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Author Topic: Symbiostock script - VAT, TAX question  (Read 11806 times)

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« on: June 06, 2013, 05:30 »
0
The VAT rules are complex and depend on:
- where you are based
- where your customer is based
- whether your customer is a business or a consumer
- whether you are selling goods or services


In my case ...

Customer is in Germany - I collect VAT at the German rate.

Customer is in the European Union (EU) and is not VAT registered in their own country - I collect VAT at the German rate.

Customer is in the European Union (EU) and is VAT registered - I do not collect VAT, but first I have to verify the validity of the VAT number. My customer is required to account for it themselves at the rate in their country.

If non-EU customer - I do not collect VAT.

So, how can this be implemented within the Symbiostock script?

Furthermore, do you send a paper invoice in order to comply with tax office regulations?


« Reply #1 on: June 06, 2013, 07:26 »
0
Can you set your Symbiostock site up as a separate company if you are already VAT registered so it does not need to be  registered, at least until it gets profitable, it might take a while t reach Euro100,000 which I believe is the threshhold?

Tax - I let me accountant advise me on this

Ron

« Reply #2 on: June 06, 2013, 07:34 »
0
You can run transaction reports from PayPal. That might be enough for your tax regulator.

jareso

  • Boris Jaroscak
« Reply #3 on: June 06, 2013, 15:30 »
+2
Yes, this is the biggest disadvantage of direct selling concept crazy bureaucracy.  >:( :-\
Because you can never know (know in advance) who may came to your personal website photo store, purchase your images there and paradoxically bring you serious problems by his purchase I mean do you more bad than good by simple purchase. Because when you dont know all required data for this person/company in advance, such as VAT ID (especially whether it is valid), full billing address, company name, etc. (not just some email address or name from his Paypal, that is NOT sufficient itself) it can get you to serious legal trouble in European Union, at least in Slovakia (European Union member state) where I am from.

This is the biggest reason possible legal/bureaucratic problems due EU legal/tax rules why I am really hesitant with setting of my direct selling channel for my photos using my personal website.

In current state of things it is much better for me just to showcase my photos on my personal website and to send possible visitors to stock agency that will take care of all bureaucracy. I mean it is much easier from accounting/tax point of view for me to receive money from agencies, than to deal with all buyers separately, because that would require to be in touch with ALL of them prior to their purchase to get/verify all of their data in advance. And this can be problem in direct selling personal portfolio website, because it is automatic in its nature. Buyer may came, purchase (what is of course very pleasing for author), but because it is automatic website and his data were not verified prior to purchase what happens if his data are incomplete or invalid (such as invalid VAT ID), guess what = serious problems! But not for him, but for you! You are required to know all of his data, such as company name/personal name, full billing address (street, numbers, state), company registration number, TAX ID, VAT ID.
If you receive money and you dont know all of these data - from who that money came - every time you received them than you have a BIG problem!

So although Symbiostock is no doubt great idea it may be quite complicated to run it in some countries due crazy legal/tax rules.
I actually mentioned only tip of the iceberg how complicated this can really be!
« Last Edit: June 06, 2013, 15:59 by jareso »

Ron

« Reply #4 on: June 06, 2013, 15:38 »
+1
I do not agree with that. The other day I bought a CD (MP3 download) from a site, and I just have a simple account with them, they may have my home address but thats it. Its basically the same as buying a photo online. They dont give me an invoice either. And basically the email from PayPal confirming the sale is the invoice. Also  I dont have to pay VAT to the Irish government, the VAT free base is 75,000 euro annually. So I can sell any photo I want and be compliant with Irish tax regulations.

jareso

  • Boris Jaroscak
« Reply #5 on: June 06, 2013, 15:51 »
0
I do not agree with that.

What to say to that Ron ...
(You are really lucky if you dont have these problems.)

