2015 EU VAT changes for electronic services should be a blessing for small companies. Legislation has introduced, into European law, a new mechanism...
Why VATlib is Free - update
January 22, 2015
I guess it is time that I update my post below following the EU 1st January 2015 changes.
The new law has introduced a presumption making the companies that collects payments from end-consumers responsible for VAT. It is a great news as now Google is in charge of the VAT in the European Union. What does it mean for example for Switzerland or Norway? These countries are in Europe. Yes - but they are not in the European Union. So the same as before apply and Google is not in charge of the VAT in these countries as Google is not in charge in non EU countries (e.g. South Africa, Norway, Switzerland...). Indeed VAT is not limited to the EU and other countries envisage introducing VAT on electronic services (e.g. Canada, Korea, Japan...).
This issue is larger than the sale of App through a Platform. In certain extend the issue on sale of App is partially solved with the platforms dealing with the VAT and I hope that the new legislations in non EU countries would have similar presumption than the EU ones and put the platform in charge of the VAT. My question is now how to deal with it if not selling through a platform or a portal. In EU, it is still possible to use the MOSS registration and even if it is not easy to comply with all the requirements it is still a huge simplification compare to a registration in 27 members state. However, this will not solve the issue in non EU countries and companies may have to register in multiple jurisdiction with the risk that the compliance will cost more than the turnover realised in the relevant country. Companies may have to decide in which countries to distribute their services... the same way we will do for goods.
Being compliant also introduce lots of additional questions - when to declare the VAT (when the sale is down or upon receipt of the payment from the platform), which exchange rate to apply, which amount to declare... To be able to comply with each rules in individual countries is far from being easy... and for certain very costly. I guess in certain case discussing with the tax authorities the best approach may be a solution.