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  1. #1
    Join Date
    Sep 2006
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    67

    * US Hosts Paying EU VAT Tax?

    Hey WHTers,

    I found numerous (mostly old) threads on this issue, but I wanted to get a more current assessment of this. It is a hard issue to figure out, because some people really know what they are talking about, but most do not...but they post anyway pretending that they do! As a result, there is a jumble of conflicting information out there. I do not wish to re-create those old threads, but I want to get to the bottom of some things.

    It's now been over 3 years since the silly "US E-Businesses have to collect VAT taxes on European customers" law was put into action. Clearly, from what I've seen, most U.S. hosts do not comply with this; in fact, I would venture a guess that the majority are not even familiar with the issue. (If you're not, see the links at the bottom of this post.) So, here's what I would like to know:

    1. Have there been any cases of U.S. internet businesses that have no physical presence in the EU being fined or punished in any way for failing to properly register and remit the EU VAT?

    2. Is it against any U.S. law for a company to ignore this EU ruling? In other words, if a company were to sell Web hosting to an EU customer without charging VAT, would that be illegal in some way as far as the U.S. government is concerned?

    3. I read somewhere that there is a magic threshold of sales to EU customers above which you are supposed to pay VAT, and below which you do not have to. However, I read some things elsewhere that lead me to believe that the magic threshold actually only applies to intra-EU business, not this external company e-commerce thing. Does anybody know the truth about this? Is there such a threshold?

    4. I have been told by one person that not collecting VAT may not get you into trouble in the U.S., but that if you don't collect it, you "better not step foot" in the EU. Is there any truth to this? If a U.S. company fails to collect VAT on a sale to a customer from Europe, does the owner have to worry about getting arrested upon visiting Paris or London in the future?

    Thanks!

    P.S. Below are the links that I mentioned for if you want to bone-up on the issue.

    An older article that talks about it
    Some information more from the source
    A year-old thread about this
    A really old, really, really, really, really, long thread about it that is often on topic, but sometimes not
    I'll have a link here someday.
    Maybe a catchy slogan, too!

  2. #2
    Join Date
    Feb 2006
    Posts
    466
    One thing I know for sure: If you do not pay the taxes to an EU country it is a criminal offense here. Even if you do not get arrested you may still get forced to pay all the taxes you owe. Now if it can be enforced as long as you stay in the US... I would say: No, it can't because I remember the US president laughing about it and saying this law was ridiculous.
    The magic threshold you mentioned does only apply to EU businesses.

    If you are concerned about it I recommend to contact a lawyer in the EU. Maybe you can contact a British lawyer using one of those "ask a lawyer online" sites.

  3. #3
    Join Date
    Sep 2006
    Posts
    67
    Quote Originally Posted by glace
    One thing I know for sure: If you do not pay the taxes to an EU country it is a criminal offense here. Even if you do not get arrested you may still get forced to pay all the taxes you owe. Now if it can be enforced as long as you stay in the US... I would say: No, it can't because I remember the US president laughing about it and saying this law was ridiculous.
    The magic threshold you mentioned does only apply to EU businesses.

    If you are concerned about it I recommend to contact a lawyer in the EU. Maybe you can contact a British lawyer using one of those "ask a lawyer online" sites.
    Thanks for your input! Do you happen to know of any "ask a lawyer onilne" sites that would have a British lawyer that would know about this obscure international law?

    Now, does anybody else have any input? This law has been around for over three years now; surely some of the U.S.-based hosts on this board have sold to EU citizens in that time...do you know anything about it and how it legally applies in the U.S.?

    Thanks!
    I'll have a link here someday.
    Maybe a catchy slogan, too!

  4. #4
    Join Date
    Feb 2006
    Posts
    466
    I don't know any British sites but I'm sure you can find one on Google.

  5. #5
    Join Date
    Nov 2004
    Location
    UK
    Posts
    774
    As someone who lives in the EU, I can safely say I have never paid VAT on any purchases from the USA. Within the last 3 years (since this law began), I have paid for many products/services from the US including shared/VPS/dedicated hosting, software/scripts, and custom services. I have also never heard of this law before until now.

