Digital Seller? New 2015 EU Digital VAT Affects You

I'm not a boffin on ZenCart but have managed to use it for 2 years now for my small online digital shop. I see that there is now a new EU policy to be put into place on 1 January 2015, where all DIGITAL goods being sold online to EU (incl. UK) must now be taxed at the relevant customer's country's VAT rate, and VAT must be paid over to that country. This will mean registering at every country for VAT, or through a holding place called MOSS.

"If you are a business making B2C digital service supplies to EU consumers and are not registered for VAT (because you are under the VAT threshold), you need to take action now as you will need to register for VAT. Under the new rules, you potentially have to register for VAT in every EU MS where you supply consumers with digital services. By opting to use VAT MOSS, you will not have to do this but will be able to make VAT declarations and payments, in respect of all of your EU supplies of digital services, to a single elected Member State on a calendar quarterly return."

My question is, can ZC detect the country of the customer and apply that specific VAT rate to the checkout cart? Then I would also need the reporting format to indicate that somehow?

Some guidance on the new VAT directive is here .... http://timeli.info/item/1673030/Forbes_Washington/European_VAT__10_Things_Online_Sellers_Need_To_Know_About_Taxes_On_Digital_Goods_And_Services___F

[From an old lady who is tired of all these bureaucrats looking for more money from ordinary citizens]

compugen:

My question is, can ZC detect the country of the customer and apply that specific VAT rate to the checkout cart? Then I would also need the reporting format to indicate that somehow?
Yes, No and Maybe!

MaxMind can reasonably accurately find the country from the IP address of the customer
However that probably won't always be relevant

We find a lot of customers order using work computers of big multi nationals so they may be in Australia but it shows the IP address as the US as they are part of a big network.

It is probably more relevent to use delivery address in calculating the VAT
NOT where the customer is when they order it.

VAT is standard applied to the shipping country of a customer, you will need to set up different zones. I normally have a zone for my own country (the Netherlands), a zone for EU countries an a zone for all other countries. Each zone has its own VAT and Zen Cart will apply it accordingly.

I'm in touch with some very small businesses who are using Zencart to sell digital downloads, worried that they will have to cease trading or move storefront due to the complexity of the new EU VAT rules (and a lot have only just found out, with a few weeks to go).

To be able to use the new MOSS system, you need to be registered for VAT already and most digital sellers do not meet that threshold, by a long way! So, if they do not want to register for VAT and all the extra cost and hassle that brings, they can simply block EU countries from being able to shop (not ideal but at least it's do-able, at least in the short-term).

If a digi seller does decide to voluntarily register for VAT, they can apply the VAT at each EU rate by setting up zones...does anyone know of any tutorials on this, and whether there are/will likely be any mods/updates to zencart that will auto update on any changes in rates across EU zones.

Also, does PayPal apply it's fees to the total, including VAT?

Thanks in advance, apologies if this is covered elsewhere, I did search first :wacko:

enlightened:

Also, does PayPal apply it's fees to the total, including VAT?
PayPal, like any payment processor, assesses their fees on the total amount of the transaction, regardless of whether there is any tax component in the transaction.

Sorry, didn't make it last night, went to bed early for a change.

This is the sql I use for my Dutch customers. I is the most basic set-up. but easy to expand.
There are three zones definitions

• the first is for the country the shop is located in
• the second for all countries in the EU (except your own)
• the third for the rest of the world

In this basic there is one Tax class

For each zone definition you need a tax rate (in the Netherlands it is):

• 21% for the Netherlands
• 21% for all EU countries
• 0% for the rest of the world

If you are also selling to companies with a valid VAT number inside the EU you can use this old addon. (I will post an updated version for 1.5.x later this week)
It will set the VAT for companies inside the EU to Zero when a valid tax number is used during registration.

