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

[twiki]

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.

 

[DAN.COM]

I just skimmed this, but saw some comments about the US. If EU countries think they are going to be able to get a US seller (or other non-EU countries) to collect and remit VAT taxes to them, best of luck.

What jurisdiction do they have over a foreign (non-EU based) citizen? How would they enforce it?

Most domainers make a one off sale here and there. They are not making a huge volume of sales worth millions of dollars that they can send to their tax compliance office.

Brad

This is absolutely not the case. No US/Non-EU buyer/seller will have to pay EU VAT now or in the near future.

The EU VAT rules are only applicable when the domain seller is a VAT registered EU company and the buyer is also from the EU.

 

[Mike Goodman]

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.

 

[DAN.COM]

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

Our VAT options support the EU VAT changes for months already. You can select even if we should calculate the VAT based on the country of the seller or buyer (MOSS).

We're unsure why the original poster doesn't simply use our VAT setting options to tailor exactly how they want us to collect VAT since moving to a non-EU platform doesn't change anything for the situation on the ground which is, if you are an EU VAT applicable business and sell to Europeans you simply have to handle VAT. EU buyers represent close to 50% of all domain end-user purchases so excluding EU buyers from the pool is not something sellers should take lightly.

Another tip, when you click on a month in your Revenue sheet, for example for July: https://dan.com/users/revenue/2021/7

You can download a CSV file that includes all data your accountant/bookkeeper needs to process your VAT filings.

Lastly, the EU introduced the MOSS structure to allow small/medium-sized companies to keep their VAT filing simple and we support that model for handling VAT at Dan.

As a last resort, sellers can also select the VAT option "Do not charge and show any VAT" since this effectively instructs us to not collect any VAT on your behalf.

 

[DAN.COM]

I think I would like an option to exclude buyers from the EU (other than your own country) that do not have a valid VAT number (individuals), bebause as the OP states it is quite a hassle to disperse the VAT to the respective EU countries.

The rules that the OP states are not relevant for 99,99% of all domain sellers. Only if you monthly have a VAT exposure of above €50K in EU countries/per country other than the country you're based in, you could get in the position of having to do that.

We'd strongly advise all EU-based sellers that are in doubt to contact a local accountant that can quickly analyze your situation and suggest the best VAT settings to use.

Excluding EU-based buyers from your sales is not something Dan will facilitate since there's no need for that.

 

[redemo]

@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?

 

[johnn]

Ebay did issue the news since the beginning of the year:
https://www.ebay.com/help/selling/selling/vat-obligations-eu?id=4650

The simply way would be ask the buyer to move to the US or any Asian Country. Sell the domain to them and they can move back to their own country.

 

[bmugford]

I just skimmed this, but saw some comments about the US. If EU countries think they are going to be able to get a US seller (or other non-EU countries) to collect and remit VAT taxes to them, best of luck.

What jurisdiction do they have over a foreign (non-EU based) citizen? How would they enforce it?

Most domainers make a one off sale here and there. They are not making a huge volume of sales worth millions of dollars that they can send to their tax compliance office.

Brad

 

[branding]

I ran into this which might be interesting regarding sales venues:

Platforms with an active role need to pay VAT
Entrepreneurs are responsible for paying the VAT on products they sell through an online platform. With the new VAT rules the online platforms are responsible for the VAT if the platform has an ‘active role’. An active role means more than just bringing together online supply and demand. For instance, enabling orders and payment of products. In that case, instead of the supplier, the platform delivers the products to private customers. Because of this, the platform pays VAT to the country where the customer resides.

https://business.gov.nl/amendment/new-vat-rules-international-e-commerce/

 

[twiki]

Have some news, and it's my duty to inform everyone.

Many will see them as good news I think. But it still "depends".

Finally got the answer from our law firm which BTW it's one of the good ones locally. Took them quite a while to go thoroughly through the mountain of stuff. In the end they gave us an interpretation that basically makes the law not applicable in our domain sales. (Emphasis: OUR domain sales in particular, not everything out there).

Their interpretation is that a domain sale is not a sale. (? yeah) It is a transfer of rights to use a service. It is not a product, also not a service, but a transfer of right of usage of a service provided by a third party (the registrar) This seems to fit more the domain's usage in general. But is it 100% valid for everyone? I don't know, probably not. Check with your own lawyer.

What they also said is this: If the domain is being sold with something else bundled, be it a service or goods of some kind, then the MOSS law applies (the segment for digital goods).

1) So if you're selling the domain with a website, data, or even a logo, then yes it's under OSS/MOSS applicability. Also if you offer hosting, or whatever else.

2) Otherwise not, and you can still apply the old' rules of VAT. you might have to pay VAT locally for EU B2C sales.

Indeed (to my own interpretation so take this with a LARGE grain of salt), if only the domain is being transferred, then the service is actually provided 100% by the registrar, not by the seller.


