2015 EU-VAT Changes

  • Jason@DPD
  • December 16, 2014
  • 42 Comments

EU VAT laws are changing for electronic service, or ‘e-service’, providers. Today, in line with existing EU VAT rules, the VAT on e-services is charged based on the location of the merchant but, from 01 January 2015, the VAT on e-services must be calculated based on the end customer’s location.

Changes to DPD and your Sales Process

There are a number of changes that vendors have to make:

  • Identify the location of their customers and collect evidence
  • Validate VAT numbers for B2B transactions
  • Apply the correct VAT rate and display it on invoices in destination currency
  • Issue e-invoices in the destination language
  • Store evidence for 10 years
  • Create a quarterly EU MOSS return
  • Be audit ready


We have been busy making changes to DPD to meet the new 2015 EU-VAT regulations. These changes will be available as a new 2015 EU VAT tax class available in the tax setup section of your DPD store prior to Jan 1st 2015.

Identify the location of their customers and collect evidence

DPD already collects the shipping address for the customer and IP address and stores them with the transaction in DPD. This meets VAT location identification requirements.

Validate VAT numbers for B2B transactions

DPD verifies that VAT IDs are valid using VIES when they are entered in the cart.

Apply the correct VAT rate and display it on invoices in destination currency

DPD is changing our VAT rate calculations to meet the new destination based 2015 rules. These rules can be summed up as:

  • Same zone, with VAT ID = Buyer charged VAT
  • Same zone, without VAT ID = Buyer charged VAT
  • Different zone, with VAT ID = No VAT charged
  • Different zone, without VAT ID = Destination VAT charged
  • non-EU = No VAT charged.


We will be doing automatic currency conversion, using Open Exchange Rates for the VAT amount charged at the time of sale to put the VAT amount charged in the destination country’s currency.

Issue e-invoices in the destination language

DPD has completely rewritten the invoice template to include all required information including seller and buyer address and VAT info. We have translated the entire invoice to the 26 languages commonly in use in the EU.

Store evidence for 10 years, Create a quarterly EU MOSS return, Be audit ready

We have made it easy, through a new VAT Report view to export what VAT you have charged for each country. We have also made the above changes to the invoices so that you can print them out and store a record of the transactions to meet any and all record keeping requirements.

DPD will keep your transactions for as long as you are a customer, but we are not a long-term data storage provider. You should always keep a record of your transactions for record keeping and audit compliance reasons.

How to set up the 2015 EU-VAT Rules in DPD

On Jan 1st you will need to switch your stores over to using the new 2015 EU-VAT Tax Rules.

1. Log in to DPD
2. Go to Preferences in the left menu for each store and enter your VAT ID and location information, then save.
2. Go to Tax in the left menu for each store
3. Edit each tax class and remove any old “VAT” or “EU-VAT” rules from your existing table rate tax classes, then save
4. Enable the new 2015 EU-VAT tax rules for each tax class.

Responses (42) / Trackbacks (0)

    by Michele Foster
    Dec 16th, 2014

    Reply

    Wow, what a huge amount of work you’ve had to do on the back-end to make it so EASY for us that use your service. Your efforts are greatly appreciated. I’ll be sharing this post along with my personal recommendation for your services. Keep up the great customer service.

    by Jay
    Dec 16th, 2014

    Reply

    Thank you for all of the hard work you are doing with this!

    by Gerben Wierda
    Dec 17th, 2014

    Reply

    Help!

    Is there a way I can keep my ‘including taxes’ pricing scheme? I’d like to charge €29.99 for a product including taxes if any. That means that everyone in the world pays the same total amount, but the ones where I have to pay VAT for effectively pay a lower amount plus VAT added which in total is the same.

      by Gavin
      Dec 21st, 2014

      Reply

      This feature would be epic if possible?

    by Chris Scott
    Dec 17th, 2014

    Reply

    If we’re in the US, but sell to EU customers, do we have to apply for a VAT number, or do these rules not apply to us?

      by Jacob
      Dec 18th, 2014

      Reply

      Doesn’t matter where you are Chris, you have to comply.

