
     
  22. domainer111

    domainer111 Top Contributor VIP ★★★★★★★★★★

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    Afternic/BrandBucket/SH/BrandPa all use consignment, so VAT does not apply.

    European domainers really should register for VAT because they can claim on the inputs. So if they have a VAT number, you don't need to fret.

    You just need a note of their VAT number and address which Sedo and Dan supply. Just watch out for private transactions on escrow.com etc.
     
  23. twiki

    twiki Top Contributor VIP Gold Account

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    They have been cracking hard on Chinese sales to EU sales lately. In fact this is a big, though secondary part of the issue.

    Can't answer for everyone and each country though. So again this is an individual decision.

    However I know for sure (from multiple previous reports by people who had this or had legal advice in this matter) that they can, and will enforce easily and successfully this in the US. IF you get under their radar for whatever reason.
     
  24. twiki

    twiki Top Contributor VIP Gold Account

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    Incorrect. This used to be the situation many years ago. Not anymore.

    Indeed they have to register for VAT. But the rest is incorrect.

    Well, if you don't want to head to a lawyer first, I suggest you read the law. And also the MOSS (most important I'd say) which is already in effect for many years. MOSS specifically names all digital and the OSS just comes to make the net a bit tighter so no fish can escape. Even without the new OSS the old one still applies to basically the same effect.

    Once again:

    - The seller is responsible for collecting and distributing VAT to EU countries (that's you, the domainer)

    - The distribution can be done ONLY via the One Stop Shop (OSS) - or IOSS for non-Union sellers = NOT by mere VAT registration and distributing collected VAT locally to the local taxman, BUT ONLY via the OSS, with collected aggregate per-country amounts so it gets distributed correctly across the EU.

    Otherwise you are infringing the law and it's not pretty. You're basically devaluing those countries of their due VAT by giving it to your local tax office.

    - Consignment platforms, true, but those are NOT resellers - so the final seller is still you. And platforms will not register for OSS as they are not mandated, and there is no enticing for them to do so, but the contrary.

    If you ever thoroughly read the contracts, for example from Sedo, you'll see that all the burden is with you. I did. Legal, financial and otherwise.

    This law not only specifies which amounts are due, how, and from which sellers. It also mentions clearly that the only mechanisms for being compliant is either by (1) registering for VAT in each country and paying taxes to each, or (2) via the OSS system as you become OSS registered and distribute your collected VAT via this mechanism through your financial statements.

    I really, really wish you'd be correct cause this would save me a ton of hassle. Unfortunately it's not the case.

    Edit: One thing is clear - this is a business killer for small sellers. I wish the EU could have come with a simpler scheme.

    But to ensnare all the siphoned VAT back to the coffers they need this. And the new global tax thing is yet another one nail in the same coffin of the old ways - where money did not ever get taxed.
     
    Last edited: Jul 7, 2021
  25. twiki

    twiki Top Contributor VIP Gold Account

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    Funny thing, i just received notification from the local taxman that the system is 100% ready and already connected to the EU. So they just wait the $$$ right now.

    If there was ever any uncertainty in this matter... One can escape all but two things, death and taxes.

    Edit: I'm getting news reports from all local media, it appears everyone here has gone crazy about the situation. The interpretation is, however the same as I've mentioned here, in all the reports even if differently formatted.

    EU's been quite successful with MOSS and now it's basically extended to everything from everywhere - a full tax on all cross-border sales to EU. And it's intended to crack down hard on anything sold via platforms.
     
    Last edited: Jul 7, 2021

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