Please be aware that this is only OUR legal firm's answer to us. It is what we will be using, but don't take it as an overall valid answer. To be safe, please check with your own lawyer as well. That's what matters.

3) It is unclear at this stage how EU will classify domain sales' platforms. I'd guess that they might be requested at some point to pay VAT for their service like that. Also, Flippa and other venues where you sell domains WITH a website might be forced to apply for it. Its very hard to tell right now.

4) Are you renting out the domain? Well - in this case it is an even deeper problem because in this case you are basically offering a service based on a service provided by a registrar. So this, I'm afraid, might fall under the new law.

So things might still be quite murky depending on what you sell (domain, or is it also a website or something else? is it rented? is it leased?... etc) and where you are.

Only your lawyer can tell with all the details you provide.

 

[bmugford]

Let me tell you one more thing about law. "YOUR NAME" (all caps) and "Your Name" (lower case) are two totally different things. Ever heard of the "straw-man"? The one in capitals is your straw-man... the fictitious company registered for you upon your birth, the one which is used by this insidious system to tax you, fine you, and control you. Use "Your Name" as a living man/woman and even the tax office in your own country has no jurisdiction over you. This rabbit hole goes far deeper than most people could comprehend and believe.

This is sovereign citizen nonsense which has been thoroughly debunked.

https://www.splcenter.org/fighting-hate/extremist-files/ideology/sovereign-citizens-movement

The IRS doesn't give a crap how you list your name, they still want their fair share of tax revenue.

They don't accept "Sorry, I don't owe taxes" as a legit exemption.

This is what happens when you try this crap in a real court -

 

[sircc]

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

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.

 

[sircc]

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

 

[twiki]

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.

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.

 

[bmugford]

If you'd be curious to pass this question to a proper US lawyer and get their answer, you'd be surprised.

True is that the one off sale are not under radar. But that's really under the $10k limit, right?

I am not really all that concerned personally.

I have an accountant.

I am in compliance with US tax laws. They have jurisdiction and enforcement over a US citizen/resident.

Brad

 

[twiki]

US sellers: Read this article. While it is about GDPR, it's a different subject but enforcement will be similar.

I've encountered in the past cases where this kind of enforcement has been successfully applied to US citizens and firms. This is why i am insisting you should contact your lawyer about this.

Again, if you chose to ignore the law, as written in the above article, you do this at your own peril.

 

[DAN.COM]

Isn't it clear from the above statement? They have clearly mentioned you do not have to pay any VAT.

No. Since you're based in India, no EU-based company is allowed to charge VAT for your purchases.

 

[tonyk2000]

The chaos in my view is if viewing Afternic as a reseller or not, the difference is subtle and I think every EU member will see the issue in different ways. The chaos is if afternic says "I'm simply an escrow/marketplace and I don't need to pay VAT (apart on transaction fees in buyer state), seller should." Then you have to demonstrate Afternic is , in fact, a reseller and I'm not sure every EU member will interpret in the same way the matter.

In their namepros thread, I think Joe Styler answered the following sellers question. The seller, being EU-based, wanted (was required to) issue invoices, and asked how to obtain buyers details. As per afternic, such invoices should be issued to Afternic, as no final buyers details are disclosed. So, imo, the sellers are safe with afternic, as they are simply selling their domains to US-based entity (Afternic/GoDaddy).

Moreover, GoDaddy buyers from EU will end up on localized godaddy websites, where the VAT will be charged, which will make the taxman happy. In case of other registrars (what if EU-based buyer elects to purchase via Chinese registrar, or via US-based afternic partner registrar that does not care about VAT), VAT may not be charged, but it has nothing to do with our alleged obligations in any way - we the domainers sold domains to US-based Afternic, and, while we are aware that Afternic resold it, we do not know who their buyer is and where is this buyer located. End of story.

For the sake of completeness, it might make sense to determine whether afternic dot com, where the domains can also be purchased, has some sort of VAT setup for EU buyers.

So, generally speaking, Afternic model appears to be the most logical. And,, hopefully, it would become the default model for all marketplaces.

 

[Jurgen Wolf]

My UK friend finished the divorce process recently.
And judge didn't consider his domains (portfolio) like properties, his former wife didn't receive any domains.

 

[Brian L.]

Fuck the EU and their unelected bureaucrats. The EU is slowly destroying all the counties under its autocracy. Thank god the UK was smart enough to escape the tyranny of the EU.

 

[sircc]

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.

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.

 

[karamakate]

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.

 

[domainer111]

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.

 

[Crysis]

So as a citizen/individual from India if I sell a domain name on dan.com, do I have to pay any kind of VAT ?

Please answer @DAN.COM

Isn't it clear from the above statement? They have clearly mentioned you do not have to pay any VAT.

 

[tonyk2000]

4)Supplies of services by taxable persons not established within the EU or by taxable persons established within the EU but not in the Member State of consumption to non-taxable persons (final consumers).

I am wondering are there any differencies between the seller being non-EU legal entity AND non-EU John Doe (natural person)...