Quick question really for Uk-based producers, especially ones running their own site in addition to a Umd Store.
With our new digital download laws that mean we are obliged to charge VAT to our customers based on where they live and at each country's rate of tax, I read that one way around the issue is if the files being purchased are mailed direct to the customer. It's as soon as you provide them with a download link that the law kicks in. Obviously it's a pain to email files to people, especially when videos can be large files.
If the site was hosted elsewhere, in the States for example like Umd, would that get around the Uk download laws? Thanks.
Nope, even emailing with a file or a link in the email counts. It doesn't help that each county in the eu interprets the rules how they see fit. We have been compliant since the rules came into force and really is a pain. And if you get caught, well that again varies by country and the pentalities can be harsh.
It doesn't matter if you are Uk based or elsewhere. If you sell a download to a customer in the use, no matter how small the cost, you have to declare and pay the vat due to that country quarterly. You also need to keep records for ten years.
They are not new laws. They came into force 3 years ago.
The UMD runs the stores from the USA. We as store 'owners' have no administrative control or access to any real individual customer data so the only thing we are able to do is declare and pay UK taxes as appropriate due on the income we receive in US dollars. There is nothing to show that this income represents income from digital downloads. Neither the Revenue nor any other collection agency in Europe has any jurasduction to demand such information from a US business.
First, if you're only selling via the UMD or another "portal" site like it (like Vidown, etc) then you don't need to worry about VAT. It's the operator of the portal that is liable to work out and pay the VAT liability. And as Soundguy said when I first flagged this up when it became law a few years back, the chance of the US tax authorities assisting EU governments in attempting to levy VAT on US-based businesses is zero.
Where it gets more complicated is when you operate your own sites (as we and the OP do) from within the UK. If you are selling digital products directly (regardless of downloads, streaming, emailed PDFs, whatever - anything that is received digitally) from the UK then you must register for VATMOSS, report all your sales broken down by country, and pay the relevant VAT rate on those sales.
VAT rates vary across the EU but the average is about 20%. So the way we did it at the Hall is I built a system to check and identify the country for each person joining. If the country is within the EU, they get directed to our "+VAT" products. Otherwise they get directed to our non-VAT product at $50 each. So anyone from the EU pays an extra $10 on their membership rate to cover the VAT charge, and we just swallow the difference where rates are above 20%. That way the base product (six months membership) is still $50 for everyone but those liable to pay taxes on top get charged, those from elsewhere in the world who do not, don't. There are various other checks we can do to ensure people aren't trying to cheat, and while it's never happened, if it did we'd suspend the person's membership till they payed the extra $10. The alternative would have been to put the price up for everyone regardless but I didn't think that would be fair to our Australian, American, or Japanese customers. I checked all this with my accountant when we set it up to make sure it complies with the rules.
Not sure how (or indeed if) Brexit will affect this but the UK is still in the EU till 2019 at the earliest so no change yet.
Note, hosting the sites in the US wouldn't make any difference, it's where the operator resides that counts, and nowadays with everything being electronic and traceable any unexplained flows of money will eventually show up.
First rule of business - do not, ever, try and fuck with the tax authorities. Back when I was a student, one of the economics lecturers told us about a guy who owned a garage and petrol station in the Highlands of Scotland. Did decent business, made a sensible profit, had a couple of houses and a nice boat, decent lifestyle. But he was also running a fairly minor VAT scam, where he charged VAT to everyone but for cash sales didn't pass it on to the revenue. Eventually they found out, and took every penny he had. Lost the houses and boat, lost his business. Definitely not worth the risk.
DungeonMasterOne said: Sorry for late reply, just spotted this thread.
First, if you're only selling via the UMD or another "portal" site like it (like Vidown, etc) then you don't need to worry about VAT. It's the operator of the portal that is liable to work out and pay the VAT liability. And as Soundguy said when I first flagged this up when it became law a few years back, the chance of the US tax authorities assisting EU governments in attempting to levy VAT on US-based businesses is zero.
Where it gets more complicated is when you operate your own sites (as we and the OP do) from within the UK. If you are selling digital products directly (regardless of downloads, streaming, emailed PDFs, whatever - anything that is received digitally) from the UK then you must register for VATMOSS, report all your sales broken down by country, and pay the relevant VAT rate on those sales.
VAT rates vary across the EU but the average is about 20%. So the way we did it at the Hall is I built a system to check and identify the country for each person joining. If the country is within the EU, they get directed to our "+VAT" products. Otherwise they get directed to our non-VAT product at $50 each. So anyone from the EU pays an extra $10 on their membership rate to cover the VAT charge, and we just swallow the difference where rates are above 20%. That way the base product (six months membership) is still $50 for everyone but those liable to pay taxes on top get charged, those from elsewhere in the world who do not, don't. There are various other checks we can do to ensure people aren't trying to cheat, and while it's never happened, if it did we'd suspend the person's membership till they payed the extra $10. The alternative would have been to put the price up for everyone regardless but I didn't think that would be fair to our Australian, American, or Japanese customers. I checked all this with my accountant when we set it up to make sure it complies with the rules.
Not sure how (or indeed if) Brexit will affect this but the UK is still in the EU till 2019 at the earliest so no change yet.
Note, hosting the sites in the US wouldn't make any difference, it's where the operator resides that counts, and nowadays with everything being electronic and traceable any unexplained flows of money will eventually show up.
First rule of business - do not, ever, try and fuck with the tax authorities. Back when I was a student, one of the economics lecturers told us about a guy who owned a garage and petrol station in the Highlands of Scotland. Did decent business, made a sensible profit, had a couple of houses and a nice boat, decent lifestyle. But he was also running a fairly minor VAT scam, where he charged VAT to everyone but for cash sales didn't pass it on to the revenue. Eventually they found out, and took every penny he had. Lost the houses and boat, lost his business. Definitely not worth the risk.
This is also our understanding of how the rules work.
For sites that we host we pay the VAT quarterly through the Revenues online VAT Moss system. It is easy to use and the VAT people where helpful.