[ffn]

Okay, say you're a US citizen building some digi service like JS Bin, and VATMOSS starts fling threats at you, for how long can you go about ignoring them? I mean 3.5k GBP and however many weekdays it took isn't exactly affordable for every small business, and if you don't even have many Euro pro-users, I don't see the cost-benefit justification of giving VATMOSS priority unless they can reach across the Atlantic.

[bluecalm]

VATMOSS is a nightmare for small businesses. I am lucky that authorities in my country decide that I can avoid it with my project (because it doesn't fit exact definition of electronic service so I can pay VAT in my country as it's a place the service is provided in according one interpretation of the new law) but they have plans to extend it and I may be forced to go through accounting hell to comply with this regulation in the future.

It's one of the most ridiculous regulations there could be. As a small business founder you are not really in position to do the accounting for it properly and most accountants here have very little idea how to prepare all the documents either. You are required to keep 2 pieces of evidence of customer's location (IP, address etc.) which you often just don't have access to in the first place (if you payment gateway provider doesn't make this information available to you).

So not only you need to find someone who knows what to do (already very hard), pay them significantly more than you would for normal accounting (big burden for small business owners and especially people who start), keep accounting information you often don't have access to, then prepare this accounting information as well (which means you spend resources for writing the scripts yourself as most tools accountants use don't track needed info).

Additionally to all of this there is no more VAT free quota for people who just start (usually there is for business who don't qualify for VATMOSS, size of the quota depends on the country).

When I've learnt about it (I started my business in 2015, the regulations started to be law Jan 1th 2015) I was really depressed about the whole thing. I was spending my days reading some contrived law and various interpretations of it instead of doing the actual programming. Nobody had answers for me (I've got different opinions from 2 tax advisors, different one from our tax office and yet different one from national tax information line) and I was just close to giving up altogether (I didn't expect my project getting as much traffic as it did and I wasn't really in position to spend significant resources for accounting when I didn't even know I would make enough to cover it).

It's a hostile piece of regulation which very severely disincentivize you from starting a business or paying your taxes properly. It only shows how out of touch EU bureaucrats are. I guess they think typical business is like Google or Amazon or something.

[pjlegato]

> I guess they think typical business is like Google or Amazon or something.

Exactly. Many in the EU imagine that "business owner" is a synonym for "evil capitalist plutocrat." For them, if you are not someone's employee, you are by definition rich. Questions of scale are ignored.

[PythonicAlpha]

I don't think, that so many (at least educated) people in the EU believe that ... but the problem is (and I saw evidence for that again and again), that the politicians like to talk about the "Founder culture" or that they want to aid smaller businesses ... but in fact, they do the absolute opposite.

I see that, because at least in Germany (where it is very chic in the political class to talk how to aid smaller businesses and startups ...!) the tax rules are in favor of the big corporations (they have been changed in the last decades, so the corporations got better and better conditions) ... but of course this relieves for the big ones must be compensated somehow -- so the smaller companies have to pay even more taxes.

The current VATMOSS legislation is also a good example: It was announced to be a means to counter the fact that bigger corporations like Amazon avoid VAT by having subsidiaries in Luxembourg. But the biggest problems with the new rulings have now the smaller companies, that never had the chance to open subsidiaries in Luxembourg. For Amazon it is a small drawback and they may have to raise some prices -- but the troubles of other companies are tremendous.

So: The politicians are talking much about smaller companies -- but are only thinking about the bigger ones. And in Germany, many laws are even written by people from the bigger corporations.

[wobbleblob]

I know two people who tried to start a business in Germany and failed, not because of the EU but because of domestic, German rules.

One tried to start some kind of innovative form of pharmacy (the details weren't clear to me), but found himself unable to join the pharmacy guild, and apparently it is illegal to start a business without joining the guild. The other tried to start a bed & breakfast business, but the 'breakfast' part was closed down indefinitely when the food safety inspection found he didn't have the right license for a Sandwichtoaster. Apparently there are different regulations for serving a hot breakfast.

[pluma]

Yes, all professions are regulated. Sadly this has less to do with an overzealous government and more with lobbies and accidents of history.

Guilds used to rule all professions in the middle ages and a lot of the regulations are sadly derived from that. This means you can't do certain things without the proper certifications (e.g. if you're a licensed car mechanic or "KFZ-Mechatroniker" that doesn't mean you're also allowed to do paint jobs because for that you'd need to be a licensed "Lackierer").

