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Say there is an offshore (Belize, Seychelles) company that provides some online service (like antivirus)

Their service is subscription based which means that users pay for membership on monthly basis which gives them software license.

The customers come from all over the world including EU countries. Are they required to pay VAT? Do they have to register under the MOSS system? Is it their duty to make sure their customers come from EU? What if they didnt know this (payment gateway like PayPal and not them processes billing)?

And ultimately how will EU enforce this, if they do not register for VAT and pay? The company is outside their jurisdiction.

Does EU even have the right to tell nonEU company to pay EU taxes? The company operates online and purchases are done on nonEU servers thus contracts are made outside EU.

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First, each EU country has its own laws about VAT and how and when they apply; it is meaningless to talk as if the EU were an entity that charges taxes.

Here is a link from the UK. The law on the additional rules for electronically supplied services is in the VAT Act Schedule 4A paragraph 9. To simplify things, I will restrict the rest of the answer just to the UK.

... the place of supply of the electronically supplied services is where their effective use and enjoyment takes place. Where this is the UK, the services are subject to UK VAT.

Specifics

Are they required to pay VAT?

Yes

Do they have to register under the MOSS system?

Yes

Is it their duty to make sure their customers come from EU?

They have to collect the right taxes for each country in the EU (and the world for that matter).

What if they didn't know this?

Too bad; its their duty to know the law.

And ultimately how will EU enforce this, if they do not register for VAT and pay? The company is outside their jurisdiction.

In what way is a company doing business in the UK outside the UK's jurisdiction?

Ultimately, if they have no assets in the UK it may be difficult for the UK to enforce any collection. If they were using, say, PayPal and PayPal received a garnishee order from a UK court, I am reasonably certain they would enforce it.

Does EU even have the right to tell nonEU company to pay EU taxes? The company operates online and purchases are done on nonEU servers thus contracts are made outside EU.

Its called sovereignty: a country can say where and when its laws apply anywhere in the world. It may lack the power to enforce them but it can certainly make them applicable.

In any event, these contracts are made in the EU - at least one party to the contract is located there.

  • Thanks for great answer. By what if they didnt know i i meant what if the country of residence of their customers was unknown to them. This may happen with 3rd party payment gateways or bitcoin payments – michnovka Oct 19 '15 at 5:20
  • @TomášNavara this is why reputable companies ask and adjust their pricing based on the result. If they are selling to a UK resident they add 20% VAT, to an Australian 10% GST etc. etc. Larger companies have different sites for each country so this is all automatic. – Dale M Oct 20 '15 at 1:57

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