Up until this year, I have not had to worry too much about VAT as the turnover from my business has been below the UK VAT registration threshold.
For those who do not know, the EU brought in regulations from January 2015, that for all e-services (software downloads, fees on sellmyretro.com for example), when they are supplied to a consumer, then VAT has to be added based on the location of the purchaser. Despite calls from the UK government, they point blank refused to implement any form of threshold, meaning that if someone sells a bit of software which can be downloaded online for £1, then WHEREVER THE SELLER IS BASED IN THE WORLD, the seller needs to find out where the buyer is located and then account for VAT on that £1 at the rate applicable to the country where the buyer is located.
The rules are very complex, as you needed at least 2 pieces of non-conflicting information showing the location of the buyer - which is nigh impossible in this day and age where people use VPNs and Proxy servers for accessing the web, or may be on holiday in one country, living in a second country, but have a credit card issued by a third country. Thankfully the UK HMRC have extended an exception indefinitely, whereby small businesses can rely on the just the location provided by PayPal as the address of the buyer - although other countries have different attitudes to this.
From my point of view, as I do not offer any automated software downloads, to date, the only issue is over the fees on sellmyretro.com - luckily to date, the overseas sellers on that site have been businesses, and therefore outside of the regulations and so are charged according to UK VAT rules. However, I do need to keep my eye on this in case someone outside the UK decides to list some personal items for sale - at which point I need to decide what to do!!
So far it is a worry, but I am coping with it...
However, more worryingly, is that Australia, Japan and South Korea are following suit, with the USA and Canada (at least) also looking to do something similar ( based on their local taxes).HOWEVER, more worryingly is that from 2016, the EU plans to extend these rules to EVERYTHING SOLD ONLINE - which means that I will need to increase my prices to take account of the headache of extra administration and submitting quarterly VAT returns, and base my prices on having to pay the highest rate of tax charged in the EU (28% ?) as there is no online tool for checking the VAT rate for each country live and therefore no guarantee that I could show each buyer the correct charge for their country before they make payment.
One option would be to find local businesses in each country which would purchase the items from me as a business to business transaction and then sell in their own country - but that will only drive up prices further...
Many businesses have already decided to withdraw automated downloads of items, or simply block sales to other countries within the EU.
What I would ask is for everyone to contact their MEP and outline the potential impact that these rules will have on the retro computer market and demand that a threshold is set below which VAT will not have to be charged. The EU thinks this is only a UK problem as not many people are complaining from other countries!
There is in fact some rules in place at the moment for selling physical goods overseas, but they currently have a threshold whereby if total sales per year to each country do not exceed €35,000 (or €100,000 in some countries), then VAT does not have to be charged according to the buyer's location. It therefore seems sensible to continue with that same threshold for ALL ITEMS (including e-services and items sold online).
The EU has talked about introducing a threshold as part of the single digital market, but it is unclear (a) if and when that threshold will be introduced, (b) what level the threshold will be at and what it will be based on, and (c) what happens in the meantime for e-services sold by small businesses throughout Europe.