But, I can assure you that there are countries out there where are so crazy tax/legal/bureaucratic rules of which you have probably never even dreamed of in your wildest dreams how crazy those rules are!! :-\ :(

« Reply #6 on: June 06, 2013, 16:10 »
0
Yes, this is the biggest disadvantage of direct selling concept crazy bureaucracy.  >:( :-\
Because you can never know (know in advance) who may came to your personal website photo store, purchase your images there and paradoxically bring you serious problems by his purchase I mean do you more bad than good by simple purchase. Because when you dont know all required data for this person/company in advance, such as VAT ID (especially whether it is valid), full billing address, company name, etc. (not just some email address or name from his Paypal, that is NOT sufficient itself) it can get you to serious legal trouble in European Union, at least in Slovakia (European Union member state) where I am from.

This is the biggest reason possible legal/bureaucratic problems due EU legal/tax rules why I am really hesitant with setting of my direct selling channel for my photos using my personal website.

In current state of things it is much better for me just to showcase my photos on my personal website and to send possible visitors to stock agency that will take care of all bureaucracy. I mean it is much easier from accounting/tax point of view for me to receive money from agencies, than to deal with all buyers separately, because that would require to be in touch with ALL of them prior to their purchase to get/verify all of their data in advance. And this can be problem in direct selling personal portfolio website, because it is automatic in its nature. Buyer may came, purchase (what is of course very pleasing for author), but because it is automatic website and his data were not verified prior to purchase what happens if his data are incomplete or invalid (such as invalid VAT ID), guess what = serious problems! But not for him, but for you! You are required to know all of his data, such as company name/personal name, full billing address (street, numbers, state), company registration number, TAX ID, VAT ID.
If you receive money and you dont know all of these data - from who that money came - every time you received them than you have a BIG problem!

So although Symbiostock is no doubt great idea it may be quite complicated to run it in some countries due crazy legal/tax rules.
I actually mentioned only tip of the iceberg how complicated this can really be!

EU red tape might be bad (I am Canada based so I can't contribute details here), but leaving 50-85% of a sale to agents just to avoid tax troubles doesn't sound like a sensible solution. If I see it right you can avoid arguing with your tax man by paying him your local VAT for ALL your sales (meaning, of course, you pay too much taxes and nobody likes that  >:( ). - I assume there's no EU country with a VAT rate of 50%+...

« Reply #7 on: June 07, 2013, 04:49 »
0
Jareso - are those requirements for VAT purposes or every single sale of every single item in Slovakia regardless of whether it is VAT rated or not?

I keep records of everything to give to my accountant at the end of the tax year and have all the Paypal records if needed to back up any sales/purchases

jareso

  • Boris Jaroscak
« Reply #8 on: June 07, 2013, 06:38 »
0
This all is really complicated and country specific stuff. Rules regarding so called "VAT transfer" between companies seated in member states of EU should be the same everywhere in EU, but unfortunately are faaaar from that, because governments of member states implement the requirements for legislation that come from Brussels in the way as they prefer. So laws regarding this differ from EU country to EU country although they should be basically similar. But are not similar or some companies dont know about them or completely ignore them and that is problem. Problem for you, if you do business with such company that is what I said. You can never know (know in advance) who may land on your personal photo store/website, and purchase there. If it is someone who doesnt respect EU (and Slovak) rules, or doesnt know about these rules, or doesnt care at all about them (he just pays you with his PayPal, or credit card and leaves without further contact with you supplying you all of his data) you as seller will have a serious problem with local financial bureau!! Because if you cannot supply all required data to the bureau, who EXACTLY was that buyer, such as ALL of his data, as I said before: his full personal/company name, full address, his company registration number, TAX ID, VAT ID (if applicable), etc. you will have a problem. Financial bureau doesnt care about your problems at all (that your buyer purchased, and left without supping you all required data) either you have ALL required data for EVERYONE with whom you do business or you are in trouble, BIG trouble!!

Btw. printed receipt from PayPal is nothing for financial bureau here. For them it is just a scrap of paper, it has absolutely no legal weight here, it is nothing!!
Also Paypal (and other similar online payment systems) as whole is not recognized as bank account or anything like that here. I mean not recognized by laws. Of course in reality PayPal is fully working in Slovakia, but Slovak legislation doesnt recognize it fully or laws regarding it totally contradict each other!! Not even people/employees in bureaus are sure how to treat it exactly one bureau will say something, whereas the other bureau will say you something completely different, etc.!
(We still have a lot of old laws that doesnt reflect this modern "virtual" times we live in.)

