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

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twiki

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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.
 
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If you are a business and you sell in the EU you have to pay sales tax. What matters it'is the place of the buyer not where the seller resides. They have multiple ways to enforce this, they can force marketplaces to collect sales tax or they can block the website (in EU space) from where you sell products/services and so on. They were able to apply GDPR pretty well in the EU space, so why not for sales tax?

Read this!
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.
 
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Ok so are we saying now consignment is gone for Godaddy and the brandable marketplaces?

In that case Godaddy has to release the contact details and collect VAT. Or if Godaddy does not collect the VAT, then the seller has to apply VAT to the gross proceeds which is a hit.
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But really the platform should levy the VAT, as the businesses should not suffer the VAT but rather just collect it on behalf of the tax regime. Only the end-user (VAT unregistered) should pay the tax.

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Same for brandable marketplaces.
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@Joe Styler could you update on consignment?
 
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twiki

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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.
 
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Finally got the answer from our law firm
Thank you @twiki ! Are they in EU or not? How familiar are they with EU requirements?

My latest experience with accounting firm is the folllowing (non-EU). I promptly explained them what I am doing and I used terms like domains, parking, escrow etc. They said literally the following: It is all too technical and hard for us or for the tax agency to understand. Do you sell websites? [I: sort of...]/ If so, you provide services. Simply because there are no physical goods in customs. Declare it is an income for services. You should also issue invoices (local requirement), provide them to foreign buyers if asked, do not provide them if not asked. If you also spend money to be able to provide the services - deduct the expenses. Thats all. Please do not overcomplicate the stuff :)
/at that time, I did not ask anything about European VAT though. Actually, foreign taxes paid (or to be paid) is something I do not expect them to be familiar with.../
 
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twiki

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Thank you @twiki ! Are they in EU or not? How familiar are they with EU requirements?

My latest experience with accounting firm is the folllowing (non-EU). I promptly explained them what I am doing and I used terms like domains, parking, escrow etc. They said literally the following: It is all too technical and hard for us or for the tax agency to understand. Do you sell websites? [I: sort of...]/ If so, you provide services. Simply because there are no physical goods in customs. Declare it is an income for services. You should also issue invoices (local requirement), provide them to foreign buyers if asked, do not provide them if not asked. If you also spend money to be able to provide the services - deduct the expenses. Thats all. Please do not overcomplicate the stuff :)
/at that time, I did not ask anything about European VAT though. Actually, foreign taxes paid (or to be paid) is something I do not expect them to be familiar with.../

Yes we are in the EU.

This particular case (domains) is a bit difficult to categorize due to its nature. Also the intricacies of the law are... mind-boggling.

Our legal said to us that the same conclusions (as I mentioned above in last comment) apply to both EU and non-EU firms. Both being VAT liable IF that is the case (again see above).

But again, seek your own counsel and a good one.

I'm afraid the guys you asked for are not competent in this field so they can't provide an answer. They seem to have no clue about MOSS law and digital goods; which is in effect, I'm afraid, since 2015. And it's not like they said. (Edit: that VAT etc apply only to physical goods;). MOSS law applies specifically to remote sales of digital goods an services and yeah, in many cases sellers are VAT liable.

(edited for clarity)
 
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robs01

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Jurisdiction.

I am in another continent. The EU tax office has ZERO jurisdiction over me and my business. No matter how much they want to coerce and thuggerize people to put aside and cough up some free taxes for them, it ain't gonna happen. "I do not consent to enter into any contract" is all you need.

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.
 

Future Sensors

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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.

Thanks again @twiki for this interesting insight.

Following this reasoning, does this mean that all communications from marketplaces regarding "sold" domains (in emails and on invoices) is currently not correct and has to be changed?
 
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twiki

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Thanks again @twiki for this interesting insight.

Following this reasoning, does this mean that all communications from marketplaces regarding "sold" domains (in emails and on invoices) is currently not correct and has to be changed?

Maybe. Can't tell exactly.

It is indeed a deep rabbit hole, appears to need quite some time to untangle.
 

twiki

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Reiterating the most important note:

I only raise awareness here and share what I learned.

I don't have a final conclusion and everyone can share theirs, including marketplaces of course (thanks for any comment). Guess we have all to make our own decisions. And some sellers already did, I think.

Solely in our case, as per our activity, we are not affected.

But is there still a risk for us? Yes - even in such case - if the local taxman concludes it's not right, we might be in trouble. And in this situation we will reject the fines etc (which are huge) and take our case to court against the tax office, on the basis of the interpretation of our legal firm.

