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The whole area of VAT in the EU, for companies like Dropbox, changes on January 1, 2015. Dropbox will not be able to state that they don't pay VAT in the EU aft

The whole area of VAT in the EU, for companies like Dropbox, changes on January 1, 2015. Dropbox will not be able to state that they don't pay VAT in the EU after this date as the rules will have changed. They will have to start paying VAT based on where their customer is located in the EU, e.g. German Dropbox customers will have to pay German VAT (19%). Hungarian Dropbox customers, meanwhile, will have to pay Hungarian VAT (27%). Dropbox will have to decide whether to pass on the price differential or absorb it. Interesting times.

Greg14 12y ago
Dropbox should be charging VAT in the EU. There is an 2003 EU law that states companies selling "e-services" into the EU must charge the VAT rate of the country of the EU customer. Dropbox stating the following doesn't remove them from paying EU VAT. https://www.dropbox.com/help/971 https://www.dropbox.com/help/971
gaadd33 12y ago
How will that work for the companies? Will each company have to register and remit payment to every country in the EU that they have customers for?
- blowski 12y ago
  I'm interested in how this would work. Where would the VAT go in the case of a German person who primarily lives and works in the UK? Is it based on their IP address at the time of signing up? Or where their banking address is registered? EDIT - Just found this, which suggests it's up to the company themselves to decide in which country the service is being 'consumed', and they need to store evidence which shows how they make that decision. http://www.hmrc.gov.uk/news/one-stop-shop.pdf http://www.hmrc.gov.uk/news/one-stop-shop.pdf
  - AverageBanana 12y ago
    Correct, the burden of proof is on the company that is supplying the electronic service. But it is not that they 'decide'. They need to collect required types of evidence (that do not conflict with each other) in order to prove where their end customer is. Accepted evidence includes the customer's IP address; their fixed landline; their mobile phone SIM card country code; and credit card billing address. VAT is based on where the service is 'consumed'. That German person who resides in the UK will have to pay UK VAT on any electronic service that they consume in the UK. There are a whole host of other rules if that person goes on holiday in the EU. EDIT: If some of the evidence above 'conflicts' with the other, e.g. UK fixed landline but a German credit card billing address, then more evidence will be required until the merchant is satisfied as to the customer's precise location.
- AverageBanana 12y ago
  The affected companies will have two options. Register for VAT in each EU country in which they have sales, or avail of what is called a mini One-Stop Shop, commonly known as MOSS. MOSS, effectively, allows a company register with one EU tax authority for the filing of all their VAT. That tax authority will then distribute the VAT due to other EU member states. MOSS will eliminate the need to register in every EU member state that an affected company has sales (could be all 28 of course). For some clarity try these sites: http://www.hmrc.gov.uk/posmoss/ http://www.hmrc.gov.uk/posmoss/ http://blog.taxamo.com/moss-system-eu-vat/ http://blog.taxamo.com/moss-system-eu-vat/ http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_wo...

Greg14 12y ago

Dropbox should be charging VAT in the EU. There is an 2003 EU law that states companies selling "e-services" into the EU must charge the VAT rate of the country of the EU customer. Dropbox stating the following doesn't remove them from paying EU VAT. https://www.dropbox.com/help/971 https://www.dropbox.com/help/971

gaadd33 12y ago

How will that work for the companies? Will each company have to register and remit payment to every country in the EU that they have customers for?

blowski 12y ago
I'm interested in how this would work. Where would the VAT go in the case of a German person who primarily lives and works in the UK? Is it based on their IP address at the time of signing up? Or where their banking address is registered? EDIT - Just found this, which suggests it's up to the company themselves to decide in which country the service is being 'consumed', and they need to store evidence which shows how they make that decision. http://www.hmrc.gov.uk/news/one-stop-shop.pdf http://www.hmrc.gov.uk/news/one-stop-shop.pdf
- AverageBanana 12y ago
  Correct, the burden of proof is on the company that is supplying the electronic service. But it is not that they 'decide'. They need to collect required types of evidence (that do not conflict with each other) in order to prove where their end customer is. Accepted evidence includes the customer's IP address; their fixed landline; their mobile phone SIM card country code; and credit card billing address. VAT is based on where the service is 'consumed'. That German person who resides in the UK will have to pay UK VAT on any electronic service that they consume in the UK. There are a whole host of other rules if that person goes on holiday in the EU. EDIT: If some of the evidence above 'conflicts' with the other, e.g. UK fixed landline but a German credit card billing address, then more evidence will be required until the merchant is satisfied as to the customer's precise location.
AverageBanana 12y ago
The affected companies will have two options. Register for VAT in each EU country in which they have sales, or avail of what is called a mini One-Stop Shop, commonly known as MOSS. MOSS, effectively, allows a company register with one EU tax authority for the filing of all their VAT. That tax authority will then distribute the VAT due to other EU member states. MOSS will eliminate the need to register in every EU member state that an affected company has sales (could be all 28 of course). For some clarity try these sites: http://www.hmrc.gov.uk/posmoss/ http://www.hmrc.gov.uk/posmoss/ http://blog.taxamo.com/moss-system-eu-vat/ http://blog.taxamo.com/moss-system-eu-vat/ http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_wo...