I really dont know how to explain it to you in short here, because it is REALLY complicated and explaining it would be not good for anyone here anyway, because it would be way to specific for local legislation.

Simply this is not only about VAT, but also about TONs and TONs of country specific rules, requirements and regulations that must be met if you want to sell virtual goods (images) directly from your online store without middlemen.

And because of that, as I said, it is better (for me) in current state of things to leave bureaucracy on agencies that will take care of buyers of my images. And so to receive earned money from agencies. To receive money from company in one state such as from USA. Simply, because when your images are sold through agency, you dont need to care who were ALL those buyers who purchased your images or whether they supplied their data to agencies or not. That is not your problem - it is problem of that agency.
For you as seller is important that you receive money for all sales of your images (as a whole) from agency and that you have all required data from who you received money, data of all agencies, such their business name, address, TAX IDs, etc. are known (when you ask their support they will tell you those).

So even if it means that agency will take some share (yes, sometimes really big share!) it is still better than being in permanent risk of problems which could be caused to you by direct selling website and crazy, sometimes even contradictory laws/bureaucracy required to run it!

Yes, it would be really great to have my own direct selling personal website.

I think about that a lot in recent times!

I actually think about programing/designing of my own personal direct selling website system, I mean completely new system from scratch (I actually started to develop it a little), through I have absolutely nothing against Symbiostock of course. I like Symbiostock idea, but I also prefer to go my own way, thats why (if) I would create my own personal direct selling website system it would be from scratch and as completely new system. But the more I dive into it and consult it with accountants, and lawyers, the more I find that it would be quite complicated due bureaucracy. :(

So to conclude it.
To run direct selling personal website is maybe totaly easy in your country.
Maybe as easy as counting to 123, but not here, ... not here. :-\ :(
« Last Edit: June 07, 2013, 06:59 by jareso »

Ron

« Reply #9 on: June 07, 2013, 08:02 »
+1
I am sorry to hear that Jareso. I have checked for Ireland and it seems its a lot easier for us

http://www.revenue.ie/en/tax/vat/registration/index.html

But I will contact an accountant to make sure I am right. So thank you for sharing your experience. It better to be safe then sorry.

« Reply #10 on: June 07, 2013, 12:39 »
+1
I still don't understand what "trouble, BIG trouble" you face in your country if you generate income without all the paperwork they want. What will they do to you? Put you in jail? What else can be worse than taking 50 to 85% of that income? I don't get it...

jareso

  • Boris Jaroscak
« Reply #11 on: June 07, 2013, 13:47 »
0
I still don't understand what "trouble, BIG trouble" you face in your country if you generate income without all the paperwork they want. What will they do to you? Put you in jail? What else can be worse than taking 50 to 85% of that income? I don't get it...

When people/state employees from financial bureau will invite you to their bureau or came to visit you for accounting inspection and they find that you have some problems in your accounting they may order you to pay so high financial penalty (depending on seriousness of [what they consider] "problem") that it can mean serious harm for your future plans. I mean you can have real problems to sustain such financial loss. Financial penalties from bureaus are seldom low. Actually they are usually very, very HIGH - even for minor problems.
(Problems that are maybe not even considered problems at all in your country.)

Which basically means that you will need to work for months or even work for some years for "free".
Work and earn money just to pay that ordered financial penalty.
It may strongly damage your business plans or even make you go bankrupt.

And of course bigger problems or too many problems found in accounting, such as not doing all required paperwork, as you mentioned, are of course considered very serious crime here! In your country those are not considered crime?!??!? :o
« Last Edit: June 07, 2013, 13:50 by jareso »

« Reply #12 on: June 07, 2013, 18:19 »
+2
I have been freelancing most of my life and, yes, I am aware that it is important to be up to snuff on my accounting if I don't want being haunted by tax officials at some point. But although I deal with accounting/tax issues myself I am sure (well, almost sure  ::)) that there are no (serious) issues.