        by Chris Scott
        Dec 18th, 2014

        Reply

        Thanks for he reply, Jacob. Any idea if we can just turn off sales to EU countries in DPD?

    by Lance
    Dec 18th, 2014

    Reply

    Is this for B2B only or for all sales? If all sales then firstly, can you provide a link to further info so I can investigate. Not living in the EU it’s the first I’ve ever heard of it. And secondly, I concur with Chris above, is there some way to just turn off sales to EU customers. This is a compliance headache I just don’t need.

      by Jacob
      Dec 18th, 2014

      Reply

      @Chris & @Lance

      I think this is possible. Go to SHIPPING and then click on EDIT SUPPORTED COUNTRIES.

    by Tom Hemsley
    Dec 18th, 2014

    Reply

    I’ve logged in to see if I can do a ‘dry run’ of making the required changes, but I can’t see where to enter our VAT ID under the store preferences. Has the dashboard been updated yet or do we need to wait until Jan 1st?

      by Jason@DPD
      Dec 22nd, 2014

      Reply

      We’ll be activating the new EU-VAT system this week. It is not released yet.

    by Lucas
    Dec 21st, 2014

    Reply

    Hi guys, great job on your service!

    Question, my business is registered outside EU and I sell ready to use web templates to EU customers, do I have to comply?

    Thanks.

      by Jacob
      Dec 21st, 2014

      Reply

      Yes Lucas, you do. The entire policy is quite complex, but the reason you must comply is because the location of the purchaser is now what matters, not the location of the merchant.

    by Bonnie
    Dec 21st, 2014

    Reply

    So, if we are collecting VAT tho based in US what do we do with the VAT collected exactly? Are we supposed to send money to each country? How the heck do we do that? Confused…please help.

    by Bonnie
    Dec 21st, 2014

    Reply

    And, where do we get a VAT ID?

    by Ramy
    Dec 22nd, 2014

    Reply

    Hey Guys,, wow you’re really doing a lot of hard work!!! appreciated!!

    Well i am Egyptian and i comply to the Egyptian taxes, i do not have VAT ID and not located in the EU … what should i do at this point!

    Thanks a lot!

    by Jacob
    Dec 22nd, 2014

    Reply

    I see a lot of people asking for guidance on what to do, which is understandable since it is all very confusing. However, I’ll just point out that it isn’t up to DPD to inform you about the process for getting a VAT number for your business (nor should they as they aren’t CPAs or anything like that). You really should contact your accountant.

      by Chris Longhurst
      Dec 22nd, 2014

      Reply

      Sadly most US accountants are clueless about dealing with anything outside the US. I know this from bitter experience.

    by Elena
    Dec 22nd, 2014

    Reply

    What are the settings for small sized, VAT exempt, companies? Meaning that we do not have a VAT ID. We are not required to charge VAT.

      by Jacob
      Dec 22nd, 2014

      Reply

      There used to be limits for VAT exempt business, but not anymore. You’ll want to make sure your compliant if you are doing business with EU countries.

    by Chris Longhurst
    Dec 22nd, 2014

    Reply

    I think this is confusing for a lot of US vendors. But there are two very important questions here:
    (1) how do we get a VAT number for Europe? Typically VAT numbers are not granted to businesses that are not registered in an EU country.
    (2) what do we do with the VAT? Are we supposed to electronically transfer it to some central bank in Europe?

      by Jacob
      Dec 22nd, 2014

      Reply

      I’m not an accountant or lawyer (speaking to a tax lawyer later today)…

      1. There are some links/information located here: http://www.revenue.ie/en/tax/vat/moss/index.html

      2. No idea. Hopefully I’ll know after speaking to my lawyer.

        by Chris Longhurst
        Dec 22nd, 2014

        Reply

        Jacob – I found some good info on the UK tax site and posted it in a comment below – thanks!

