1.1.2015 – EU MOSS VAT Change Compliance

extremecarver
(@extremecarver)

9 years, 5 months ago

Hi everyone. This topic concerns any company or individual who sells any kind of digital service to EU customers. So this also applies (at least in theory – because enforceability is not yet known)to non EU residents/companies selling any non hardware good to the EU.

So far for digital services – the location of the company in B2C trade was the determining factor on the VAT rate. Now for any transaction it will be based on the location of the customer.
The location needs to be proofed by TWO independent factors. For s2member and paypal this would mean e.g. IP address conforms with the country of the payment address in the paypal profile. Other possibilities would be if there could be an obligatory country field for the customer to enter – and that matches the IP. Or landline (not mobile!) telephone number country code matches address or IP.

It will be illegal to sell any e-services (such as a membership) to EU customers without before knowing if a) they are private or business customer b) have 2 independant (as given above) non conflicting factors to determine their location.

This really needs to be checked by s2member.

Also there would be a need to block people from some EU countries (e.g. Poland) who have invoice regulations that are so complicated that I cannot conduct business with Polish customers anymore – as any sale would mean a loss to me due to administration overhead.

So s2member should block customers from country XX to checkout.

Of course while in theory any non EU company/private selling e.g. a membership for a site to people in the EU (also to tourists traveling through the EU!!!!) – it will be difficult to enforce for EU bodies. They did announce however to specifically work together with US law enforcement agencies to get US companies to comply and use spiders/bots to track this down.

The best resource about the changes I have found here:
http://www.taxamo.com/blog/

But basically if s2member is not able to follow the law here, dropping Paypal, Stripe or any other payment gateway that does not follow the law is the only solution. So far only markets such as the Apple Appstore, Google Play or Amazon marketplace take over that tax/invoice work.

And I know even less what to do with all subscriptions. Probably I will have to cancel them all and ask to reapply under new EU terms.

Basically if there are no easy solutions, my business is ruined.

https://wordpress.org/plugins/s2member/

Viewing 15 replies - 1 through 15 (of 41 total)

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Thread Starter extremecarver
(@extremecarver)

9 years, 5 months ago

Oh yeah – here’s the guideline published by the EU (but that doesn’t explain at all how to do it – it only lists the requirements):
http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/telecom/one-stop-shop_guidelines_en.pdf

As for users of s2member who are not doing a lot of business with EU customers – s2member should have an option to block them from paying altogether.

KTS915
(@kts915)

9 years, 5 months ago

Whoa there!

I very much doubt that s2Member needs to do anything at all. The software doesn’t actually handle the sale on which VAT may be levied. That is handled by the payment processor.

I think we can save your business.

I am sure that all reputable payment processors, like PayPal and Stripe, are aware of the requirements. They will, therefore, provide the means for compliance (even if they haven’t got there yet).

So I’d start by looking at your account(s) with them to see if you need to adjust your current settings. For example, Stripe does not, by default, capture a user’s address, but you can require that it does so if you go into your Stripe account.

As for banning users from a specific country, you should take a look at this thread for a means to accomplish what you are looking for.

Thread Starter extremecarver
(@extremecarver)

9 years, 5 months ago

Papyal will not do it. They pass it back to the website. I spend hours on support calls with them already. Stripe is not available in Austria yet – so I currently use Papyal besides bank transfers (which are horrible from the new law too).

I already set up Paypal to not accept any payment without address – right from when I started to use s2member. Sadly this is not working if people enter countries or incorrect adresses – then I will be forced to return payments (2-3%).

The problem is – as laid out – address is NOT enough. One needs two INDEPENDENT factors to determine the country which both place the user into a specific country.

Paypal will neither hand out the credit card number (could be used to check for the country) nor the IP of the user. And so far you can only ask for a delivery address with s2member – it’s unsure if that will count at all. Would need to have the Paypal billing address to fully comply with EU law to my understanding.

Even worse for subscriptions. I think subscriptions will cause huge headache in accounting – as paypal doesn’t even include any address in the payment mails – but sends you the address in separate mails – so you can spend 1-2 minutes per payment to look up the country – then send invoice if required, then if you don’t get all that info return the payment if you cannot get that info from the user – then store all that info for 10 years!

So basically old subscriptions are useless now – I have spoke with my tax consultant and he advised me to cancel them all, or move outside of EU jurisdiction…

In the end I would end up doing nothing but trying to comply, not having any more time to actually work on my products.

KTS915
(@kts915)

9 years, 5 months ago

@extremecarver,

I understand you need two means of ID/location. But s2member already captures user IP number at registration so, together with address, you already have two.

So PayPal is quite right to refuse to hand out CC numbers. That would be disastrous.

Your problem (and, apparently, that of your tax consultant) is that you expect PayPal, Stripe, etc to provide everything you need. But they don’t need to do that at all. They just need to provide enough so that you will be able to comply using information that you can easily collect already.

As I said, you just need to make sure you have configured your payment processor accounts correctly.

Thread Starter extremecarver
(@extremecarver)

9 years, 5 months ago

Yes – but I need to check that the IP is the same. Which I can tell you – it is not for my customers in about 10% of the cases! (namely people traveling).
So If I don’t have a check that works, it will be plain nightmare. Currently tax consultants recommend to have 3 factors – if you cannot check them – in order to limit work.

And there is no automatic way to return paypal payments, and I need an automatic check. Average payments are about 15€ including VAT. So if I deduct VAT/payment processor fees only – without any other costs – I’m already well below 11€. Now I cannot spend 10-20minutes on average to check that. Impossible to employ someone for below 50€ in Austria qualified to do that (if I spend 50€ per hour – with our social system maybe 17-18€ end up at the employee). The cost to make sure that payments are correct, would be higher than the income. Not considering other costs. So if there is no automatic way that works in 97-98% of all cases – I can shut down. As simple as that.

