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According to EUVATACTION Key Facts the business is among other things required to:

  1. store personal data securely for 10+ years
  2. calculate taxes for every EU country
  3. based on client's location as determined by 2 distinct and non-contradictory pieces of evidence

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

Thankfully, there are services like Taxamo which claim to be able to do it for you, but:

  1. 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
  2. the technical aspects of the integration enable you to get the transaction counts "99.9% right"
  3. simply knowing a tax rate 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
  4. you are liable, not the service provider, if something is calculated badly
  5. in some EU countries like Croatia your business will get a huge fine if it's just 2-3 euros off

So... Here's the little chain question :)

  1. is there any way to comply with these rules 100%?
  2. 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?
  3. 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)
  4. 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
  5. if so, where? :) Or in short :D What would Google do? :D
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  • Are you talking about actual physical goods as your title implies, or "automated digital services" are mentioned by the linked article? Also, what country are you based in, and what regime applies to you? What your total turnover, and what's your turnover in your largest markets (countries)? In most EU countries, "micro" enterprises are exempt from VAT, and there are thresholds as well for distance selling.
    – jcaron
    Jan 19, 2016 at 16:21
  • @jcaron The income is 0 as we're just starting and we don't expect it to raise over 20-30k euro within a year so if we could present our goods as a physical good it would work threshold-wise, but the business model is based on charging a fixed monthly fee for the continued provision of the service (number of megabytes stored in the cloud, CPU time etc) so I don't have an idea how to present it as a physical good less than some scheme involving sending a package every month to every subscriber
    – bbozo
    Jan 19, 2016 at 16:28
  • Something in the lines of "subscribe to this monthly bottle of wine and get web hosting free" :D
    – bbozo
    Jan 19, 2016 at 16:31
  • As for the country... It would be easy enough to register a company, even online, in a couple of european countries such as the UK - which allows online company registration, so let's say that's not an issue
    – bbozo
    Jan 19, 2016 at 16:40
  • It's intended to be a EU-general question, not scoped to a single country, or single use case for that matter
    – bbozo
    Jan 19, 2016 at 17:28

2 Answers 2

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I think you vastly exaggerate the difficulty.

Basically:

  • 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

In the case of the UK, HMRC says:

Support for MOSS registered micro-businesses

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.

  • 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!

  • 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).

In the case of a micro-business, this should be more than enough to comply with the rules.

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2
  • Thank you :D can you provide a link to that quote?
    – bbozo
    Jan 20, 2016 at 7:12
  • 1
    Link added (the whole page is quite informative). This is UK-specific, but there are probably equivalent measures in other member states, including Bulgaria.
    – jcaron
    Jan 20, 2016 at 8:13
-1

Here's a list I've created form different sources, basically https://euvatrates.com/rates.json and https://www.gov.uk/guidance/vat-eu-country-codes-vat-numbers-and-vat-in-other-languages

Hope this is useful, I may update it with any suggestions: https://gist.github.com/xpallicer/955c9e1ddd776ea1b305e9ca593d05a8

  {
    "last_updated": "2016-08-12",
    "rates": {
      "AT": {
        "country": "Austria",
        "standard_rate": 20.00,
        "exclusions": false
      },
      "BE": {
        "country": "Belgium",
        "standard_rate": 21.00
        "exclusions": false
      },
      "BG": {
        "country": "Bulgaria",
        "standard_rate": 20.00
        "exclusions": false
      },
      "CY": {
        "country": "Cyprus",
        "standard_rate": 19.00,
        "exclusions": false
      },
      "CZ": {
        "country": "Czech Republic",
        "standard_rate": 21.00,
        "exclusions": false
      },
      "DK": {
        "country": "Denmark",
        "standard_rate": 25.00,
        "exclusions": {
          "FO": "Faroe Islands",
          "GL": "Greenland"
        }
      },
      "DE": {
        "country": "Germany",
        "standard_rate": 19.00,
        "exclusions": {
          "buesingen": "Büsingen",
          "helgoland": "Heligoland"
        }
      },
      "EE": {
        "country": "Estonia",
        "standard_rate": 20.00,
        "exclusions": false
      },
      "GR": {
        "country": "Greece",
        "standard_rate": 24.00,
        "exclusions": false
      },
      "ES": {
        "country": "Spain",
        "standard_rate": 21.00,
        "exclusions": {
          "ES-CE": "Ceuta",
          "ES-ML": "Melilla",
          "ES-CN": "Canarias"
        }
      },
      "FI": {
        "country": "Finland",
        "standard_rate": 24.00,
        "exclusions": {
          "AX": "Åland Islands"
        }
      },
      "FR": {
        "country": "France",
        "standard_rate": 20.00,
        "exclusions": {
          "GP": "Guadeloupe",
          "MQ": "Martinique",
          "RE": "Réunion",
          "PM": "St. Pierre and Miquelon",
          "GF": "French Guiana"
        }
      },
      "HR": {
        "country": "Croatia",
        "standard_rate": 25.00,
        "exclusions": false
      },
      "IT": {
        "country": "Italy",
        "standard_rate": 22.00,
        "exclusions": {
          "livigno": "Livigno",
          "campione-d-italia": "Campione d’Italia",
          "lake-lugano": "Lake Lugano"
        }
      },
      "LV": {
        "country": "Latvia",
        "standard_rate": 21.00,
        "exclusions": false
      },
      "LT": {
        "country": "Lithuania",
        "standard_rate": 21.00,
        "exclusions": false
      },
      "LU": {
        "country": "Luxembourg",
        "standard_rate": 17.00,
        "exclusions": false
      },
      "HU": {
        "country": "Hungary",
        "standard_rate": 27.00,
        "exclusions": false
      },
      "IE": {
        "country": "Ireland",
        "standard_rate": 23.00,
        "exclusions": false
      },
      "MT": {
        "country": "Malta",
        "standard_rate": 18.00,
        "exclusions": false
      },
      "NL": {
        "country": "Netherlands",
        "standard_rate": 21.00,
        "exclusions": false
      },
      "PL": {
        "country": "Poland",
        "standard_rate": 23.00,
        "exclusions": false
      },
      "PT": {
        "country": "Portugal",
        "standard_rate": 23.00,
        "exclusions": false
      },
      "RO": {
        "country": "Romania",
        "standard_rate": 20.00,
        "exclusions": false
      },
      "SI": {
        "country": "Slovenia",
        "standard_rate": 22.00,
        "exclusions": false
      },
      "SK": {
        "country": "Slovakia",
        "standard_rate": 20.00,
        "exclusions": false
      },
      "SE": {
        "country": "Sweden",
        "standard_rate": 25.00,
        "exclusions": false
      },
      "GB": {
        "country": "United Kingdom",
        "standard_rate": 20.00,
        "exclusions": false
      }
    }
  }
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  • You've provided a solution, but have in no way answered the question at all.
    – Zizouz212
    Aug 10, 2016 at 17:39
  • @Zizouz212 - This is an "answer by evidence." I.e., it implicitly answers the primary question in the affirmative, and supports its answer with a demonstration of how one could comply.
    – feetwet ♦
    Aug 10, 2016 at 19:34

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