european-union tax-law
Micro businesses in EU selling electronic goods, how to comply with EU VAT regulations?
<p>According to <a href="http://euvataction.org/key-facts/" rel="nofollow">EUVATACTION Key Facts</a> the business is among other things required to:</p>

<ol>
<li>store personal data securely for 10+ years</li>
<li>calculate taxes for every EU country</li>
<li>based on client's location as determined by 2 distinct and non-contradictory pieces of evidence</li>
</ol>

<p>Points 1 and 2 mean that a small/micro business can not do this alone. Period.</p>

<p>Thankfully, there are services like <a href="https://www.taxamo.com/" rel="nofollow">Taxamo</a> which claim to be able to do it for you, but:</p>

<ol>
<li>nobody really knows what the exact EU VAT rates are for every country, region, time of year, product, ... There is no central EU authority at the moment which supplies "official" information on EU level and Taxamo and others don't have a crystal ball that the EC doesn't have</li>
<li>the technical aspects of the integration enable you to get the transaction counts "99.9% right"</li>
<li>simply knowing a <a href="https://vatinfo.eu/" rel="nofollow">tax rate</a> doesn't really help you apply the tax rate all the time - in Croatia for example you need to pay the tax when you issue the invoice, not when funds get billed to your account, for example</li>
<li>you are liable, not the service provider, if something is calculated badly</li>
<li>in some EU countries like Croatia your business will get a huge fine if it's just 2-3 euros off</li>
</ol>

<p><strong><em>So... Here's the little chain question</em></strong> :)</p>

<ol>
<li>is there any way to comply with these rules 100%?</li>
<li>if not, how much bad stuff can happen if you don't comply with the regulation 100%? But 99.9% for example :D (simply because of technical limitations some transactions will not be presented or calculated properly) Does the bad stuff depend on your country, the country of the buyer or combination of both?</li>
<li>if the bad stuff is bad, and if there's no way of complying technically are there ways for a subscription based service selling an online service (using recurring credit card charges) to avoid being subject to this VAT scheme? (i.e. presenting the product in a different way or restricting yourself just to B2B transactions)</li>
<li>if there's no way to avoid the VAT scheme does it make sense to open a company outside of the EU to handle payments if the said country does not acknowledge jurisdiction of EU law over its businesses, and</li>
<li>if so, where? :) Or in short :D What would Google do? :D</li>
</ol>

<p>I think you vastly exaggerate the difficulty.</p>
<p>Basically:</p>
<ul>
<li>when a user registers, ask for their address, including country, as well as a phone number (including country code, which you may validate via SMS for instance). This should give you the 2 pieces of information that help you determine the country</li>
</ul>
<p>In the case of the UK, HMRC <a href="https://www.gov.uk/government/publications/vat-supplying-digital-services-to-private-consumers/vat-businesses-supplying-digital-services-to-private-consumers#support-for-moss-registered-micro-businesses" rel="nofollow noreferrer">says</a>:</p>
<blockquote>
<h3>Support for MOSS registered micro-businesses</h3>
<p>UK micro-businesses, that
are below the current UK VAT registration threshold and are registered
for the VAT Mini One Stop Shop (VAT MOSS), may use best judgment and
base their ‘customer location’ VAT taxation and accounting decisions
on a single piece of information, such as the billing address provided
by the customer or information provided to them by their payment
service provider.</p>
</blockquote>
<ul>
<li><p>based on the country, use the standard VAT rate for that country. The difficulty here is to track when those rates change, but your accountant should be able to keep up with that. There is very little chance any special reduced rate would apply to such services, and in any case, no tax authority will complain if you apply the standard rate instead of the reduced one!</p>
</li>
<li><p>then declare everything online to your local MOSS (you don't need to register with each tax authority! You can, but you don't need to).</p>
</li>
</ul>
<p>In the case of a micro-business, this should be more than enough to comply with the rules.</p>