    by Chris Longhurst
    Dec 22nd, 2014

    Reply

    FOR ALL US BUSINESSES SELLING TO THE EU : This is some useful information.
    You can register with the UK tax service as a “non union” (ie. not in the EU) business and use their “MOSS”. MOSS is a Mini One Step Shop. At the end of each quarter, you file a single payment to the UK MOSS service using their online gateway, along with the details of all the various VAT collections (per country) as a single report. The MOSS service then distributes the VAT payments to the various EU countries for you so you don’t need to register as a business in every country and don’t need to send out all the individual payments yourself. The registration is free and “relatively” straight forward. You can read more about it here : https://www.gov.uk/register-and-use-the-vat-mini-one-stop-shop

    by Gavin
    Dec 22nd, 2014

    Reply

    Really great work done to accomodate this pretty frustrating law coming into force.

    As someone based in the EU there is one potential problem with not being able to use a VAT inclusive price as EU consumer law requires product prices to be displayed inclusive of VAT – it’s illegal for me to use a system that applies VAT at the shopping cart / checkout stage.

    It’s an absolute crazy situation businesses are finding themselves in with these requirements. The new law paired with the current “EU consumer VAT inclusive price law” means I have to price my products inclusive of VAT from the get-go and so technically have to absorb the costs of the VAT.

    Not sure how enforcable this EU VAT inclusive price requirement is for businesses outside the EU.

      by Jacob
      Dec 22nd, 2014

      Reply

      I’ve heard of this too Gavin and realized that DPD doesn’t really comply with this additional mandate. On a completely personal level, it’s low priority for me (and laughable that the EU is trying to tell foreign companies how to display prices on their site). They’ll get their money, so that’s good enough.

      For me, VAT will be applied as an additional cost – not going to absorb anything.

      Now, if my lawyer steps in and says not to do this, the easier solution for me is to just not sell to the EU. I’m sure EU residence will start using proxies anyway.

        by Chris Longhurst
        Dec 22nd, 2014

        Reply

        Despite my other post, I echo others sentiments here – thanks for doing all this up-front for us – you are making life easier in the face of this particular issue 🙂

    by Jason@DPD
    Dec 22nd, 2014

    Reply

    I just want to make it clear to everyone that “Jacob” in this comment thread is not Jacob@DPD and does not represent our company. This is not to say that Jacob is wrong or right- I just want to clear up any confusion anyone may have.

    DPD is not qualified to give tax advice and you should speak to a tax professional on if you need to collect VAT.

    by Gregg
    Dec 22nd, 2014

    Reply

    The question for non-EU-based sellers (including USA) is whether EU has jurisdictional authority to require us to register with MOSS, and collect and remit VAT for them. My research says the answer is no, which is to say that the EU law does not apply to U.S. based sellers that have no nexus in EU countries even though EU claims it applies to everyone in the world whether you have nexus or not. What is to prevent every other country in the world to now state that we must now register, collect and remit their VAT tax? Can DPD handle that? It does not appear the US Government is interested in helping EU collect their VAT when they can’t even help their own states with sales tax collection. But more to the point, of the DPD changes, will there be an option to not collect the VAT if we feel the EU law does not apply to us even though the customer is in the EU?

      by Jason@DPD
      Dec 22nd, 2014

      Reply

      DPD will only collect VAT if you enable the new 2015 EU-VAT collection system. We do not force anyone to collect VAT. We can not advise you if you need to collect VAT if you do not have a tax nexus in the EU- you will need to speak to a tax professional.

        by Gregg
        Dec 22nd, 2014

        Reply

        Thanks Jason@DPD for the quick reply. That is the answer I needed.

        by Chris Longhurst
        Dec 22nd, 2014

        Reply

        Interestingly, this law has been in place since 2003 for US vendors but it’s not been well publicised. At all. If ever. The big change on Jan 1st is that EU businesses selling to customers in the EU must now collect VAT based on the customer country. So if you’ve (we’ve) been running stores from the US, selling to EU customers, technically we should have been doing this all along since 2003.

    by Gregg
    Dec 22nd, 2014

    Reply

    That’s absolutely correct Chris. Many have missed that point. We (U.S. based businesses) have been “in violation” of the EU law since 2003. However, since 2003 I have maintained that, absent a specific cooperative tax collection treaty between the U.S, and EU, my business (based only in the U.S.) is not subject to EU tax collection law. At this point, EU has only a couple of coop treaties with non-EU countries, none of which is the U.S. or Canada.

      by Duff
      Dec 27th, 2014

      Reply

      I remember a war being fought over “taxation without representation” heh.