--
-- Table structure for table `geo_zones`
--

DROP TABLE IF EXISTS `geo_zones`;
CREATE TABLE IF NOT EXISTS `geo_zones` (
`geo_zone_id` int(11) NOT NULL,
  `geo_zone_name` varchar(32) NOT NULL DEFAULT '',
  `geo_zone_description` varchar(255) NOT NULL DEFAULT '',
  `last_modified` datetime DEFAULT NULL,
  `date_added` datetime NOT NULL DEFAULT '0001-01-01 00:00:00'
) ENGINE=MyISAM AUTO_INCREMENT=4 DEFAULT CHARSET=utf8;

--
-- Dumping data for table `geo_zones`
--

INSERT INTO `geo_zones` (`geo_zone_id`, `geo_zone_name`, `geo_zone_description`)
VALUES
(1, 'Nederland', 'Nederlandse btw'),
(2, 'Alle landen binnen de EU', 'Intracommunicataire landen'),
(3, 'Alle landen buiten EU', 'De rest van de wereld');

-- --------------------------------------------------------

--
-- Table structure for table `tax_class`
--

DROP TABLE IF EXISTS `tax_class`;
CREATE TABLE IF NOT EXISTS `tax_class` (
`tax_class_id` int(11) NOT NULL,
  `tax_class_title` varchar(32) NOT NULL DEFAULT '',
  `tax_class_description` varchar(255) NOT NULL DEFAULT '',
  `last_modified` datetime DEFAULT NULL,
  `date_added` datetime NOT NULL DEFAULT '0001-01-01 00:00:00'
) ENGINE=MyISAM AUTO_INCREMENT=2 DEFAULT CHARSET=utf8;

--
-- Dumping data for table `tax_class`
--

INSERT INTO `tax_class` (`tax_class_id`, `tax_class_title`, `tax_class_description`)
VALUES
(1, 'BTW Tarief hoog', 'BTW Tarief hoog');

-- --------------------------------------------------------

--
-- Table structure for table `tax_rates`
--

DROP TABLE IF EXISTS `tax_rates`;
CREATE TABLE IF NOT EXISTS `tax_rates` (
`tax_rates_id` int(11) NOT NULL,
  `tax_zone_id` int(11) NOT NULL DEFAULT '0',
  `tax_class_id` int(11) NOT NULL DEFAULT '0',
  `tax_priority` int(5) DEFAULT '1',
  `tax_rate` decimal(7,4) NOT NULL DEFAULT '0.0000',
  `tax_description` varchar(255) NOT NULL DEFAULT '',
  `last_modified` datetime DEFAULT NULL,
  `date_added` datetime NOT NULL DEFAULT '0001-01-01 00:00:00'
) ENGINE=MyISAM AUTO_INCREMENT=4 DEFAULT CHARSET=utf8;

--
-- Dumping data for table `tax_rates`
--

INSERT INTO `tax_rates` (`tax_rates_id`, `tax_zone_id`, `tax_class_id`, `tax_priority`, `tax_rate`, `tax_description`)
VALUES
(1, 1, 1, 1, 21.0000, 'Btw 21%'),
(2, 2, 1, 2, 21.0000, 'Btw 21%'),
(3, 3, 1, 3, 0.0000, 'Btw 0%');

-- --------------------------------------------------------

--
-- Table structure for table `zones_to_geo_zones`
--

DROP TABLE IF EXISTS `zones_to_geo_zones`;
CREATE TABLE IF NOT EXISTS `zones_to_geo_zones` (
`association_id` int(11) NOT NULL,
  `zone_country_id` int(11) NOT NULL DEFAULT '0',
  `zone_id` int(11) DEFAULT NULL,
  `geo_zone_id` int(11) DEFAULT NULL,
  `last_modified` datetime DEFAULT NULL,
  `date_added` datetime NOT NULL DEFAULT '0001-01-01 00:00:00'
) ENGINE=MyISAM AUTO_INCREMENT=242 DEFAULT CHARSET=utf8;

--
-- Dumping data for table `zones_to_geo_zones`
--

INSERT INTO `zones_to_geo_zones` (`association_id`, `zone_country_id`, `zone_id`, `geo_zone_id`)
VALUES
(1, 150, NULL, 1),
(2, 14, 0, 2),
(3, 21, 0, 2),
(4, 240, 0, 3),
(5, 57, 0, 2),
(6, 73, 0, 2),
(7, 81, 0, 2),
(8, 27, 0, 2),
(9, 33, 0, 2),
(10, 55, 0, 2),
(11, 67, 0, 2),
(12, 72, 0, 2),
(13, 84, 0, 2),
(14, 97, 0, 2),
(15, 103, 0, 2),
(16, 105, 0, 2),
(17, 53, 0, 2),
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Thanks, Design75!

enlightened:

I'm in touch with some very small businesses who are using Zencart to sell digital downloads, worried that they will have to cease trading or move storefront due to the complexity of the new EU VAT rules (and a lot have only just found out, with a few weeks to go).