Here in Canada I just report my (freelance) income and pay taxes based on that. If that income goes to my paypal account, fine. If it goes to my bank account, fine. Doesn't really matter as long as I report it. For sales within Canada I have to charge GST (same as VAT) and give that (or the equivalent percentage [5%] of sales) to the tax man. That is IF my income from such sales totals above a certain threshold, which is (I believe) $30.000. Far too high for me to worry about it at all (yet  ;D). So IF I ever earn more than that from my own photo web site I'd just report all sales I can't be sure/can't document where it went as being inner-Canada sales and pay my 5%. Then there is no way for them to get my ass because of missing data (that I simply can't know) because I already paid maximum tax on those sales. (That is what I was suggesting you could do as well to keep your tax man happy).

The tax man might ask for an audit anytime and check everything I've reported. Never happened to me in over 10 years. If they find something wrong it might result in hefty penalties, here too. Tax evasion is considered serious matter in Canada, but so far I never came across some issue that wasn't handled reasonably. In doubt I can always ask/hire a tax adviser to deal with it, which, of course, cost a fee, but it'd still be better than paying 50-85% just to avoid such complications (which was my point to begin with).

jareso

  • Boris Jaroscak
« Reply #13 on: June 08, 2013, 02:39 »
0
Yes, in Slovakia we also have something more or less similar to what you described.
When someone runs business like that he is required to do only very simplified accounting, and he is not required to know all data of those with whom he made business, he just reports total money he spent and received, he pays taxes, social insurance, hearth insurance, etc. and he is fine.
(Of course this is just very simplified explanation.)

But problem is that you cannot do this, I mean to have this kind of simplified accounting:
1.) If you are company (kind of LLC, INC equivalents)
2.) Or if your income crossed some threshold.
3.) Or when you DID BUSINESS, received, or sent money, from/to company based in another member state of EU!!! PRIOR to doing business with that company based in other member state of EU you are required to become so called "VAT payer" (otherwise you will receive BIG financial penalty from bureau), and since than you must run different type of accounting! Not that simplified version any more.

I am not accountant. I have accountant who is doing all that for me, because I wouldnt dare to do it myself. It is waaaay to complicated, because I must do full accounting, not simplified.
But, of course, I have learned many things since I do business here.

And non-simplified accountings are of course many, many times harder to do, with various requirements I described in previous posts!

Here is one of those dangers I was speaking about.
Hypothetical story for example:
***
Imagine you are person who is required to run just simplified accounting, you will setup your own personal photo store, and you are of course very happy about that!
But one day some company from EU will land on your website, purchase while you are away,(your photo store is automatic system it doesnt need your support), you will came to your PC and see that you have had sale. YAY, you are sooooo happy and you starting to think about many ways how you are going to celebrate this sale ;) ... but wait ... then you will notice that buyer was from other member state of EU ... ahhhhh, no, $#@##, @#$$ ... and now your happy days come to end! :-\

Right now, by this sale, you committed serious legal/accounting violation! You didnt reported fact you are going to do business with company based in another member of EU PRIOR this business happened. You should have asked your financial bureau to become "VAT payer" PRIOR this, and they should have give you your VAT ID, which you should have used during current and future transactions.

Now you should go to financial bureau and report yourself that you committed this violation, so that they can give you your VAT ID at least afterwards, and of course you will be given BIG penalty for not doing things right. If you dont go to report yourself to financial bureau you will be given another BIG penalty for not reporting yourself dont worry they WILL find out, soon or later. In this online world it is easy. They may check money transfers at company that sent you money, finding out you made business with company in another member state of EU. 

And of course since now, and ever after, you are required to run much harder type of accounting, with much more requirements. No way to return back to simplified accounting.
***
End of hypothetical story.

Was that worth? For sale of one image, maybe for 5$?!?
Isnt it better to receive money just from companies based in non-European countries, such as USA?

This is how EU "helps" flow of business inside union!

99.99% of people from here, such as: photographers, illustrators, programmers, etc. people doing business online dont do business with companies that are based in another member state of EU. Never ever! In no way! If they find out that company is based in EU, they dont want to hear about it any more!
If you came to local (Czech, Slovak) microstock forum, where agencies and online places where to submit photos are discussed, you would find that almost always the most important question is:
Is that agency based in EU?
If yes, everyone advices you:
Beware! Dont register and dont sell there it is company based in EU!! You will have "VAT payer" problems.
 
