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.

 

[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

 

[twiki]

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

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?

Edit: I admit I don't have the final answers for everybody. But at least, get informed - professionally.

 

[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.

 

[twiki]

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

These are international laws, cross-border laws. They change everything.

 

[tonyk2000]

As per Germany-based SEDO:
https://faq-us.sedo.com/app/answers/detail/a_id/2079

What does the Value Added Tax (VAT) status indicate?
The VAT status of a member indicates if the member is trading on Sedo as a VAT-liable company. When the VAT Status shows as "Applicable" the member has specified within their Sedo account that they are VAT-liable. The VAT does not apply to US or Canadian members.

Members not trading as VAT-liable companies and all individuals should have a VAT status of "Not Applicable."

If you are trading on Sedo as a VAT-liable company, you need to specify this in the "Account Data" section of your Sedo account and enter a valid tax registration number. If you are trading as an individual, this is not required.

Please note that all offer/counter-offer prices and auction prices are inclusive of VAT (if applicable). No additional taxes and/or VAT will be added to the final price on completion of negotiation.

(QUOTE END)

This may be outdated already. So, earlier, almost all EU-based sedo buyers requested invoices from sellers,
got their invoices without EU VAT (from non-EU sellers who are not trading as VAT-liable companies).
And now? Will Sedo change their operating mode? It seems they should. Let domainers sell to Sedo (to their U.S.-based identity?) without VAT, and let Sedo sell to EU buyers with VAT according to their country rates, via either Germany-based or US-based legal entity?

@Sedo can you enlighten us, please?

 

[noneisnone]

still no clear answer on how will they manage to enforce this or if the major marketplaces will change policy
can you guys give me an idea of how it will effect sellers in other regions of the world other than europe and the states(the middle east to be specific) ?

 

[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.

 

[Supreme Dark Lord]

It seems to me like using a marketplace protects you:

The new rules also mean so-called ‘electronic interface’ marketplaces and platforms, such as Amazon and eBay, are the deemed supplier for VAT purposes in certain cases when distance selling to EU consumers.
.......

Deemed supplier rules remove the need for sellers who use these marketplaces to account for VAT at the point of sale.

Effectively, it’s as if each consumer purchase process means they sell the goods to the online marketplace, who then sell the goods to the consumer and account for VAT while doing so.

from - sage com/en-gb/blog/ecommerce-vat-eu-need-to-know/

 

[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.

 

[NameFilter.com]

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.

Show attachment 194863

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.

 

[domvault]

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.

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

 

[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.

 

[kite26]

I use DAN landers. I I am located in an EU country (Greece). What is better to choose VAT based on buyer or seller country?

 

[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.

All EU countries have signed a VAT pact that allows you to submit the VAT for each EU country from one single entry point. At Dan, for example, we simply submit and pay the Dutch tax agency the VAT required for other EU countries and they settle the payments with the respective countries.

 

[DAN.COM]

I use DAN landers. I I am located in an EU country (Greece). What is better to choose VAT based on buyer or seller country?

That depends on many variables. Please contact your accountant to determine what works best for you.

 

[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.

 

[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.

 

[twiki]

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.

Please note - I am a big big fan of Dan, so I'll always recommend their services. Thumbs up for Dan.

This post is definitely not intended to cause disruption in domain sales; but rather to have everyone look into the new situation and just make sure you're covered.

But based on the documentation mentioned here, the above quote is most likely not valid anymore, I'm afraid. There is no longer any threshold for non-EU sellers, and for intra-EU sales the threshold has been lowered to 10k.

Please open this document: https://ec.europa.eu/taxation_customs/sites/default/files/vatecommerceexplanatory_28102020_en.pdf .

Page 6 (reasoning for non-EU sellers):

Since non-EU businesses selling goods from 3rdcountries to consumers in the EU can make VAT-free supplies into the EU and are not required to register for VAT, they profit from a clear commercial advantage compared to their EU established competitors.

Same page:

The main changes are the following:

Given the success of the VAT Mini One Stop Shop (MOSS) allowing suppliers of telecommunications, broadcasting and electronically supplied (TBE) services to register for VAT in one Member State and to account in that Member State for the VAT due in other Member States, this system will be extended to other B2C services, to intra-Community distance sales of goods as well as to certain domestic supplies of goods, thus resulting in a bigger One Stop Shop (OSS).

The existing threshold for intra-Community distance sales of goods will be abolished and replaced by a new EU-wide threshold of EUR10000 below which the supplies of 7/99TBE services and intra-Community distance sales of goods may remain subject to VAT in the Member State where the taxable person supplying those TBE services is established or where those goods are located at the time when their dispatch or transport begins;

Side note I just learned from this document that the 10K limit actually applies to TBE services since Jan 2019. I ha no clue about that.

Page 7:

The following transactions are covered by the new provisions:

...
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).

B2C sales, in essence.

Also switch to page 32 and read everything below. For non-EU suppliers BTW there is no threshold.

Now - I'm not claiming I have the answers. This post is intended just to raise awareness of the new law.

However the answers are, I'm afraid, not to be given by me, any domain platform or any other NP member, but by the professional legal advice each of us have access to.

Edit: For any NP members that have taken this through their legal advice: Please comment about the advice received from the legal team, thank you. That would be helpful for everyone here.

 

[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)...

 

[Vivek Tailor]

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

So this makes the things clear you dont have to worry and op and his lawyer is overlooking at this.

 

[branding]

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

Yes. A natural person cannot charge VAT.

 

[twiki]

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

I discussed in the past about this with our legal team. It's subject to interpretation, but this is a thing of the spirit o the law not just the letter.

If John has 2 domains and sold them, that's John the enduser - consumer. In such case he needs not worry. Extremely small sellers that sold one or 2 domains also need not worry.

If John has 2000+ domains and selling some regularly, that's John doing a business. Regardless of being incorporated or not (even as self employed etc), the context is business.
So in such case John is a taxable person and needs to collect and pay VAT from his EU customers.

Edit: Incorporating must probably be needed at this point or anyway getting the EU VAT code and applying for the thing. Accountant / legal advice is yet again required to interpret the context.

Yes. A natural person cannot charge VAT.

Indeed. But a natural person trading as a business (business volume of sales) needs to register as a business and for VAT in such case.

 

[branding]

I discussed in the past about this with our legal team. It's subject to interpretation, but this is a thing of the spirit o the law not just the letter.

If John has 2 domains and sold them, that's John the enduser - consumer. In such case he needs not worry. Extremely small sellers that sold one or 2 domains also need not worry.

If John has 2000+ domains and selling some regularly, that's John doing a business. Regardless of being incorporated or not (even as self employed etc), the context is business.
So in such case John is a taxable person and needs to collect and pay VAT from his EU customers.



Indeed. But a natural person trading as a business (business volume of sales) needs to register as a business and for VAT in such case.

That's a different discussion. In order to be able to charge vat (legally) you'll have to be vat registered. A seller cannot be vat registered unless he's registered as a sole trader or company, so no natural person.

But I agree, if you do the numbers it's probably wise to setup a decent business structure.

 

[twiki]

That's a different discussion. In order to be able to charge vat (legally) you'll have to be vat registered. A seller cannot be vat registered unless he's registered as a sole trader or company, so no natural person.

But I agree, if you do the numbers it's probably wise to setup a decent business structure.

Yep but the fact that you're not incorporated, does not make you exempt from VAT if you're basically operating a business as a natural person.