Likewise, pharmacies and pharmaceuticals in general are heavily regulated, especially with regard to prescription drugs. I think online pharmacies only became legal quite recently (previously most of them operated out of other EU countries, effectively creating a grey market with all the problems that entails for the customers).

What killed your friend's B & B idea was likely the strict requirements for food safety. It's practically impossible to use private kitchens to produce commercial food products and commercial kitchens have to conform to various rules (plus the employees working in them have to obtain the necessary certificates). IMO this is a good thing, but it can of course make easy things (like serving a breakfast in a single bedroom B & B) very difficult.

The huge difference between the US and Germany is that in Germany suing for damages results in compensations that are a fraction of what you see in the US. But at the same time companies are more likely to run into trouble with the authorities before they can harm you and even if you end up with permanent injuries the public healthcare covers them in most cases -- i.e. you're less likely to be harmed and the economic damage of that harm is likely considerably smaller.

But as an employer I have to say some of the regulations, laws and restrictions can be incredibly tedious and annoying. Especially if you're running a very small business.

[PythonicAlpha]

> But as an employer I have to say some of the regulations, laws and restrictions can be incredibly tedious and annoying. Especially if you're running a very small business.

Yea. My impression is (too), that the regulations in Germany are much more harmful to smaller companies than to big corporations. As big corporation, you basically can do very, very much, without being penalized much. In Germany, you always can say, that health costs are covered by the public health insurance. So, it is common, that compensations are small fractures of that which is paid in the US or even no compensations are made.

My feeling is, that German judges are much more reluctant to rule against corporations, as long as their fault can not be proven 110% -- for common people on the other hand, 80% prove are enough most of the time (I remember, that not long ago a young girl was convicted for computer fraud, just because Siemens said, that the 4 digit PIN-system for EC cards was 100% secure -- something we soon later found out, was never true!).

[maze-le]

In germany there is a saying: "If you work independently, you are always with one foot in jail". It is not unreasonable either, because I know of accountants and laywers (ie: people who do this all the time) who sometimes get lost in the jungle of regulations and decrees (European, National, Subnational, Communal, Branch of work, Union/Worker-regulations etc.). It is also no uncommon for some regulations, depending on the type of work, to be mutually exclusive.

I live in germany and I am willing to be independent in the mid-term (~ 2-4 years), but I have major doubts about doing it here...

[wobbleblob]

Look across your north western border. Many people, especially in the tech and creative industries, work as freelancers there. As long as you have no employees other than yourself, it is made very easy.

[PythonicAlpha]

Thank you for sharing!

>I guess they think typical business is like Google or Amazon or something.

I guess, that is all they want -- and it very likely could be, that this is all they will get, when they are not stopping this. The EU is about to kill inventions in the online business. With this kind of regulations, the EU will become a dessert with the Amazon's and Googles ruling over it.

But I think, many big systems tend to go in this direction: The dinosaur corporations are going to win, because after the day, they can change the rules to their favor and the small businesses are going downhill, because they are to small to be recognized -- but those are those that innovate. And remember: Google and Amazon once also started small, but those where the days, where the focus of the big players where mostly elsewhere.

[camdenre]

desert* A good way to remember is a dessert (the post-meal treat) is so good you want 2 (hence 2 's' characters)!

[PythonicAlpha]

Thanks, as non-native speaker, I always fall in those traps ...

[tekromancr]

Haha, and as a native English speaker, I also fall for these traps. English is a silly language, sometimes.

[PythonicAlpha]

Thanks! I don't feel so silly any more! ;)

[Lawtonfogle]

>It's a hostile piece of regulation which very severely disincentivize you from starting a business

Would this fall under regulatory capture? I'm not sure to what extent existing international businesses worked to get this established.

[wobbleblob]

The intention with EU regulations like these is usually to prevent a 'race to the bottom' as they call it. They're turning the EU into a common market without internal trade barriers, but when you do that, what happens when one country has a VAT of 15% and another of 25%? Businesses that can move, will move (administratively) to the 15% country, forcing all countries to lower their VAT to the lowest level. You can argue that this measure isn't working, or that the cost outweighs the benefits, but I don't think it is regulatory capture. Brussels is really trying to minimize the impact of the common market on member states' domestic policies.

[Lawtonfogle]

>The intention with EU regulations like these is

Regulatory capture is almost always given some reason behind it. As such when determining if something was regulatory capture, the stated reasoning behind it is ignored, which is why I was asking to what extent did multinational organizations influence this decision.