KTS915
(@kts915)

9 years, 5 months ago

Yes – but I need to check that the IP is the same.

The same as what?

Thread Starter extremecarver
(@extremecarver)

9 years, 5 months ago

That the IP is from the same country as the address paypal provides. And that check better be automatic.
In case it’s not – there would need to be an additional email to the customer aksing him to provide further proof – or else block the account and return the payment!

Oh and worse – about 5% of people paying – never register. So I would need to crosscheck there too – and return them their money if there is no full determination of their country BEFORE they pay, or WHILE they pay. Or at least s2member would need to link payments without registred account to IP (and return payments if there is conflict).

This better be done by s2member automatically for everyone who has EU IP. There is no limit at all – you have someone sign up for 1USD to your US membership site – and you get a controll – you will pay hefty charges (for some EU countries the fines start at over 5000€ for 1€ VAT not paid).

Also sometimes people pay with emails at paypal which are not reachable. Or register wrongly. I already spend ages to filter out payments from non EU countries right now. But checking every EU payment for 2 non conflicting country indicators would just be madness. That needs to be automatic.

KTS915
(@kts915)

9 years, 5 months ago

In that case, you can just do what companies like Amazon have been doing for years.

You just add one or more fields to your s2member registration form that ask for the user’s address again. They call these two groups of fields “Home Address” and “Delivery Address” or something like that.

You can then use the approach on the thread to which I linked to check both sets of fields, so that you have two independent addresses both being automatically checked before any payment is accepted. So no need for any refunds either.

Then you also have the IP registration number as a third piece of data, as a sort of “insurance.”

KTS915
(@kts915)

9 years, 5 months ago

Of course, you would call these fields something like “Home Address” and “Address where credit card is registered”

Thread Starter extremecarver
(@extremecarver)

9 years, 5 months ago

And requiring people to enter two addresses – before paying – I’m sure to loose 50% of them before they pay.

Also at least in Austria – we have no Papyal Payments Pro. Only Web Payments Standard and Express Checkout (plus Digital Products Express Checkout)

– the only good procedure would be to have the people pay. Then have s2member or some other plugin check if the IP address matches the country given in the paypal address – then send out another email for accounting summarising this and the payment amount/country.

KTS915
(@kts915)

9 years, 5 months ago

Well, I suggested that option before, and you didn’t want to use the IP address!

I think it’s pretty clear that what the new law requires is doable without leading to untold doom for online businesses.

Even if you don’t have PayPal Pro, you can still use s2Member Pro forms with PayPal Express, so you can add whatever extra fields you want or need.

Thread Starter extremecarver
(@extremecarver)

9 years, 5 months ago

Well – I’m still quite in the dark – BTW – here are a few expamples of vaild addresses:
http://www.taxamo.com/eu-consumers-location/

It’s not even sure a user entered address is valid proof!!! Paypal billing /shipment adress should be.

If no s2member dev does anything about this in the next 7 days – I’m, well open to pay good money for implementation. Also if that means going via taxamo.js in order to make it easier. (in that case no problem to block countries – as taxamo will automate the invoicing and also run proper checks on the country – but I don’t really know their API).

I’ll also need to have customers from Cyprus, Poland, Romania and Slovenia – because I do not know how to create valid invoices for residents of these countries. Romania and Poland are real nightmares about invoices – because they do not use € – and require that the invoice is made in local currencies! Cyprus and Slovenia have laxer laws – and use the €.

I have too many customers from the Netherlands and Italy as both countries require full invoices (paypal is not doing that – actually cannot) to block payments from there – but would advise anyone not having many customers in theese 2 countries to do so!
France would also be on that list for payments over 25€ including VAT.

I do hope that the standard paypal payment mail is enough for Lithuania. I will inquire more about it. Else I would recommend blocking it too. Same goes for Finland (under German/Austrian law “paypal invoice” is a simplified invoice and hence enough). Luckily both are Euro countries.

See here why I chose those countries to be blocked: http://www.taxamo.com/moss-invoicing-revealed/

KTS915
(@kts915)

9 years, 5 months ago

Yes, there’s nothing like a professional setting up a site to scare people, is there?

Ever been to the UK? Such scare stories about the predicted effects of new EU laws are a dime a dozen. They never turn out to be much of an issue in practice, but they scare plenty, and there’s lost of money to be made in doing that.

There’s nothing in the site to which you linked to suggest that the solutions I proposed above aren’t adequate. In fact, quite the reverse.

Thread Starter extremecarver
(@extremecarver)

9 years, 5 months ago

Well I’m not so sure. As I can read here Easy Digital Downloads plugin gave up on it:
https://github.com/easydigitaldownloads/Easy-Digital-Downloads/issues/2137

It’s clearly not easy at all to implement properly from everything I gathered so far, and noone really knows how it will work.

And yeah – been plenty of times to the UK. Would prefer to have my business there. UK government is usually protecting it’s companies from EU craziness (in case of possible audits – which can be brought in by any of the 28 member countries -whether or not you did any business there). In Austria the government loves to slap on additional charges to you, instead of any help. Also no-one here is currently able to tell you anything about the exact regulations.

KTS915
(@kts915)

9 years, 5 months ago

Read that thread again!

EDD did not give up on it. Pippin essentially came to the same basic conclusion as me, and then someone wrote an add-on for that plugin to do the extra bits that I’ve already told you can be done easily with s2member with the approach in the thread to which I’ve linked.

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