See what this means?

You cannot really decide by yourself. It's too risky.

You need legal support and a good one if you want to sleep just fine. (or... sort of.)
 
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Lox

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@twiki The domain name holder via acquisition process can transfer the ownership or holders right to the another party. The domain name itself doesn’t (only) belong to the “digital product or service” but can be classified under the acquisition of goods.
EU Intra-Community acquisition of goods


As far as I know, two of my EU based companies are able to operate under the “acquisition”. Anyway, I’m going to ask for more info. Thanks for the info.

Regards
 

Kingslayer

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A lot of talk about this seems to be from marketplaces.

What happens if you are involved in a private deal via Escrow.com, buyer is masking who they are/where they are from or you are involved with a buyer who has hired a broker to represent them (ie you do not know which country buyer is from).

When the deal as gone through and you find out the buyer is from the EU, you could be hit with a tax bill?
 
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twiki

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@twiki The domain name holder via acquisition process can transfer the ownership or holders right to the another party. The domain name itself doesn’t (only) belong to the “digital product or service” but can be classified under the acquisition of goods.
EU Intra-Community acquisition of goods


As far as I know, two of my EU based companies are able to operate under the “acquisition”. Anyway, I’m going to ask for more info. Thanks for the info.

Regards

Well, as I said it is a matter of interpretation. Our legal says domain do not classify as goods either.

So... everyone and their legal is probably where the answer is.
 

twiki

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A lot of talk about this seems to be from marketplaces.

What happens if you are involved in a private deal via Escrow.com, buyer is masking who they are/where they are from or you are involved with a buyer who has hired a broker to represent them (ie you do not know which country buyer is from).

When the deal as gone through and you find out the buyer is from the EU, you could be hit with a tax bill?

Guess the answer here is... maybe. It's possible, though not certain. The devil seems to be in the details...
 

Future Sensors

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"Equalization Taxes and the EU’s 'Digital Services Tax'".
by Georg Kofler & Julia Sinnig, Jan. 2019

This article appeared earlier than the recently announced measures, but could be helpful in interpreting matters in this regard.

Happy reading, lawyers (200 pages) :unsure:

Abstract:

Equalization taxes have a number of potential disadvantages and shortcomings, including their negative impact on growth, innovation and productivity, non-neutrality, double taxation, and problems in compliance and administration. However, some also view them as a politically feasible way to address perceived 'unfairness' in the territorial allocation of taxing rights in a digitalized economy. In any event, however, there are also certain technical features any such tax should comply with, including, e.g. compliance with international obligations (e.g. EU and tax treaty law), administrative simplicity, and a scope that is not overreaching. This contribution will address the general background of 'equalization taxes', the fundamental objections raised against it, and the relevant design features, both on a general level and specifically with regard to the proposal for an EU 'Digital Services Tax'.

https://www.researchgate.net/public...ion_taxes_and_the_EU's_'digital_services_tax'
 

twiki

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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.

Correct, our lawyers said the same. They aren't property, nor services (when sold). They are services however if you are the registrar.

But they generate taxable income when sold, the issue is where and how VAT is due.
 
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Kingslayer

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Can someone simplify this for me. I'm from the UK, if i agree a private deal (most of my deals have been private via Escrow.com) with company from the EU i (as a seller) should be paying VAT to the EU, even though I'm a UK Citizen and the UK is no longer part of the European Union?

If that is the case i can't get my head around that, I'm no longer a EU citizen and If I have agreed a deal in my own home, on UK soil what jurisdiction does the EU have on business deals that take place outside the European Union?

Some companies are also multi-national companies with sites all around the world, including the EU. So what happens if i do a deal with say Adidas (a German brand and EU member) but i dealt with Adidas who are based in America?
 
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Joe Styler

Aftermarket Product Manager
GoDaddy Staff
Afternic Staff
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Ok so are we saying now consignment is gone for Godaddy and the brandable marketplaces?

In that case Godaddy has to release the contact details and collect VAT. Or if Godaddy does not collect the VAT, then the seller has to apply VAT to the gross proceeds which is a hit.
##
But really the platform should levy the VAT, as the businesses should not suffer the VAT but rather just collect it on behalf of the tax regime. Only the end-user (VAT unregistered) should pay the tax.

#
Same for brandable marketplaces.
##
@Joe Styler could you update on consignment?
I cant answer tax questions. We have some help articles on VAT and you can ask support a specific question about your account but they cannot give tax advice only let you know what we collect and what info we would have to give another party. [email protected]
 
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