To be able to use the new MOSS system, you need to be registered for VAT already and most digital sellers do not meet that threshold, by a long way! So, if they do not want to register for VAT and all the extra cost and hassle that brings, they can simply block EU countries from being able to shop (not ideal but at least it's do-able, at least in the short-term).

I sell such a small amount on my zencart site that dealing with VAT is not even remotely worth messing with. I would like to be able to block selling to the EU, or will have to shut my personal store down. Does anyone know of a way to do this?

clikchic:

I sell such a small amount on my zencart site that dealing with VAT is not even remotely worth messing with. I would like to be able to block selling to the EU, or will have to shut my personal store down. Does anyone know of a way to do this?

Just disable all EU countries, so people from those countries can not create an account.

Design75:

Just disable all EU countries, so people from those countries can not create an account.
Especially easy with Zen Cart v1.5.3, where the "Selectable Countries" plugin has been incorporated. If you're running an earlier version of Zen Cart, just install that plugin and you can selectively disable a country.

lat9:

Especially easy with Zen Cart v1.5.3, where the "Selectable Countries" plugin has been incorporated. If you're running an earlier version of Zen Cart, just install that plugin and you can selectively disable a country.

...except, it would seem blocking EU countries is "discrimination" under other EU legislation :wacko:

So, there are specific requirements for collecting the 2 non-conflicting pieces of data, and a third if there's a problem...does Zencart already capture sources of this evidence? I am not a techie, I am not a tax or compliance expert, but reading up from those who are it seems a bit of a nightmare, having to reprogramme their systems to collect this data as well as add the VAT (but ZC seems to have the tax covered nicely).

@Design75 what do we do with that code? Where do we put it? Do we repeat the code for every EU state?

Thanks in advance, and apologies for any dumb questions!

I'm looking at a solution (since I'll need one for my website) that doesn't "block" EU customers per se but would require them to contact me for an "alternate delivery method" for any commercial digital downloads. Unfortunately, the licensing for the ip-to-country interface that I've found isn't GPLv2 so it won't be available from the Zen Cart plugins area when it's finished ...

enlightened:

...except, it would seem blocking EU countries is "discrimination" under other EU legislation :wacko:

So, there are specific requirements for collecting the 2 non-conflicting pieces of data, and a third if there's a problem...does Zencart already capture sources of this evidence? I am not a techie, I am not a tax or compliance expert, but reading up from those who are it seems a bit of a nightmare, having to reprogramme their systems to collect this data as well as add the VAT (but ZC seems to have the tax covered nicely).

@Design75 what do we do with that code? Where do we put it? Do we repeat the code for every EU state?

Thanks in advance, and apologies for any dumb questions!

I think the 2 non-conflicting and in reality it should be 3 pieces of data is a major problem. We have the ip address, so that is one, but the customer entered address from what I can see doesn't qualify. It has to be a bank address, or credit card address which if you only accept credit cards via Paypal may not be provided. Paypal from what I have read has stated that they will not be providing this information. Not to mention the privacy issues with retaining such data. I for one don't WANT someones credit card information or bank details.

This new legislation really is completely unworkable for nano and micro business.

Thanks for the suggestions above in regards to blocking countries. There are some thoughts places I have been reading that the high administrative burden for nano businesses will be sufficient reason to block the EU countries without going against the discriminatory regulations. I must do more of my own research on that. I am running zencart 1.5.1 but will look into the selectable countries plugin mentioned. I probably should upgrade my site but have been putting it off due to modifications and not wanting to have to mess with all the mods again.

I have every faith that this will either become standard in ZC, or there'll be a plugin offered but perhaps not in time for January.