So this is how EU really "helps" trade inside union ... :-\
« Last Edit: June 08, 2013, 02:54 by jareso »

Ron


« Reply #15 on: June 08, 2013, 11:51 »
0
Yes, simplified accounting is nice and easy. But if one can put a store online one can surely also learn how to properly account for income from that store. First part is definitely harder to achieve.
Sorry, I don't buy your hypothetical story. If your tax authorities are really so penalty-happy why don't you go straight to your local tax office, explain your problem and ask them how you should deal with it in order to comply with their rules?

jareso

  • Boris Jaroscak
« Reply #16 on: June 08, 2013, 12:31 »
0
Believe it or not, but principle shown in that hypothetical story is not uncommon here.
But OK, of course you are absolutely free to think what you want.
(Really no offense.)

Just to answer your question. They will tell you that you should become "VAT payer" prior to making business with company based in another EU member state, exactly just as law requires. But that will mean that financial bureau will give you your VAT ID and you will loose ability to have simplified accounting. And that is not worth for most of people. They would rather prefer not do business with companies based in another member states of EU, than to have VAT ID and loose ability to have simplified accounting.

So, ... anyway, I said pretty much all what I wanted to say to this thread ...
(No need for me to try to persuade anyone here.)
« Last Edit: June 08, 2013, 12:33 by jareso »

Ron

« Reply #17 on: June 08, 2013, 12:39 »
0
I dont understand, I dont need to start charging VAT until I pass 75,000 euro in sales.

« Reply #18 on: June 28, 2013, 11:53 »
0
Tax laws are complicated stuff. I tried to find out what the rules are here in Sweden, and my conclusion is that you must charge VAT to a private person within EU, but not to companies if they can show that they have a VAT number. For sales outside EU you don't have to charge VAT.

So my thought was this: It should be possible to customise the registration form so that the buyers must state a) whether they are  EU or non EU residents and b) ( if EU resident) whether they are private persons or represent a company. If a company within EU, they should also enter the VAT number. Based on this information you chose one of two price lists, one without VAT, one with. A bit complicated, but at least the customer has to do it just once, after that he correct pricelist will be picked automatically.

I am not sure what the legal situation would be if e.g. a private person claimed to be a company and entered a fake VAT number to avoid VAT, but if it is not possible to do something like that, I think this kind of direct sales really is impossible in countries like Sweden, at least if you want to do it legally. Of course you in the more "liberal" countries wouldn't have to worry about this option for the registration.

Any thoughts, anyone?

« Reply #19 on: June 28, 2013, 22:09 »
0
While we're discussing these matters, it seems to me that it would be good to be able to add a custom header block as well as the current bottom-of-body text to the 'Thank You' email, sufficient to make it a tax invoice. The New Zealand IRD have this to say:

 For supplies worth between $50 and $1,000 (including GST), a simplified tax invoice is acceptable. It must clearly show:
  • the words "tax invoice" in a prominent place
  • the name and GST number of the supplier
  • the date the tax invoice was issued
  • a description of the goods and/or services supplied
  • the total amount payable for the supply, and
  • a statement that GST is included.
This could be met by adding a text block at the top of the body and the date of the sale. Sales under $50 need no special documentation but the above would be welcome there as well. Anything over $1000, we'll be happy to raise a manual invoice!

No doubt these additions would be useful for some other countries as well, so if anyone wants to come up with a paid 'customisable email' plugin...

Noedelhap

  • www.colincramm.com

« Reply #20 on: August 31, 2013, 09:00 »
0
I ran into the same problem with my own website script, how to properly register my customers based on whether its a business (VAT-registered) or not, and whether they're located in the EU or outside of the EU.

That means I can't let a customer buy something by letting him log in on his Facebook or Twitter account, because I wouldn't know where the customer is located. That means that I wouldn't know whether I should charge VAT or not.

