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When an EU resident buys physical goods from a non-EU country the shipment is stopped at customs. The customer must then pay VAT (plus an importation tax) on t

When an EU resident buys physical goods from a non-EU country the shipment is stopped at customs. The customer must then pay VAT (plus an importation tax) on the value of the goods in order to have the shipment released. There is no requirement that the seller of the goods pay VAT - how could the EU hope to enforce this across hundreds of foreign countries all with different legal system? They simply police their own borders. What I don't understand is how they apply this to digital goods, where there are no borders to police? How do they even find out that digital goods are being imported? If neither the buyer nor seller pay the VAT, how do they stop the transaction? If the seller is located in Assfuckistan, then surely the transaction takes place in Assfuckistan, and unless Assfuckistan has signed a treaty with the EU to collect VAT on their behalf, why would their authorities interfere?

rahimnathwani 13y ago
the shipment is stopped at customs This is not always the case. As far as I can tell, they stop some random % of shipments. The customer must then pay VAT (plus an importation tax) on the value of the goods VAT is not applicable to low-value shipments. When I lived in the UK, that threshold was 18 pounds, which is just under US$30. (The tax authorities could, in theory, group separate shipments from the same vendor to the same customer in, e.g. the same month, but I've never heard of this happening.) Import duty is only applicable to some classes of items, not on everything. how they apply this to digital goods It's important to understand that VAT and import duties are not even applied consistently to physical goods which are imported by individuals for their own use (e.g. by ordering from overseas web sites). It's another leap to expect consistent treatment for things which, as you suggest, are hard to detect.
coldtea 13y ago
>What I don't understand is how they apply this to digital goods, where there are no borders to police? How do they even find out that digital goods are being imported? If neither the buyer nor seller pay the VAT, how do they stop the transaction? Well, this mostly applies to places they have treaties with (which is most part of the world one would care to do business with). If they find out they sell digital stuff without handling the proper tax, the company gets fined. It's a simple as that. They don't have to police every sale, nor every country. Just the more popular countries and sellers. You know the 80/20 rule.
gamblor956 13y ago
What I don't understand is how they apply this to digital goods, where there are no borders to police? How do they even find out that digital goods are being imported? Audits of online stores, plus massive penalties (potentially exceeding 100%) on the VAT and other taxes that should have been paid. Tax evasion generally means that the statute of limitations (the period of time for which the tax authority may still go after a taxpayer for back taxes) never ends and they can go after a taxpayer for unpaid taxes from decades prior. If the seller is located in Assfuckistan, then surely the transaction takes place in Assfuckistan, and unless Assfuckistan has signed a treaty with the EU to collect VAT on their behalf, why would their authorities interfere? Under international treaties and laws, sales are deemed to occur in the jurisdiction of the buyer, not the seller. However, if the transaction is agreed to/executed in another jurisdiction (i.e., the seller's country or a third country), it could also be subject to tax in that other country.
- hayksaakian 13y ago
  In this case, who is evading customs? The play store or the app developer?

rahimnathwani 13y ago

the shipment is stopped at customs This is not always the case. As far as I can tell, they stop some random % of shipments. The customer must then pay VAT (plus an importation tax) on the value of the goods VAT is not applicable to low-value shipments. When I lived in the UK, that threshold was 18 pounds, which is just under US$30. (The tax authorities could, in theory, group separate shipments from the same vendor to the same customer in, e.g. the same month, but I've never heard of this happening.) Import duty is only applicable to some classes of items, not on everything. how they apply this to digital goods It's important to understand that VAT and import duties are not even applied consistently to physical goods which are imported by individuals for their own use (e.g. by ordering from overseas web sites). It's another leap to expect consistent treatment for things which, as you suggest, are hard to detect.

coldtea 13y ago

>What I don't understand is how they apply this to digital goods, where there are no borders to police? How do they even find out that digital goods are being imported? If neither the buyer nor seller pay the VAT, how do they stop the transaction? Well, this mostly applies to places they have treaties with (which is most part of the world one would care to do business with). If they find out they sell digital stuff without handling the proper tax, the company gets fined. It's a simple as that. They don't have to police every sale, nor every country. Just the more popular countries and sellers. You know the 80/20 rule.

gamblor956 13y ago

What I don't understand is how they apply this to digital goods, where there are no borders to police? How do they even find out that digital goods are being imported? Audits of online stores, plus massive penalties (potentially exceeding 100%) on the VAT and other taxes that should have been paid. Tax evasion generally means that the statute of limitations (the period of time for which the tax authority may still go after a taxpayer for back taxes) never ends and they can go after a taxpayer for unpaid taxes from decades prior. If the seller is located in Assfuckistan, then surely the transaction takes place in Assfuckistan, and unless Assfuckistan has signed a treaty with the EU to collect VAT on their behalf, why would their authorities interfere? Under international treaties and laws, sales are deemed to occur in the jurisdiction of the buyer, not the seller. However, if the transaction is agreed to/executed in another jurisdiction (i.e., the seller's country or a third country), it could also be subject to tax in that other country.

hayksaakian 13y ago
In this case, who is evading customs? The play store or the app developer?