As this becomes more widely known about - especially to non-EU sellers - and with the fact that it will extend to physical goods as early as 2016 then all carts will need to adapt, and I'm glad to be with ZC! However, I'm surprised this isn't getting more coverage in the ZC community as there are lots of digi sellers who use it. Maybe we need a new thread - or rename this one - to grab attention: reading the title of this thread, I would not think this applied to me at all if I didn't know about #VATMOSS

Something like "Do you sell digital goods - read this!" might get more attention and reach the folks who need to be knowing about it. Or "Is anyone working on a solution to #VATMESS"

Hi,

Just a quick note to say that the Zen Cart team are watching this, although at the moment we don't have a complete strategy to address the problem

I'm attending a webinar next wednesday
https://blog.recurly.com/prepare-for-the-2015-eu-vat-rules-with-recurlys-new-vat-feature
which might throw up some further useful info.

The topic also came up on Radio 4 today, and a representative from HMRC (Her Majesty's Custom's & Excise) added some intersting info.

For sellers in the UK, where the customer is based in the UK, you can use the current VAT Registration limit and apply to your sales (think it's £81,000)
The UK argued strongly to have an EU wide registration limit to address the concerns of SME's, but this was rejected by other EU countries.

There is unlikely to be any core code in Zen Cart to address this in the short to medium term, although I am looking at what would be needed to build a contribution to address this.

Would like to hear from shops based in other EU countries, apart from UK, to see if they are getting the equivalent of the MOSS

FWIW, I've submitted a plugin named Restrict Digital Downloads (http://www.zen-cart.com/showthread.php?215524-Restrict-Digital-Downloads-Support-Thread) that I'll be using on my websites that have paid, downloadable products.

So things just seem to get more complex.

The VAT on digital goods also applies to non EU suppliers, so if you are a US company supplying digital goods to EU customers, you too have to pay EU VAT. In fact this has been law since 2003 (VAT on E-Service Scheme (VoES)). Although for that scheme the VAT rate used was based on where (which VAT locale/country) the supplier registered.

It was problems with that scheme (ie suppliers registering in the lowest VAT % locale) that prompted the move to charging VAT on the customer's locale.

It could be argued that the new scheme isn't really VAT at all, since with physical goods the supplier could reclaim VAT on their inputs.
e.g I buy my stock from someone and pay VAT on that, and then sell the goods on and charge VAT on the sale, I could at least reclaim the original VAT, so my VAT exposure was based on my net profit. (ie: I'd only be required to remit the collected difference, much like local sales tax in the US/Canada.)

With the digital goods VAT, since there is no original supplier (and no original resource to which "value" has been "added"), there's no input-VAT to claim as a credit. It's therefore arguable that it's not really VAT "Value-Added tax" but a simple sales tax.

Still working on how best to address. Given timelines there is unlikely to be core code changes, but we may work with other partners to produce a plugin.

Thank you, thank you, thank you Lat9 and wilt :hug:

It's been feeling like nobody is taking this seriously! AND thank you for clarifying it IS also non-EU stores - here in the UK we are trying to alert people but many just do not think it's something for them to worry about.

I'm part of the UK Group and in touch with the 'euvataction' team if you need any contacts/info.

Are we able to show prices with/without VAT already?

Off to look at your contribution Lat9, as a short-term measure perhaps.

Again, thank you!

HI.

I'm currently working on a scoping document for code changes necessary to support the EU Digital Seller rules. I'll push a link here once I have made some progress, hopefully by tomorrow.

The idea would be to integrate some stuff that has already been built and add other stuff e.g. reporting.

Just wondering if anyone here has registered on one of the MOSS sites, and what then the MOSS site asks in terms of information for sales.

I also wonder what happens if a supplier already has a vat registration, and then registers for MOSS.

Hi,

So I have started putting together a document at https://confluence.zen-cart.com/display/PUBDOC/EU+Digital+Goods+VAT

I've also created an initial github repository at https://github.com/zcwilt/eu-digital-vat

I doubt very much that we will get anything useful coded before 1st January :(

I'm wondering if those subscribed to this thread would be interested in doing a join.me conference, sometime between the 27th to the 31st, to look at priorities.