I wish they didn't make VAT laws so terribly complicated in the EU. Especially because no one can give me a straight answer on how to handle this, not even the government itself. That makes me think I shouldn't really matter anyway, but I don't want to risk a fine.
« Last Edit: August 31, 2013, 09:05 by Noedelhap »

Ron

« Reply #21 on: August 31, 2013, 09:30 »
0
I think I am blessed living in Ireland, http://www.revenue.ie/en/tax/vat/registration/

I dont have to register for VAT and I dont have to charge VAT either, even if the licence is bought in a country where VAT does apply.

At least thats what I understand.

sandorgora

« Reply #22 on: September 01, 2013, 03:12 »
0
In the Netherlands (in EU) I have to deal with 2 taxes: Income tax and VAT. As a starter my earnings in stock are >1 euro, so taxes dont care now; I have to look at it at the end of the year.

Income tax will be quicker than VAT. As a private person you have to pay income tax: earning = profit minus cost. (costs: hosting, photogear write-down, memberships, subscriptions, bankfee, etc). You have to administrate things.

VAT will follow later, not before it becomes serious business. VAT for selling author rights (what we do) is in NL 21%. VAT until 1.345 (NL) is free, that means the earnings may be 6.404. You need to agree that with your local TAX office (as in EU taxes are regulated by the separate countrys).

VAT-number: you need your own VAT-number from the Tax office when you are into VAT business. And make a notice on your website that prices are ex-VAT.

VAT-paying: you pay the VAT you received minus the VAT you paid for your costs. You have to administrate things. There is a difference in VAT% for your own country, for in the EU en for outside the EU.

User form: in your userform (contactform) you add a field and asks for his/her VATnummer. And a field for their website, than you can find their address.

Advice: make an administration from the beginning (simple in excel or something like that), save you bills, take care about taxes at the end of the year, have a talk with the tax office. Taxthings are impossible to build in the Symbiostock script, I suppose, because each country have its own rules. But.... when you can build a Symbiostock website you are smart enough to handle with taxes as well, I think! And do it the same way: step by step.

« Reply #23 on: September 01, 2013, 03:42 »
0
US and other non EU businesses selling digital goods to EU customers are required under EU law to collect VAT. Everyone who knows about hosting etc will be aware of this and all of the arguments around it since it has been extensively discussed over the past decade. Your business accountants and legal people should be able to advise you best about how to implement the system such that the correct rate is charged depending on where the customer is based.

Of course - one could argue that there is nothing they can do about it ... The problem with this is that it potentially impacts the customers. And obviously the reputation of the network as a whole depends on all of the component sites being compliant therefore it is something you need to work on together. FWIW many businesses find it much easier for accounting reasons to buy goods and services from other businesses which are TVA registered in an EU country.

AFAIK the registration thresholds which apply to EU based entities do not always / typically apply to non EU entities. So potentially VAT compliance is more of an issue for non EU based businesses with a lower turnover. Also - even EU traders need to be aware that lower thresholds often apply to the sale of services - and the supply of digital goods is classed as a service.

EU FAQ

http://www.cooley.com/57529 - some background info.

Quote
Starting July 1, 2003, the European Union will require US and other non-European business to collect and remit value added tax on internet sales of software, music, films, games, other digital products and services to EU consumers. The new requirement, known as Council Directive 2002/38/EC, applies only to sales by businesses to individual consumers (B2C sales). Sales between businesses (B2B sales) are not covered by the directive, regardless of whether the purchaser is consuming or reselling the products. US companies that do not collect and remit VAT on such sales should begin to develop compliance programs and take the steps necessary to implement those programs by July 1.
etc etc
« Last Edit: September 01, 2013, 05:48 by bhr »

« Reply #24 on: September 01, 2013, 04:45 »
0
Further to above. Apparently non South African companies selling digital goods into South Africa are now also required to register for and collect VAT on those sales.

Again - it affects the customers and their ability to correctly do business with you and to record that business as a cost.

Basically - from what I can work out you need a checkout system which no matter where the seller is based applies the correct rate of sales tax depending upon where the customer is. And then you need to ensure that you are registered in any jurisdictions which require registration.

Here is some more about the EU situation and how that applies to US and other non EU businesses: http://www.hsp.com/blog/2012/5/vat_and_electronic_content


 

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