    My point is, no one else seems to be taking this seriously, so maybe you should follow the crowd.

  6. #6
    Join Date
    Feb 2006
    Posts
    466
    Quote Originally Posted by shockuk
    As someone who lives in the EU, I can safely say I have never paid VAT on any purchases from the USA. Within the last 3 years (since this law began), I have paid for many products/services from the US including shared/VPS/dedicated hosting, software/scripts, and custom services. I have also never heard of this law before until now.
    You know that you have to pay VAT yourself if you are a business owner, do you ? I.e. a EU business owner hires a webserver in the US. Now since he is a business owner it is him who owes the VAT to his government because according to EU law the service is considered as being delivered where you reside and as a business owner it is you who has to pay the VAT.

    Now if you are a regular business that pays VAT you can charge it back at the same time (i.e. on the tax form you first mention the VAT, then you charge it back so afterall you do not really pay it but still declare it and charge it back).

    However, if you are a small business that does not have to charge VAT you do in fact have to pay the VAT and can not charge it back. I.e. you are a small business that does not have to charge their customers VAT. Now if you hire a server in the USA you owe the VAT to your government and you can not charge it back. You do in fact have to pay it.

    I too didn't think I had to pay it. Then I had to pay 1500 Euros when it turned out that I did infact owe the VAT for US webservers because I have a business license so that's for sure: US companies do not have to charge EU BUSINESSES VAT because businesses (identified by a VAT ID number) have to pay it themselves. American companies who consider charging EU businesses VAT should keep that in mind: Not only do you not have to charge EU businesses with a valid VAT ID number VAT, you are not even allowed to do that.

    In some EU countries this applys even to services you use privately. As long as you are a business owner you have to pay the VAT yourself even for privately used services... However, this is not based on EU laws and only applys to some countries. The other stuff I wrote before is based on EU laws and should be the same in all EU countries.
    Last edited by glace; 10-04-2006 at 04:39 PM.

  7. #7
    Join Date
    Nov 2004
    Location
    UK
    Posts
    774
    Luckily i'm currently not a business owner, just a consumer with some expensive hobbies

  8. #8
    Join Date
    Sep 2006
    Posts
    34
    The european union is a tremendous paper tiger. There are so many contradicting laws that it can drive you insane. The fact that some EU countries, like the UK i.e., have some further special laws on the EU laws makes it even more fun.

    My advise to you is this: either, you find a lawyer or consultant who is specialized on EU business and then you just trust his advice. The second option is you send a registered letter to the governmental institution responsible, i.e. in UK or Germany and ask them what you should do. They created this mess, so let them figure it out.

    Perhaps you could even call the US embassy in London or Berlin, they for sure have a business affairs office and can tell you where to get the information you need.

  9. #9
    Join Date
    Sep 2006
    Posts
    67
    Thank you everyone for the responses so far--some very good input!

    I am still hoping for a few comments from any U.S. hosts out there with European customers that might be able to address, from experience, my numbered questions in the original post.

    Thanks!
    I'll have a link here someday.
    Maybe a catchy slogan, too!

  10. #10
    Join Date
    Feb 2004
    Location
    Scotland
    Posts
    2,830
    Quote Originally Posted by kopptech
    I am still hoping for a few comments from any U.S. hosts out there with European customers that might be able to address, from experience, my numbered questions in the original post.
    You need to seek professional advice and ignore every single comment posted here telling you that you do/do not need to pay it.

    If you don't pay this then in a few years you step foot in Britain and were arrested, do you really think "Well someone on WHT told me I didn't need to pay it" is going to get you off with it?

  11. #11
    Join Date
    Sep 2006
    Posts
    67
    Quote Originally Posted by YetiHost-Wullie
    You need to seek professional advice and ignore every single comment posted here telling you that you do/do not need to pay it.

    If you don't pay this then in a few years you step foot in Britain and were arrested, do you really think "Well someone on WHT told me I didn't need to pay it" is going to get you off with it?
    Thanks for the advice. Still, I would also like to hear from those who have had any experience with this.
    I'll have a link here someday.
    Maybe a catchy slogan, too!

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