      This is not legal advice, but I suspect the US will never comply. The founding of our nation was fought over this kind of thing.

    by Chris Longhurst
    Dec 23rd, 2014

    Reply

    Jason : if we change to the new store format on Jan 1st, is there a reporting facility that can provide a report broken down into VAT due for each country? For the MOSS systems in Europe they need a single payment from the business owner but they also need a report of how much is to go to each member state. Thanks

    by Tamisha
    Dec 23rd, 2014

    Reply

    I just found this article – there’s way more to this than people realize. I would advise you to read it. http://www.forbes.com/sites/janetnovack/2014/05/15/european-vat-10-things-online-sellers-need-to-know-about-taxes-on-digital-goods-and-services/2/

    by Carol H
    Dec 23rd, 2014

    Reply

    I just checked with my bank and they want $50.00 to do an International wire transfer, and going up to 100.00 in Feb. Does anyone know if there are any other ways to pay the MOSS? I sell very few downloads to Europe, probably less than 100.00 per year so paying so much every quarter for say a 25.00 payment seems outrageous (for a small business owner like myself).

    by Damon
    Dec 25th, 2014

    Reply

    Does anyone have a link to what the IRS requirements are for collection of EU VAT by US citizens who do not have a physical presence in the EU? For US citizens, I think the biggest thing to consider what the IRS actually requires for this. Since US citizens are not governed by any EU nation, they do not fall under EU law. For such a tax law to be in effect for US citizen’s, I think the IRS would need to have some requirements in place for US citizens.

    I searched for a few hours but couldn’t come up with anything that shows any actual IRS filing requirements.

      by Jakub
      Dec 26th, 2014

      Reply

      To be honest, I think the EU won’t really care about small businesses. However, if the business in question is large enough to be of importance, I can imagine them blocking its website in the EU and hence effectively preventing it from doing what they consider illegal. I don’t think there is any way they could take legal action against you, though.

        by Damon
        Dec 26th, 2014

        Reply

        I completely agree with all of that. I’m just curious if the IRS is working together with the EU on this. Or is the EU just trying to over-reach it’s governing power of influence. We once dumped a bunch of tea in the Boston harbor for similar reasons 🙂

        It seems like this would be similar to the state of Idaho demanding that UK residents pay them a 6% sales tax for any sales to Idaho residents. That’s just my take on it.

      by Gregg
      Dec 26th, 2014

      Reply

      I have not found anything that says the U.S government is interested in helping EU with this either. The only thing I saw is EUs desire to start talk with U.S. about a cooperation agreement, but I don’t see what would be in it for U.S. since we don’t even have VAT and most (all?) state sales taxes are nexus-based and require the buyer to pay tax on purchase of out of state or foreign goods. Virginia even specifically exempts sales tax on digital goods. On the other hand, if an EU country were able to identify a U.S. business owner as a tax scofflaw, they may be able to take action if you ever enter their country. As I understand the EU regulation process, it is the responsibility of each individual member country to enforce the law (and adjust if if they choose) if they want their VAT due.

    by June Birch
    Dec 27th, 2014

    Reply

    I understand that they have now amended the rule in the U.K. so that if you are below the VAT threshold, you don’t have to pay VAT if you are selling to customers in the U.K… only if you are selling to other countries in Europe. Also, we do have to show the price being paid before checkout… it is a requirement that customers know exactly what they are having to pay. Is there any chance that you can let us over-ride the VAT deductions in the U.K. in your calculations, if required??
    As the hope is that the rules will be changed if there is enough pressure from small businesses, this might mean more work for you again in the future. This is a brilliant site for U.K. sellers, especially the updates http://euvataction.org/ Thanks again for all the hard work.

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