[wobbleblob]

It's difficult to see why the EU would try to favor large, usually American and Asian tech giants like Amazon, Samsung and Google versus local startups through tax regulation. The most likely explanation if you ask me is that the motivation behind VATMOSS is exactly what it says on the tin: harmonization of the common market without forcing every member state to adopt the same domestic policies.

The dynamics are different in the decision making processes in the EU. None of the commissioners are elected, they don't have campaign funds to worry about, so there is no legal veneer for corporate 'lobbying' as you would call it. I can't tell you for sure that it doesn't happen, but it can't happen out in the open as it would be considered corruption, and illegal.

The problem instead is that the commissioners are put forward by the (elected) governments of member states, so there is always the danger of them either deliberately or unwittingly favoring their national interests, and it makes them potentially vulnerable to domestic political pressure.

[Lawtonfogle]

>It's difficult to see why the EU would try to favor large

It is just as difficult to see why the US population would support laws that favor massive companies at the cost of the general populace but they still do. Large companies have no nationality in the realm of politics.

[Asbostos]

Can't you just assume the highest tax rate and pay that on every sale so you don't have to guess the country? Seems like it would save everyone money for a small business like this.

[matheweis]

Depending on the kind of service, a good solution is to use a third party provider that handles VAT payments for you; FastSpring, for example: http://www.fastspring.com/vat

(disclaimer, I am a happy FastSpring customer in the US, but have no other relationship with them)

[matheweis]

I should also add a point relevant to this article; that outsourcing to a provider like FastSpring can also give you the benefit of real-time fraud detection/risk analysis. https://support.fastspring.com/entries/64433830-Understandin...

I've had maybe one or two chargebacks that made it past their filter in the ~three years I've been with them, and I don't remember having to pay any extra fees for it.

It sounds like a part of OPs issue was not the "cost" so much as trying to do to much himself, which ended up being costly.

[SyneRyder]

Another +1 for FastSpring (happy customer from Australia here). This is exactly why you would use such a service, even though it takes a higher percentage cut. It's worth it for reduced tax hassle & improved fraud screening. If they detect fraud on one customer's site, they can block the card for all their customers.

I love Fastspring but they're not the only game in town. I used to use Kagi, and Avangate & Cleverbridge are two other companies I've heard of. There's lots of them out there.

[emilburzo]

Does this work if I am in the EU?

[nkozyra]

I think the obligation to pay customers' VAT goes back way before VATMOSS. That said, I think you've answered your own question. Unless you're at a size that would be drawing attention, it would be logical to ignore this if you're not in the EU.

[masklinn]

> I think the obligation to pay customers' VAT goes back way before VATMOSS.

Yep, VOES was put in place in 2003 and that was a simplification, before that businesses were supposed to register themselves with each country's tax office and fill VAT everywhere. For non-EU businesses VATMOSS mostly updates the scheme: register yourself in any member state and use their MOSS portal as a non-EU business, the tax office is supposed to redistribute VAT based on your fillings.

The business also has the option to forego MOSS/VOES and register itself in each country of course.

[JoshTriplett]

A business outside the EU has no obligation to do anything, unless it makes itself subject to EU jurisdiction. Just as you don't have to collect US state sales taxes for any US state unless your company has a legal presence in that state.

That doesn't help you if you're in an EU country, of course.

[zmmmmm]

I have a complex notice written entirely in Spanish that I can't understand, but which with the help of Google translate I have decoded to indicate that some 100 odd euros is being withheld from me as the customer paid for my services and has voluntarily paid some kind of tax on my behalf. I am sure with sufficient effort I can probably find a way to get that 100 euros refunded, but boy, it sure aint worth my time. But I mention it because while you may have no obligation to do anything, you can find oneself in this "withholding" situation if you don't.

[jfoster]

How do you distinguish between that and some form of scam/fraud?

[zmmmmm]

I suppose that's a good point - it would be a remarkably well executed scam, since it had all the account numbers, and details that I use with that client, as well as the actual amount from the invoice I sent them, printed on it. I didn't hesitate to believe it at the time.

[mingabunga]

This is correct. Our payment provider GlobalCollect has passed us on a court ruling from Netherlands to state we don't need to pay any VAT since we're not physically there, even though we do sell there. A lot of payment processors like FastSpring, Avangate and Cleverbridge act as resellers for your products and are therefore obligated to charge and pass on VAT even if your company is not located there.

[bluecalm]

You only needed to register in different countries once your sells to them are above a quite hefty limit though so when you started you just paid VAT in your country and that was it. (I am talking from EU citizen perspective)

[masklinn]

My comment is about businesses from outside the EU, sorry if that wasn't clear.